Ratings agency Fitch has warned that the recovery path for Macau’s gaming operators remains blurry, despite its short-term prospects appearing brighter than other regional locations such as Singapore or the Las Vegas Strip.
In a note examining the recovery pathway for major jurisdictions around the world, Fitch noted that those with access to locals markets or with some online gaming exposure were performing best during the early days of COVID-19 recovery, placing European casino operators and US regionals at the top of the pile.
While destination markets outside of the US, including Macau, are so far performing poorly, the agency said it “expects Macau to recover faster than Las Vegas, due to closer proximity of Macau’s feeder markets,” namely mainland China.
“However, the recovery trajectory for Macau is still opaque. Travel restrictions remain in Hong Kong and there is a potential for a reversal of mainland Chinese policy if there is an increase in coronavirus cases.
“Fitch projects third-quarter 2020 and fourth-quarter 2020 revenue to be nearly 80% and 50% down, relative to 2019 periods, respectively. Revenues for 2021 are projected to be about 20% below 2019 levels.
“Elsewhere in APAC, destination casino resorts in the Philippines, Singapore and certain states of Australia recently reopened and will have the benefit of respective local markets. However, these gaming markets have varying reliance on international travel, which will remain tepid in the near term.”
Likewise, while US regional operators such as Penn National Gaming and Boyd Gaming are showing promising results, destination operators such as Las Vegas Sands – whose three key markets of Las Vegas, Macau and Singapore all rely on foreign visitation – continue to be “at the mercy of long-distance travel trends normalizing, the timing of which remains uncertain.”
Fitch said casino operators in Europe appear best-placed due to their exposure to online gaming.
“Performance through the pandemic has held up well, given the challenging environment,” it said. “Online casino games and poker helped to offset declines across retail locations and lack of sporting events to wager on during parts of first-half 2020.
“Large EMEA (Europe, Middle East and Africa) gaming operators GVC Holdings (BB/Negative) and Flutter Entertainment (BBB–/Negative) reported flat or higher EBITDA in first-half 2020.”
Fitch added, “We expect the revenue generation of companies exposed to local markets and online channels to hit 2019 baseline levels faster than those with high exposure to destination markets or markets with a more cautious approach to re-opening and travel.”
