Australian casinos have received a stark warning from Macau about what lies ahead for them financially. Macau reports its Gross Gaming Revenue (GGR) each month and the latest figures are shocking.
The Macau government took the unprecedented step of closing all casinos when COVID-19 hit the gambling haven. Only 10 people in the whole of Macau were diagnosed with the coronavirus, but the government acted swiftly to prevent its spread.
Officials saw how quickly the virus spread through neighbouring China and didn’t want a similar scenario. All 41 Macau casinos were forced to close for a period of two weeks from February 5. They remained close until February 20 despite gambling accounting for four-fifths of Macau’s revenue.
Experts predicted vastly reduced revenue figures, for obvious reasons, but nothing prepared them for the actual results.
Macau Gaming Revenue Plummets Almost 88%
February’s gross gaming revenue figures were awful. The enforced closures resulted in an 87.8% contraction year-on-year. GGR weighed in at only MOP 3.1 billion (A$647.5 million) compared to MOP 25.7 billion (A$5.37 billion) last year.
March was equally as poor. Macau’s Gaming Inspection and Coordination Bureau reported GGR of MOP 5.3 billion (A$1.1 billion). These figures are huge but are 79.7% less than reported in March 2019.
The increase in GGR from February to March was only 69.4%, which is the worst in Macau’s history.
April Could Be Even Worse For Macau
April could be even worse for casinos in Macau because of massively reduced footfall. Analysts JP Morgan warned the GGR of Macau could be near zero.
“We wouldn’t be surprised to see Macau printing near-zero GGR until the restrictions at the Guangdong border are lifted.”
Guangdong is a neighbouring province in mainland China. It serves as a major feeder for the Macau tourism industry. Guangdong has strict travel restrictions in place as China continues its attempts to halt the spread of COVID-19.
Macau’s Public Security Police revealed the terrifyingly low number of tourists visiting the town. The statistical average is 108,000 tourists per day. Sunday saw only 230 tourists and only 270 on Monday.
JP Morgan said, “April could possibly be the worst month since the first Vegas-type casino opened in 2004.
Operators Have Between Six and 40-Months of Available Cash
Business needs to pick up and pick up quickly in Macau. Gambling employs 75% of Macau’s 600,000 population, either directly or indirectly. More than 80% of its tax revenues come from the gaming sector.
Most Macau casinos are thought to be cash-rich or have vast credit facilities.
Galaxy Entertainment Group Ltd, the owner of StarWorld, has abundant cash reserves. It has 40-months worth of breathing room before it needs to draw on new liquidity. Other operators have between six and 17 months with current cash reserves. This increases to 15 to 25 if they really need to stretch.
Stark Warning For Australian Casinos
The poor trading figures in Macau serves as a stark warning for Australian casinos. Prime Minister Scott Morrison ordered all Aussie casinos to close for at least 30-days. The lockdown could be enforced for a much longer period with six-months being touted.
Both Crown Resorts and Star Entertainment Group are massive companies, but it’s unknown if they could survive being closed for half a year. Star recently temporarily laid off 90% of its workforce. Crown laid off most of its 10,000 staff last Monday.
The hotel business of both companies remain open, albeit in a limited capacity. The casino gaming floor remains completely closed until further notice.
It was a decision not taken lightly. Casinos pay huge sums of tax to the Australian government, but won’t be by not being open for business. This comes at a time when the government needs cash the most.
Throw into the mix tens of thousands of casino employees being out of work and you have a recipe for an economic disaster. Interesting times are ahead for Australia’s gaming sector.