Regulatory Woes, Coronavirus Vaxx Key 2022 Issues for Some Casino Centers, Says Fitch

Posted on: November 24, 2021, 10:10h. 

Last updated on: November 24, 2021, 01:49h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Casino hubs facing regulatory headwinds and strict coronavirus vaccination policies could have headwinds in 2022. That’s while regions that have higher vaccination rates and those making due with the pandemic should see smoother sailing in the new year.

international casinos
International casinos, such as Parisian Macau, could bounce back in 2022. However, Fitch Ratings sees potential headwinds. (Image: Wall Street Journal)

Broadly speaking, the global gaming operating climate is improving, with those dependent on domestic visitors likely to surpass pre-pandemic gross gaming revenue (GGR) figures in 2022, according to Fitch Ratings. That rebound is already materializing in the US, as Nevada is on an impressive pace of $1 billion-plus GGR months, while some regional casino markets are on fire, too.

Jurisdictions with faster vaccination rollouts and ‘living with the coronavirus’ mentalities, like the United States, are experiencing stronger recoveries than those that rely on international visitation,” says Fitch.

During the pandemic’s early days, the consensus was that Asia-Pacific gaming markets would rebound more rapidly than the Las Vegas Strip and US regional casinos. But the opposite is proving true. Shares of Las Vegas and regional-heavy operators are among the best-performing gaming equities this year, while rivals dependent on Macau and other Asian markets are sagging.

Plenty of International Issues to Consider in 2022

While international GGR figures could perk up next year, Fitch sees an array of challenges facing operators in multiple regions outside the US.

“Regulatory uncertainty will be a key global theme in 2022. In Macau, concessions expire in June, and uncertainty remains on the concession rebidding process and future regulatory & operating structure,” said the research firm. “For Australia, license suitability is still overhanging both major operators. Restrictions on digital gaming, such as bet size and loss limits, are expected to continue in Europe.”

Amid heightened regulatory fears and slow-moving action on border reopenings — the latter of which is fostered by China’s zero-tolerance policy on COVID-19 — 2021 has been miserable for Macau stocks. Analysts and investors are largely displaying preferences for casino operators with Las Vegas or domestic regional exposure over Asia-Pacific fare.

Specific to Macau, the world’s largest casino center, there are avenues for a rebound. If COVID-19 case counts remain low and vaccination rates accelerate, authorities may be compelled to open more borders and permit higher levels of tourism from mainland China. Second, if officials there back off some previously heavy-handed regulatory efforts and highlight a clearer path to 2022 concession renewal, shares of operators there could rally.

Better Ratings Outlooks in the US

Fitch is one of the three major credit ratings agencies, and it notes that plenty of Asia-Pacific casino operators relying on international tourism still sport negative outlooks on their credit ratings, implying downgrades are possible.

Conversely, many domestic operators have shed the negative outlook status because of strong recovery here in the US.

“Stabilized outlooks are most common for domestic operators and digital operators that have seen cash flows fully recover, though shareholder return initiatives have come back into focus,” adds the research firm.