The Macau government has ordered a 15-day closure of all casinos and gambling operations in the city in order to contain a further outbreak of the novel coronavirus.
The decision, which took effect from midnight, is the longest-ever suspension of gambling activities since the liberalization of the sector at the start of the century. It is only the second such suspension after Typhoon Mangkhut forced a 33-hour shutdown in 2018.
The announcement was made during a special press conference convened yesterday by Chief Executive Ho Iat Seng. The city’s leader said that the discovery of two casino operator employees among the now 10 cases of coronavirus in Macau had inspired the decision.
“I remember I was asked earlier by a journalist if the casinos would close should the situation worsen,” the Chief Executive recalled at a special press conference held yesterday. At the time, Ho had refused to rule out the possibility.
“Today, we see the risks heightened, as one of the new cases works in a casino complex,” continued Ho. “It’s too early to determine when the situation will get better, so we have decided to suspend casinos and [gambling-]related activities for half a month preliminarily.”
The 15-day suspension will affect the gaming areas of integrated resorts and other casino establishments, but hotels are understood to remain open.
The closure also covers other entertainment facilities including cinemas, theatres, indoor playgrounds, internet cafes, billiard rooms, bowling alleys, steam rooms, massage parlors, beauty salons, fitness centres, health clubs, karaoke premises, bars, nightclubs, discotheques and dance halls, according to the Executive Order published by the government.
Asked about the economic impact of the half-month closure, Ho said that the city is prepared to “bear that cost,” adding that there may never be a better time to tap into the government’s fiscal reserves. Gaming taxes, which account for about 80% of local government revenue, have allowed the special administrative region to maintain one of the world’s healthiest fiscal and foreign currency reserves per capita.
The Chief Executive and Macau’s Secretary for Economy and Finance, Lei Wai Nong, later met with representatives of casino operators and other betting companies, all of whom agreed to cooperate with the suspension, according to the government.
The top economy official said that casino operators had promised to uphold their corporate social responsibility commitments by not making staff redundant or asking them to take unpaid leave. He said that the casino operators had assured that their employees would have their salaries paid as normal.
“We should not be overly pessimistic” about the economy, said Lei. “Gross gaming revenue will drop to zero [during this period], but we need to ensure the health of locals and tourists as our first priority. We can make the money back in the future.”
Gross gaming revenue dropped 11.3% in January to 22.12 billion patacas, according to official data released over the weekend by the Gaming Inspection and Coordination Bureau.
Behind January’s contraction is the plummeting number of visitor arrivals from the mainland, Macau’s primary tourist source market, where the deadly coronavirus outbreak has infected more than 20,500 and killed over 420 as of Tuesday. Visitor arrivals dropped by about 80% during the Chinese Lunar New Year period according to preliminary data provided by government. The festive period, when millions of Chinese travel and shop, typically gives casino revenue a big boost due to the influx of tourists.
The casino sector directly accounts for about half of the local economy, but is also a lifeline for many small and medium-sized businesses in the city.
Market analysts agree that casino operators will likely bear the brunt of any short-term pain to the local economy caused by this “extreme measure.”
“This is indeed an extreme measure. It is unlikely for casino operators to pass all this burden to staff, so they may bear all the fixed costs and expenses,” Angela Han Lee, equity analyst with China Renaissance Securities HK, told Bloomberg. “Near-term profit might fall into the negative territory.”
“Due to the travel restrictions in place, virus concerns and no more visas issued under the individual visitation scheme, we expect the gross gaming revenue to likely stay weak near term,” said analysts at Credit Suisse led by Kenneth Wong. “The suspension will drag the sector performance for a longer period, in our view.”
Analysts at Sanford C. Bernstein predicted that even a two-week shutdown could cause gross gaming revenue to slump by as much as 50% in the first quarter.
“Whatever the details of the temporary shutdown are, the first quarter is obviously going to show awful results,” noted a memo from Sanford Bernstein, as cited by GGRAsia. “Assuming only a two-week shutdown followed by some soft business resuming in late February and March, the first quarter could show [gross gaming revenue] year-on-year decline of 50 percent,” the analysts said.
The Bloomberg Intelligence index of Macau operators fell as much as 3.7% on Tuesday on the news, with every stock in the gauge declining. MGM China Holdings Ltd. and Galaxy Entertainment Group Ltd. were the worst performers among the six concessionaires.
Casino operators contacted by the Times expressed support for the measure and said that they would cooperate to prevent the coronavirus from spreading in Macau.
“In light of the pneumonia outbreak caused by novel coronavirus, Galaxy Entertainment Group has been working closely with the relevant [government] departments, and adopted and supported all protective measures laid out by the Macau SAR Government,” said Buddy Lam, senior vice president of public relations at Galaxy Entertainment Group (GEG), in an emailed statement to the Times.
“Despite that the closure of gaming premises may bring challenges to the industry and Macau’s economy, GEG fully supports the government’s decision and believes that the most important thing is for society to unite and work together to contain the spread of the virus.”
A representative for Melco Resorts & Entertainment said that “the health and safety of guests and colleagues is a top priority, and we have put in place stringent measures to best safeguard their well-being. We continue to work closely with the government and are supportive of their initiatives to prevent the spread of the new strain of coronavirus.”
Katharine Liu, senior vice president for communications at Wynn Macau, said that the company’s “greatest concern and our top priority is the health and safety of our employees, their families and the citizens of Macau.”
“We support the Government’s decision to prioritize public safety and temporarily suspend the operations of all of Macau’s gaming areas, which we believe is in the best long-term interests of everyone concerned. We will fully cooperate and comply with all government directives and recommendations,” added Liu.
A representative for MGM said, “the health and safety of our employees, guests and all Macau citizens are of paramount importance and the control of the virus outbreak is our current topmost priority. As a responsible corporate citizen, MGM will follow the government’s direction and fight the epidemic in spirit of solidarity and cooperation.”