Macau/gaming: casino operators bet on unlikely comeback

As casinos in Singapore and Las Vegas come back to life, the world’s biggest gambling hub remains pitch black. Casinos in Macau, an hour ferry ride away from Hong Kong, generated revenues of $36bn before the pandemic. The twin effects of Covid-19 and China’s bleak economic outlook mean recovery is a distant prospect.

Macau has no choice but to follow Beijing’s lead on a strict zero Covid policy. Closure of the city includes its biggest casinos, run by the city’s six operators — Sands China, Wynn Macau, MGM China, Galaxy Entertainment, SJM Holdings and Melco Resorts. Casinos operate at the whim of Beijing’s regulators. All six of the operators’ contracts expire at the end of this year. Operators will have to pass the retendering process to keep their businesses going.

In line with Beijing’s emphasis on maintaining social stability, they have not laid off staff and are burning through cash reserves. But even if they could open, the casinos would have a problem. More than 90 per cent of Macau’s visitors come from mainland China. China’s increasingly strict enforcement of local capital and currency controls would discourage high rollers.

Macau’s fortunes are tied to China’s growth, which slowed sharply in the second quarter with gross domestic product up just 0.4 per cent from a year earlier, well below expectations.

Tech sector share gains and rising property values were once key sources of new wealth for locals who frequented Macau resorts. But June property sales extended their declines by another 18 per cent. New home prices were down for the tenth consecutive month. On Friday, reports of a new probe into Alibaba also led to a fresh decline in tech share prices.

Shares of Macau operators, including MGM China, SJM Holdings and Wynn Macau, are down 60 per cent in the past year. That reflects operating margins that have turned negative since 2020. On both counts, there are further declines ahead.