Golden Week isn’t so golden, and the reverberations of the depressed Macau gaming market are being felt in Las Vegas by three casino operators.
Many analysts expected Golden Week – the second most lucrative holiday on the Chinese calendar – to be the turning point in boosting the gaming enclave that has experienced six straight months of 90% gaming revenue declines.
Roth Capital Partners gaming analyst David Bain, however, wasn’t part of the optimistic crowd.
Last month, he warned investors that high hopes for increased Macau visitation due to the lifting of travel constraints from several Chinese provinces would have little impact.
His prediction was borne out when the Macau Government Tourism Office said visitation was down 86.2% for the first four days of Golden Week.
“Headwinds to visitation continue, including slow visa processing (and) cumbersome COVID testing logistics,” Bain said in a research note Monday. “While Golden Week investor expectations were finally reined in over the last two weeks, we believe (the first four days) of October visitation are disappointing, even amongst lowered forecasts.”
Most analysts believe Golden Week gaming revenues will be down between 70% and 80% compared to a year ago. That actually wouldn’t be bad, considering Macau has been a revenue disaster since January. The outset of the coronavirus pandemic caused the cancelation of Chinese New Year and led to a 15-day shutdown of all Macau casinos in February.
“Investors have been cautious toward Golden Week … amid low expectations,” said Macquarie Securities gaming analyst Edward Engel. “While Golden Week may disappoint, the conclusion of the holiday should remove an overhang as investors look further out for the recovery.”
Masked-up Venetian Macau customers
Macau’s total gaming revenue for the first nine months of 2020 is $4.84 billion, down 82.5% from a year ago. In all of 2019, Macau casinos produced $36.6 billion in gaming revenues.
At this pace, the world’s largest gaming market is in danger of being passed by Nevada, which has challenges of its own related to high-end business.
On the Strip, revenues from baccarat are down 42.6% through August. Wagering is off 34%.
The numbers aren’t surprising, given that much of the Strip’s high-end play is associated with special events. Those attractions have been non-existent since March after COVID-19 led to a 78-day shutdown of all gaming in Nevada.
International customers, primarily from Asia who are the major baccarat players, have also disappeared. Through August, international airline travel to and from Las Vegas is off more than 72%. The only intentional flights Las Vegas has seen are from Canada and Mexico.
That’s not good news for Las Vegas Sands, Wynn Resorts, and MGM Resorts International. Macau overhangs the three Las Vegas-based companies, which use Macau to help attract high-end play to Las Vegas.
MGM Resorts draws roughly 21% of its quarterly revenues from its two Macau resorts, the smallest percentage of the three. Wynn’s Macau revenues are roughly 70% of the overall total.
Las Vegas Sands has the highest concentration of resorts in Macau, including the Venetian complex, Sands Macau, and the Parisian. The company is also spending $2.2 billion to convert Sands Cotai Central into the Londoner, which is expected to be completed next year. The market represents 65% of the company’s annual revenues.
The challenge, however, is Las Vegas Sands’ close ties to both the political and economic outlook in Mainland China. Should U.S policy toward China have an adverse impact on American companies doing business there, Bain suggested that Las Vegas Sands could face additional risk.
On Tuesday, research firm Spectrum Gaming Group released its annual list of the top trends in gaming – the most significant issues that regulators, operators, and suppliers need to consider as they make plans for the coming year.
Obviously, COVID-19 looms over the industry.
Spectrum predicted that Macau would experience a steady increase in both visitation and gaming revenues “as it transitions to more of a destination market.” However, government-imposed restrictions on travel for Chinese nationals will create repercussions throughout Asian gaming, “including severely restricting the ability of junket operators outside Macau to function.”
Similarly, travel-related impediments in the U.S. – combined with a possibly lengthy recession brought on by small business closures – will slow the economic recovery in Las Vegas, Spectrum said.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
