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Macao casino revenues drop 80% in March, but worst may be yet to come

Revenue generated by Macao's casino industry plunged 79.7% in March, and further struggles may be in store with the introduction of tighter entry restrictions designed to prevent the spread of the new coronavirus in and around the world's largest gambling hub.

Data released April 1 by the Gaming Inspection and Coordination Bureau shows that gaming revenue fell to 5.26 billion patacas, the sixth consecutive month of declines. Before the coronavirus outbreak, casinos were already suffering from reduced footfall due to the anti-government protests in neighboring Hong Kong.

The Macao government on March 20 halved its forecast for gross gaming revenue in 2020 to 130 billion patacas, 55.5% lower than the 292.46 billion recorded in 2019. Gaming reportedly accounted for 80% of tax revenue collected by the Macao government last year.

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Casinos in Macao were closed for 15 days in February after a hotel employee was found to have contracted the virus. On March 19, the Gaming Inspection and Coordination Bureau said 37 out of 39 casinos in Macao had resumed operations, with 80% of tables reopened. Overall, Macao had 41 confirmed COVID-19 cases as of April 1, according to Johns Hopkins University.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Yet the casinos are likely to remain nearly empty as the Chinese gamblers who make up the bulk of visitors will not be returning anytime soon. The Chinese government on Jan. 28 announced a temporary freeze on individual visitors to Macao. The move by the neighboring Guangdong province to impose a 14-day quarantine on all arrivals, including mainland Chinese residents, starting March 27, marks another blow to the casinos in Macao, Jefferies analyst Andrew Lee wrote in a research note.

Lee said the policies had led to hotel cancellations in Macao. Jefferies estimated that 32.5% of Chinese visitors to Macao in 2019 embarked from Guangdong, the largest proportion among all the Chinese provinces.

"Although we expect recovery from 3Q20 onwards, the Guangdong quarantine is likely to lead to weaker near-term [gross gaming revenue] and visitation," Lee wrote, noting that industry sources have suggested that gaming revenue could be close to zero over the near term.

Furthermore, on March 25, the Macao government began barring entry to residents from mainland China, Hong Kong and Taiwan who have traveled overseas in the past 14 days over fears of a second wave of infections in the region on top of a 14-day quarantine for those without a travel history.

All visitors to Macao are now required to fill a health declaration form before entering, while patrons at casinos are required to wear face masks.

Though executives have been bullish about a swift recovery, the measures will place a heavy burden on the global casino operators, many of whom count on Macao as a key source of revenue.

MGM Resorts International said March 27 that net revenues for the first two months of 2020 were down 10% year over year due to lower footfall in Macao. Two days earlier, Fitch Ratings downgraded the ratings of MGM and its MGM China Holdings Ltd. subsidiary.

The websites of casinos such as Sands Resorts Macao and Venetian Macao, operated by Las Vegas Sands Corp.'s Sands China Ltd. subsidiary, show that shuttle bus services are suspended, and a significant number of restaurants at the facilities remain closed. The companies' ratings were placed on review for downgrade by Moody's on March 16. Macao accounts for about 64% of Las Vegas Sands' revenue, Moody's said.

Wynn Macau Ltd., the Wynn Resorts Ltd. unit, announced March 30 that it is scrapping its dividend for 2020 due to the impact of the COVID-19 crisis.

As of March 31, US$1 was equivalent to 7.98 Macanese patacas.