Why Social Distancing Won’t Put the Brakes on Macau Gaming Recovery
May 20, 2020 – Some of the more striking images from the COVID-19 lockdowns have been from places like Macau and Las Vegas, where casinos which would normally be filled with activity, are seen empty and dark. While casinos in Macau were allowed to open back on February 20th, travel restrictions across Mainland China remained in place as did border restrictions in Hong Kong. As these begin to lift, players are starting to return to the gaming tables. However, their new casino experience will be markedly different from the one they experienced before COVID-19.
Like most other public spaces, temperature checks are likely required at the door and initially, masks will need to be worn at all times. But the biggest change will be at gaming tables, where regulators have issued conditions stating that gaming tables can only operate at 50% capacity — every other seat must be empty — and players cannot place bets while standing at the table.
Many are concerned that these restrictions will mean that gross gaming revenue for casino operators will not be able to recover to previous levels. We disagree. Based on the proprietary table surveys which we’ve collected since January 2014, we don’t believe the newly imposed conditions will be a bottleneck. Based on our observations, mass market Baccarat table utilization historically is below 100%. And in the premium mass segment, which makes up 60% of gross gaming revenue, only ~46% of Baccarat tables are generally at play and each table had on average around two players. This is below the upper limit of four with the social distancing measures.
Ironically, the new measures may also increase gaming volumes. Time spend per game is one of the major factors that determine casino gaming volumes. As top wagering players will be able to play at higher speeds due to fewer players at the table, increasing the speed at which top wagering players are able to play should lead to higher gaming volumes.
But will people flock back to casinos once travel restrictions are lifted? Preliminary signs on Chinese domestic tourism are encouraging. We view this is a positive for Macau casino volumes and supports our view that gross gaming revenues will swiftly recover soon after the quarantine requirements and travel restrictions are lifted.
Authors: George Choi, CFA,