The most pressing question in Macau has been when will casino business levels return to normal? Defining “normal” as three months of GGR matching or exceeding the same period in 2019, most analysts are predicting an optimistic Q3 or Q4 recovery. I predict a return to the good old days in Q2 of 2021.
With the sudden spread of the Covid-19 virus to outside China, we are on the cusp of a pandemic which will devastate economies worldwide. Blue chip companies like Microsoft and Apple have already warned of lower earnings due to supply chain issues, before the spread of the virus within the US. The 11-year economic recovery will likely end this year, which, combined with China’s slump, will trigger a global recession.
The Chinese government will offer an aggressive monetary stimulus in order to revive its key industrial and financial sectors, which coincidentally generates the capital of many of Macau’s premium and VIP players. The government will not look favorably on these players spending their time and money in casinos – many foreign-owned – instead of working on economic recovery.
Reduced demand for Chinese goods may also lead to factory layoffs, adversely affecting the ability and mood of the mass segment as well.
For Macau to get back to the good old days, it needs four factors: First, transportation to be revived (which the central government favors); second, visas to be issued (which can be deliberately slow-walked); third, player sentiment to turn positive (difficult during recessions); and finally, access to money (increasing crackdown by the government on underground banking and Union Pay).
Economies around the world – especially China – are expected to undergo an extended period of uncertainty. Casinos, reliant on demand and player sentiment, will undoubtedly be affected until the next recovery.