Americans are currently debating the proper time and manner by which to end the coronavirus lockdowns and open non-essential businesses, including casinos. As each state makes its plans, there are few precedents to consider. Biloxi, Mississippi is probably the best candidate; its casinos have been closed before by hurricanes, so, while it’s far from a perfect parallel, Mississippi’s operators are experienced in the process of starting again after a disaster. But hurricanes and viruses are not the same, of course. A more comparable example might be Macau.
The exact origin of the coronavirus is still a subject of debate and investigation. One thing is undeniable, however: it gained the world’s attention when it surfaced in Wuhan, China. China reacted quickly once it publicly acknowledged the severity of the outbreak. President Xi Jinping canceled Chinese New Year and all public gatherings and celebrations. In normal times during the New Year week, as many as 400 million people travel to visit family, shrines, and other culturally important sites – and many of them go to Macau to have a go at the casinos, as well. All of that notwithstanding, China came to a dead stop within a matter of days.
A pedestrian wearing a protective mask walks past Wynn Macau
The city of Macau also responded; it ordered the casinos to close for two weeks, limited all public gatherings, asked people to remain at home, and restricted all travel within the city. Besides the limit on travel and public events, Macau increased testing and began a mask distribution program. It was done in rounds. Each round lasted a few days, and, as of April 20th, the city had distributed roughly 46 million masks. Macau also authorized monetary aid for individuals and small businesses. Residents received electronic cash cards or vouchers they could use to help them through the crisis. The casinos contributed by retaining their employees and donating food, masks, and money to the fight against the virus.
The casinos reopened after 15 days, limited at first to 50 percent capacity and 50 percent player occupancy. Social distancing was enforced, employees and customers were required to wear masks, and frequent cleanings were mandated. The limit on the number of customers appears to have been unnecessary; there have not been many. Over the Easter weekend, when as many as a million people might have been expected to come to the casinos in Macau, only approximately 1,000 people entered the city. Gaming revenue reflects a lack of gamblers. Revenues were down 80 percent in February and March, and April is not looking much better.
There are no gamblers because of the restrictions that Macau and China have put on movement. Macau stopped nearly all incoming traffic, and the people it did allow in were subject to testing and a 14-day quarantine. The city took over control of 12 hotels to use for the quarantine. However, the measures that had the biggest impact were the cancellation of individual visas for Chinese citizens, and the lockdown of Guangdong Province. Before the elimination of individual visas, those travelers accounted for 47 percent of Macau’s visitations. Travel to and from China is highly restricted and not allowed at all from Guangdong. Macau gets 80 to 90 percent of its visitors from China, and 80 percent of those come from Guangdong. Until the travel and visa restrictions are lifted, Macau is not likely to see an increase in gaming revenue.
In the meantime, the city is increasing its controls on travelers. To enter Macau, a person must have a certificate of a negative test, have a normal temperature, and not have visited one of the restricted regions or countries in the last 14 days. And it is continuing its quarantine policy, although it now only has two hotels earmarked for the process. In total, Macau has had less than 100 cases, and most of those cases were introduced by people returning from Wuhan, England, Italy, and the United States. Those people were identified and quarantined, keeping the virus from spreading throughout the city. Macau has been very successful at containing the virus. It has not yet figured out how to restart the casino business, however.
Macau has a new chief executive, Ho Iat Seng took office at the end of December; on April 20th he made his first policy statement. It does not seem Ho is going to be particularly friendly toward casinos. That may complicate the recovery even more. Ho made it clear he would not reduce gaming taxes to help the casinos during the crisis. He expects the casinos the retain all employees and continue their efforts at diversification. Ho also announced a bidding process for the licenses when the renewal process begins in 2022. The rules and criteria have yet to be determined.
The casinos may not eligible for a tax break or government subsidies, but they will be getting some help. Macau has committed $400 million to a program intended to convert day-trippers into overnight visitors. The logic is good – an overnight visitor is worth three times the amount of a one-day player, Maybe Ho and his team will develop a magic wand to convert those day-trippers into free-spending overnighters. It is not as easy to do as it is to say, unfortunately.
In the end, Macau does not offer much insight into what needs to happen to reopen the casino industry in the United States. Macau’s situation is unique because it relies on almost completely on China. Therefore, China’s economic health and its policies will determine Macau’s future. Macau is a long way from recovery, and until China reduces restrictions on travel and its economy has started to rebound, it has little hope for doing so. A recent survey in China indicated that Chinese citizens were putting off travel planning until next year. Macau and its casinos are not yet a priority for President Xi or China, and until – or unless – that changes, Macau will struggle.
