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Macau Casinos Suffer Over $2 Billion in Losses for H1 2022
By Jeff Osienya Aug 25, 2022 IndustryMacau is on the receiving end of COVID-19 yet again, reporting a crushing $2 billion loss between January and June 2022. Restrictive government policy isn’t helping the situation either. However, the region is expected to bounce back sometime in 2023.The Macau gambling industry continues to face serious economic challenges following a series of political and pandemic-related obstacles. A recent report has revealed that the Chines Special Administrative Region (SAR) lost over $2 billion in H1 2022, a clear sign that its ongoing casino woes will not end any time soon.
The Macau economy has been in a slump for quite some time and more so after the Chinese President turned his attention to the SAR as part of his ‘common prosperity’ agenda. The past year has brought the gambling mecca to the brink of turmoil as casino operators began reporting significant losses in revenue. China’s casino industry, which is only legal in Macau, is the government’s latest victim in a regulatory crackdown that has hit several other sectors, including tech, education, and entertainment.
All 41 Casinos in the SAR Reported Huge Losses
Owing to the heavy losses, the total revenue recorded for H1 2022 in Macau stands at $3.3 billion. The recent H1 revenue reports come on the heels of a new strain of Covid-19 that ravaged the SAR, causing a 12-day shutdown of casinos in July. This is no doubt going to reflect on the Q3 and H2 2022 reports as well as the yearly financial reports. All the 41 casinos in the SAR reported upsetting H1 losses that neutralized the success that was recorded over the same period last year.
Galaxy Macau Casino reported a $108 million loss in H1 2022, and Melco Resorts & Entertainment saw a 29% drop in revenue with $434.7 million in losses. Other operators who experienced huge losses include Wynn Macau, which revealed that it lost $$458.8 million, and Sands China which posted a $759.6 loss at its Sands Macao and Venetian Macao establishments. Likewise, SJM Holdings also lost about $350.5 million.
Not the First Struggle in Macau’s Gaming Market
The current situation in the Macau gaming industry is not new, as the world’s gambling capital has had a few losing streaks over the years. But, of course, each time, the world’s largest gambling hub sprung back to its feet and even exceeded its previous all-time highs. The SAR has had a history of setbacks caused by various factors ever since the liberalization of the Macau casino market in 2002, which opened the region’s economy to foreign investors. By the end of 2006, Macau had bested Las Vegas to become the most lucrative gaming economy in the world.
The first blow to the gaming revenue stream began in 2008 when investors started pulling out of the game following fears of an imminent collapse due to the Global Financial Crisis of 2008-2009. At that time, visa curbs had also been imposed on tourists. As a result, operators moved fast by cutting costs by laying off workers, among other things but still suffered significant losses. The year-over-year decline was a whopping 18.1% from 2008.
In 2014, another precarious wave of panic swept across Macau as President Xi Jinping launched an anti-corruption campaign after taking charge in 2013. This caused high rollers to go underground and mostly refrain from crossing over to the Southern Chinese city to gamble. At the time, casinos reported losses on consecutive months at an average of 20% month-on-month basis. Another setback that hit the industry back then was a daily cash limit on tourists traveling into and out of the SAR.
Unfortunately, the current situation is worse than things have been before. Besides the damages incurred from the pandemic outbreak since 2020, recent government efforts have frustrated the industry and created a hostile environment that discourages any immediate progress. Consequently, the region’s GDP has dropped by over 50%, which is way below that of other jurisdictions. This damage is a definite wrench in the works for a region that has boasted one of the highest GDP per capita compared to over 90% of economies worldwide.
Recovery Expected in 2023
Since the start of the pandemic, investors have been debating whether to continue pouring money into the SAR’s gambling industry. Moreover, most investors have also been spooked by the government’s recent actions, including the recent endorsement of radical gaming reforms.
Applications for casino licenses have been open for a few weeks now, and global operators are expected to submit their bids for a chance to be one of 6 holders in the region. The current license period expires at the end of the year, and by then, the vetting committee would have decided on who wins the bids.
As the market faces what may be the most challenging period yet, analysts have predicted that the earliest signs of recovery may be in 2023. The projected sluggish recovery pace is attributed to low visitation rates from ongoing quarantine and the ‘Zero Covid’ policy being implemented by Xi’s government.
In addition, the overly strict measures to zone in on corruption coupled with the effects of the pandemic is a sure sign that things will take time to normalize again. However, the good news is that Macau has been through this before and may yet again thrive and rise to the top once more.
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