October 14, 2022 Macau
Fitch Ratings Inc says it does not expect the relaxation of travel restrictions between mainland China and Macau will result in a quick rebound in revenue for the city’s gaming industry. That is because “uncertainty” and “key risks” related to Covid-19 remain an overhang, said the ratings agency in a Wednesday note.
The number of mainland visitors to Macau has been increasing since the mid-June local Covid-19 outbreak. On October 1, the city recorded more than 37,000 visitor arrivals, its highest daily total since mid-June and the second highest daily total so far this year, according to the tourism authorities.
Macau logged an aggregate of more than 182,000 visitor arrivals from October 1 to 7 inclusive, during the so-called autumn Golden Week. Approximately 163,000 of the visitors were from mainland China, showed official data.
The Chinese mainland is seeing a rise in reported Covid-19 infections coinciding with the week-long break around National Day.
“Macau visitation is beginning to recover following the recent easing of travel restrictions with mainland China,” stated Fitch in its Wednesday memo. “But continued low visitation levels, the potential for a viral variant to cause a reinstatement of travel restrictions, and regulatory uncertainty are key risks that could lead to negative rating actions,” it added.
Fitch had said it expects Macau’s gross gaming revenue (GGR) this year to be only 27 percent of 2019 levels, i.e., before the onset of the pandemic. That would be followed by 50 percent and 70 percent of 2019 levels in, respectively, 2023 and 2024.
“Relaxing strict coronavirus policies could result in a materially faster rebound” in visitor arrivals and revenues, “but the timing of such policy changes is uncertain,” noted Fitch. “Any major easing in the zero-Covid approach in the near term is unlikely,” wrote analysts Colin Mansfield, Connor Parks, and Stephen Boyd.
The central authorities announced in September plans to restart – either in late October or early November – package tours from the mainland to Macau, and to recommence online issuance of exit visas for travellers wishing to visit Macau. The mainland remains to date, since the start of the pandemic, the only place to have a largely quarantine-free travel arrangement with Macau.
But local gaming scholar Wang Changbin said, in comments to GGRAsia, that China shows no sign of easing its “dynamic zero-Covid” policy regarding community management of Covid-19 infection risk, and it may persist into next year.
Fitch highlights a few risks faced by Macau’s casino sector. They include: fresh Covid-19 outbreaks; slower economic growth in the mainland; and regulatory policy uncertainty regarding the Macau licences.
“Capital access for the operators’ Hong Kong-listed subsidiaries, which are the primary debt issuers associated with Macau operations, is likely to remain limited until GGR recovers to levels closer to 2019 and the regulatory overhang from the gaming concessions subsides,” stated Fitch.