Macau Rebound Beset by Delays as ‘Friction’ Sets In

Posted on: October 19, 2020, 12:50h. 

Last updated on: October 19, 2020, 01:49h.

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

Hopes for an earnest fourth-quarter recovery in the gaming mecca of Macau are on hold. Hurdles continue impeding travelers seeking entry into the Chinese territory.

Macau Rebound
An analyst sees a longer road to recovery in Macau. Seen here, employees inside MGM Cotai in Macau. (Image: Reuters)

That deals a blow to expectations that the last three months of 2020 would shape up better than the rest of the year.

The assumption was spurred after Guangdong province resumed issuing individual visit scheme (IVS) travel permits in August, with the rest of mainland China coming aboard in late September. Lingering issues with visa issuance are among the factors hindering Macau’s rebound efforts.

Currently, there’s too much friction for a large scale recovery in visitation,” said Union Gaming analyst John DeCree. “Although visas are available, the online/automated process is not.”

He notes that travelers hoping to go to Macau need to apply for IVS visas in persons and approval times are sluggish. In many cases, the delay is up to two weeks.

As such, the analyst pushes out the timeline for the special administrative region’s (SAR) recovery. That’s something that’s becoming a common refrain as of late. Some market observers believe it will be 2022 before Macau’s gross gaming revenue (GGR) figures approach pre-coronavirus pandemic levels.

Quarantine Policy Enacted for Visitors

While travel to Macau is open for residents of mainland China, the SAR faces other headwinds beyond the slow-moving visa approval process.

There’s still a 14-day quarantine policy for visitors arriving from Hong Kong. The policy is also enforced on the return trip to that SAR.

It makes travel between the two autonomous regions undesirable for many would-be gamblers. That’s relevant because, in a standard operating environment, Hong Kong accounts for 10 percent of visits to the gaming hub and 15 percent of its GGR.

Additionally, Chinese citizens seeking entry to Macau must present negative COVID-19 tests, a step that makes trips more difficult.

“Travelers to Macau still need to present a current (7 days) negative nucleic acid test. This makes last minute, spontaneous, or frequent trips impractical,” said DeCree.

The analyst points out that authorities are mulling extending the time frame on the validity of the negative test results to 14 days, which he says would be “moderately helpful” for Macau.

Junket Operators Pull Cash

DeCree also mentions some other issues popping up recently with regards to Macau, including a junket business he describes as “impaired.”

The consensus is that the SAR’s junket industry isn’t structurally impaired, but it’s being tested by Beijing’s efforts to curb cross-border money transfers. This is crimping VIP demand.

As a result of the central government’s crackdown, junket operators are pulling billions in cash, much of it denominated in Hong Kong dollars, from gaming company accounts.

DeCree adds that there is some concession renewal risk on the horizon, even if the deadline is pushed out to 2022. While analysts aren’t shying away from acknowledging license renewal issues, the prevailing wisdom is that China doesn’t favor barring US operators from Macau, and that tensions between the two countries will ebb if former Vice President Joe Biden defeats President Trump in the upcoming presidential election.