Macau kicked off 2021 by recording an increase in its gross gaming revenue (GGR). However, a rise in COVID-19 cases across mainland China forced the city to reimpose travel restrictions and extend other measures designed to curb the spread of the virus. The deteriorating situation on the ground prompted analysts to reassess their previously upbeat forecast, and it’s now expected that GGR will only reach 42% of the 2019 level.
The restrictions also require arrivals from Hong Kong to quarantine for two weeks, which won’t help Macau attract tourists and players. Furthermore, the Macau government remains firm that it won’t change this policy until Hong Kong doesn’t see any new infections for 28 days.
Analysts lower the full-year projection for Macau’s gross gaming revenue by 5%.
JPMorgan analysts DS Kim, Livy Lyu and Derek Choi, said they were disappointed with the slow launch of the so-called travel bubble between Macau and Hong Kong, which would impact forecasts for 2021. They expect the mass gaming market GGR to reach only 51% of the 2019 levels and VIP market just 26%.
Hong Kong and mainland China are the primary sources of revenue for casinos in Macau. The new COVID-19 cases make it challenging to return to normal.
“Hong Kong’s importance lies in its position as a key channel for traveller and capital flows from the mainland, in our view,” JPMorgan’s analysts said. This is not a surprise since Hong Kong generates between 15% and 20% of Macau traffic and 10% of GGR.
Macau GGR was up 92% in April, with $1.05 billion in revenue.
May showed further signs of a rebound from the pandemic, but new restrictions have dispelled any optimistic predictions in June. GGR during Q3 is expected to hit 43% and in Q4 58% of the pre-COVID-19 year. This is a significant drop from previous forecasts of 50% and 66%.
Brick and mortar gambling venues will have a difficult time recovering from the effects of the pandemic. However, plenty of online casino venues are acting as a great alternative until travel restrictions are lifted.