While the global pandemic has hit many countries drastically, Macau has been suffering exceptionally hard resulting in damaging impact for the territory’s economy. As Macau’s gambling industry is seven times larger than that of Las Vegas, as much as 80% of the local government’s revenue is drawn out from the gaming sector. The continuous declining revenue is the worst recorded in history for the region and is mainly brought about by the temporary shutdown of casinos, border closures and travel restrictions imposed.
Gross Gaming Revenue Plunges 93 Percent
Another brutal month was reported by the Gaming Inspection & Coordination Bureau (DICJ) as the SAR’s six concessionaires only posted a combined gaming revenue of $221 million for the month of May. The recorded results led to a 93.2% decline, slightly better than the forecasted 95% drop by top analysts but still on the very low end for the struggling industry.
More than double of last month’s revenue of $94.4 million, the recent earnings however, still leaves Macau’s first quarter reports on its significant downturn for the year approximately losing an average of $1 million per day. Currently, the region’s 2020 year-to-date revenue total is down to $15.7 billion, a massive 73.7% decline strongly affecting the overall state of the economy.
“The results for May represent the eighth straight month of declining revenue, coming after Macau had already been battered by a two-year-long trade war and months of Hong Kong protests,” reports Bloomberg.
GDP Shrinks Almost 50%
The territory’s Statistics and Census Service reported Macau’s gross domestic product (GDP) to have fallen 48.7% year-on-year for the first quarter of 2020, a fifth straight quarterly decline for the region’s economic output. In a statement, the bureau also relayed how the current COVID-19 situation had “significantly dampened” global economic activity saying, “Although no widespread transmission of the virus was observed within the city, the economy of Macau, which was mainly driven by exports of services, was severely hit amid the epidemic, with a substantial decline in total demand”.
According to data published, real exports of gaming services from Macau fell by 61.5 percent in the first quarter of this year in comparison with the previous year while real exports of other tourism services shrunk by 63.9% and real investment declined by 36.7%. Being the ninth-highest recipient of tourism revenue, Macau is expected to experience a “much deeper economic contraction” in 2020 than other ‘AA’ -rated locations “whose economies are less dependent on tourism” as suggested by Fitch Ratings Inc. The ratings company also projected the autonomous region’s economy to shrink for a second straight year, declining by roughly 24% this 2020.
6.6% Occupancy Rate in Five-Star Hotels
With tourism at an all-time low, the average occupancy rate in Macau’s hotels has likewise dropped significantly to 12.9%, according to data released by the city’s Statistics and Census Service. Luxury five-star hotels several of which are located within the integrated casino complexes fell to a 6.6% low occupancy rate, down by 85.9% points compared to last year’s data. Highly reliant on tourism, the region boasts of a total 33,800 available guest rooms within 110 establishments with the majority being five-star properties.
The experienced decline was heavily impacted by the “tightened quarantine measures” for travellers according to the statistics bureau. While travellers from Mainland China and Hong Kong are the key markets for the gaming and tourism industries in Macau, the imposed 14-day quarantine period and COVID-19 testing requirement for visitors have ultimately hindered visitors from coming into the world’s largest gaming hub.
For the first four months of the year, Macau’s average hotel occupancy rate recorded only 34.8%, down by 57% points from a year ago to be the steepest year-on-year decline in occupancy rate in history. The Macao Government Tourism Office (MGTO) also published a separate set of data to reveal the average room rate of the region’s three- to five-star hotels in the first four months of 2020 to be at $135.3, representing a year-on-year decline of 21.2%.
Long Shot for Recovery Without Ease on Travel Restrictions
While many are hoping for travel restrictions to and from Macau to ease in the recent months, the slew of strict travel controls within vital regions, including mainland China, Hong Kong and Taiwan are still currently enforced. Macau policymakers are highly motivated to loosen these policies in the coming weeks as economic outputs are driven to a new historic low.
Necessary to Macau’s recovery efforts is the lifting of quarantine protocols in the nearby Guangdong province, a region in Mainland China that provides a significant percentage of VIPs or premium gamblers to the Special Administrative Region (SAR). Travel between Hong Kong and Macau is also currently subject to a 14-day quarantine period in each direction.
Brokerage JP Morgan Securities (Asia Pacific) Ltd said it now expected a “travel bubble” plan for the Guangdong-Hong Kong-Macao Greater Bay Area “to be announced in early June.”
“This should be a meaningful first step toward the industry’s return to normalcy, considering that Guangdong and Hong Kong are the source of the majority of Macau’s visitors,” said the JP Morgan analysts in a note. “This should be followed by gradual easing for the rest of China, which we think could kick in during late July or August, as governments may want to observe the trend after re-opening for at least a month or so.”