Ghost Town

The closure for all casinos for at least half a month and the plunge in the visitation in view of the outbreak of the novel coronavirus will take a toll on the local economy, and any recovery depends on how long this epidemic will last.


●       15-day shutdown might result in a MOP12-billion (US$1.5 billion) loss in gaming revenue; February gaming revenue to decline up to 75 percent, reducing the 2020 annual revenue by 6 percent

●       Visitation figure in February might drop 80 percent

●       Analysts only see the recovery of gaming industry, tourism, and other sectors in the second half of this year at the soonest

●       Large corporations, retailers, and SMEs also temporarily suspend their operations or shorten the opening hours amid the casino shutdown and virus outbreak

●       Macau government pledges to roll out an array of measures to support the economy

No more glitz, at least for the moment. Taking an extraordinary move to curb the outbreak of a new strain of coronavirus, which is from the same family that caused the SARS (severe acute respiratory syndrome) epidemic in the late 2002-2003 period, the Macau government has ordered the closure of all 41 casinos in the city for at least 15 days starting from the midnight on 5th February.

It was the latest hit to the gaming-reliant economy, which has already been dragged down in recent times by a plunge in the visitation to the city, as Macau and Beijing try to curtail this new pneumonia-like illness, which is believed to have originated in the Chinese central city of Wuhan. While analysts are still assessing how long and profound the economic impact might be, the economic outlook in the next few months are — without any doubts — grim.

In a press conference announcing the closure of all 41 casinos here, as well as cinemas, theatres, fitness clubs, beauty salons, discos, bars, nightclubs, and other entertainment venues, for half a month, Chief Executive Ho Iat Seng: “This is, of course, a difficult decision, but we have to do it for the health of Macau’s residents.”

“We will have no [gaming] revenue in this half of a month, while other industries will only contribute to a minimal income [for the government],” he noted. “We will also launch different tax relief programmes to support the city in this difficult period, so we will definitely have a budget deficit this year.”

It’s the second time all the casinos in Macau have come to a halt since the 33-hour shutdown amid the lashing of Typhoon Mangkhut in 2018. The gaming industry makes up about half of the territory’s gross domestic product (GDP), and about 80 percent of the government revenue.

“Our robust fiscal reserve comes into play now to support the city in this difficult period,” Mr. Ho, who was wearing a facial mask, told the press. “Macau can still bear these economic losses,” he added, who does not rule out to extend the closure period should the epidemic continue to escalate.


More infections

This decision came as the city has reported 10 cases of the novel coronavirus as of February 4, including a 29-year-old employee at Galaxy Macau, the flagship integrated resort operated by gaming operator Galaxy Entertainment Group Ltd, and a 59-year-old coach driver of another operator SJM Holdings Ltd. The first cases of this new coronavirus were first reported in December in Wuhan, a major transportation hub in the central part of the mainland with a population of 11 million.

In just two months, this illness, which could be transmitted via person-to-person transmission, has quickly spread across the nation and the globe. As of 4th February, there were over 24,530 cases of the novel coronavirus in all provinces in China, claiming over 490 lives, according to the Chinese authorities, while Taiwan and Hong Kong have recorded 10 and 18 cases respectively. Albeit a lower mortality rate, the number of Wuhan Coronavirus infections in the Greater China region has far exceeded the number of SARS cases in the 2002-2003 period, when there were 5,320 cases, 1,750 cases, and one case respectively in Mainland China, Hong Kong, and Macau. Beyond the Greater China region, 24 countries have also reported the infections, including the United States, Australia, Singapore, South Korea, Japan, Malaysia, France, Canada, Vietnam, the Philippines, Thailand, and others.

MOP12 billion revenue loss

Hayman Chiu, research director of brokerage Cinda International Research Limited, expects the gaming industry will lose at least MOP12 billion in the 15-day closedown, based on the calculations of the daily average of about MOP800-850 million in the January-February period of 2018 and 2019.

“The casinos basically had no guests, and the gaming revenue has gone downhill in the Chinese New Year period before the closedown,” said Mr. Chiu, who has visited the gambling enclave during the CNY period, which fell on end-January, one of the traditional peak seasons for the gaming industry when tens of thousands of Mainland Chinese flocked to the territory.

According to government figures, the 2019 Macau gaming revenue totalled MOP292.46 billion, down by 3.4 percent from the previous year and is the worst performance since 2015, amid the on-going trade war between China and the United States, the slowing mainland economy and months of protests in nearby Hong Kong. The latest monthly data show the gaming industry raked in MOP22.13 billion in January this year, plunging 11.3 percent year-on-year, which, however, was yet to show the full impact of the epidemic.

Mr. Chiu agrees that the shutdown will help contain the outbreak more effectively so that the industry will be in a better position for recovery at the end of this epidemic. “But the outlook will worsen should this epidemic continue to deteriorate and the closedown period be extended,” the brokerage research director added.


Grim 1H

Brokerage JP Morgan said in a research note after the casino shutdown: “February GGR [gross gaming revenue] is expected to drop roughly 75 percent to US$700 million (vs US$2.8 billion originally), which in turn would reduce our annual GGR by -6 percent.”

The brokerage added the local gaming industry is set to incur a US$300 million EBITDA loss in February, around US$1 billion less than the original February forecast of a US$700 million gain before the virus outbreak. Despite the 15-day shutdown, all six gaming operators agree with the government that it would continue to pay the casino workers, equivalent to about 40,000 in total across the sector.

“Assuming only a two-week shutdown followed by some soft business resuming in late February and March, [the first quarter] could show GGR [gross gaming revenue] y/y decline of 50 percent,” said brokerage Sanford C. Bernstein in a research note. “If casinos were to remain closed for the rest of [the first quarter], GGR would show a y/y decline of over 70 percent.”

“There are mixed views on how virulent and lethal this outbreak may be (so far, contagion is much worse than SARS, but mortality is materially lower),” the analysts at Stanford C. Bernstein added. “At this stage, we see Macau having a solid recovery in [the second half of this year], with recovery contingent on 1) the contagion being brought under control and travel into Macau resuming, and 2) China’s economy not faltering materially and reducing customer confidence.”

Visitation plunge

Apart from the casino shutdown, both the central government and Macau authorities have hurtled to roll out an array of measures to halt and slow this rapid transmission. In addition to the lockdown of Wuhan and 12 nearby cities in Hubei province – where all public transportation services were shut down and about 40 million residents were not allowed to leave the cities without valid reasons – Beijing has banned all outbound tour groups and the sale of outbound flights and hotel packages for the mainlanders from end-January until further notice.

The central government has also banned issuing new individual travel visas for the mainlanders to visit Macau from end-January for an unspecified period of time, while the individual visas to the city previously issued remain valid. These mean the mainlanders can only travel to Macau now with a family or business permit. Mainland Chinese visitors with a family, business and other permits only accounted for about 30 percent of the total number of mainland travellers to the city in 2019, according to official data.

The Macau administration has also rolled out various preventive measures in recent times, for instance, the opening hours of the Gongbei Border Gate, the city’s main checkpoint with the mainland, has been adjusted from 6 am – 1 am to 6 am – 10 pm; visitors from Hubei province and those who have been to Hubei province in the past 14 days would be denied entry to Macau without a valid certificate confirming they are free of the Wuhan Coronavirus, and others. The ferry service between Macau and Hong Kong has also shut down since early February until further notice to minimise the mobility of people, while many flights to the city have been cancelled.

The visitation to Macau — where the mainlanders account for over 70 percent of the city’s visitor arrivals  — has taken a hit amid this public health alert, as shown in the visitation data during the CNY holiday. According to the Macau Government Tourism Office, the number of visitors to Macau between January 24 and January 30 plunged 78.3 percent to about 261,100 from the Chinese New Year period last year. The number of mainland travellers skydipped 83.3 percent to just 149,200 in this year’s CNY period.


Worse than SARS

Andy Wu Keng Kuong, chairperson of the Macau Travel Industry Council, noted the industry was slightly pessimistic towards the tally of visitors to Macau for the CNY period before the outbreak, given the loss of the stream in the past six months. Albeit there was a 10 percent gain in the total number of travellers to Macau in 2019, but the growth has slowed down since July last year and there has been recorded a monthly decline in visitation since November, due to the pro-democracy protests in Hong Kong and the slowing mainland economy.

“The impact of this new Coronavirus upon the city’s tourism depends on how profound and rapid the illness could spread,” said Mr. Wu, expecting the visitation figures will fall by 80 percent this February. “If it’s not well contained… the impact … would be worse than SARS.”

In the first half of 2003 — when the SARS outbreak was at its peak — the total number of visitors to Macau declined 7.5 percent year-on-year to merely 5 million. However, thanks to the introduction of the Individual Visit Scheme (IVS) by Beijing in July 2003 to salvage the economies of the two special administrative regions, in particular Hong Kong, the visitation figures to Macau finished with a 3.1 percent hike for the entire year of 2003. The IVS allows mainlanders in designated mainland Chinese cities – the current tally standing at 49 – to visit Macau as independent travellers rather than as part of a tour group.

Besides tourism, the city’s economy shrank 9.4 percent year-on-year in the second quarter of 2003 after a 13.8 percent growth in the first quarter. But the territory quickly rebounded with a 21.7 percent rise in the GDP in the July to September period; before finishing the year of 2003 with an increase of over 11.6 percent in GDP.

“Given the experience of SARS in 2003, the tourism market had only resumed normal operation about three months after the end of the epidemic,” said Mr. Wu, adding he expects the market might show signs of recovery this time in June, in the best case scenario. “The Wuhan Coronavirus definitely deals a huge blow to the tourism industry,” he remarked.

His group hopes the government will soon roll out measures to ramp up the local economy, as the epidemic has affected not only the tourism industry but also the sectors of gaming, hotels, aviation and food and beverage. “But no measures will be effective before the spreading of this epidemic is curtailed,” he added.


Shortening hours

While the 15-day suspension of casinos and entertainment venues does not cover retail outlets and food and beverage businesses in the local mega resorts, some have followed suit or shortened operation hours due to the absence of customers. Technology giant Apple Inc has closed its two Macau outlets — located in Galaxy Macau and Sands Cotai Central, operated by Sands China Ltd — for a week starting from 5th February, and it is expected the two shops will remain closed for another week, in line with the shutdown of casinos, Macau Business has learnt.

A 4th-February memo sent by the retail operation of Sands China to its retailers, seen by this magazine, noted the operations of hotels and shopping malls at its properties have remained normal, but suggested the tenants could change their opening hours and carry out daily temperature checks on their staff.

Already afflicted by the slowing mainland economy, the local retail industry is expecting a deteriorating performance amid the current epidemic. The city’s retail sales has dwindled for three consecutive quarters through the July to September period of 2019, the latest government figures show; with a 18.1-percent decline in clothing in the third quarter, which was the largest drop since the second quarter of 2015.

A store manager of a luxury clothing brand contacted by this magazine for this story noted quite a few stores have shortened their opening hours since the outbreak and before the temporary shutdown of casinos. “This measure could also help cutting costs, with fewer staff manning the operation,” said the manager, who declined to be identified due to the company’s policy. “Many brands now don’t need their part-time sales assistants while also encouraging their full-time staff to take annual leave or un-paid leave.”

The store manager noted the store has remained in operation but the business volume has plunged by more than 80 percent since the epidemic; adding: “I know some shops have chosen to suspend their operation after the casino shutdown.

I could only pray this outbreak is temporary and the business could rebound soon. Otherwise, I won’t be surprised if the luxury brands start to cut the headcount when the outbreak persists for months,” the manager added.

Half-year impact

In light of the virus outbreak, public bodies have halted many of the services catered for the public, apart from emergency services. The Macau Association of Banks also noted at least half of the branches of each bank here have been closed until further notice; while the opening hours of the remainder have been shortened.

The city’s largest telecommunications operator, Companhia de Telecomunicações de Macau (CTM), also announced its five outlets have been temporarily closed while the other three outlets have shorter opening hours.

Not only large corporations, but the small and medium-sized enterprises (SMEs) — which make up over 90 percent of companies here — have also been dealt a huge blow amid this turmoil.

“The high operating cost in Macau has made the operation of SMEs extremely difficult during this predicament,” said Fong Kin Fu, president of the Federal General Commercial Association of Macau Small and Medium sized Enterprises. For instance, the food and beverage SMEs have been greatly affected by the plunge in the visitations and the lower expenditure of local residents since the onset of the epidemic, with “some seeing their business drop by 90 percent or more”, he illustrated.

As the administration has waived the rents for three months for the tenants at government-owned properties, Mr. Fong remarked: “Some SMEs have already been in talks with their landlords to ask for lower rents in this time period, and I hope some prominent groups and figures here could come out and lead by example in lowering or waiving the rents.”

The Macau SME Association also remarked in a statement that some of its members have reported a decrease of over 50 percent in their business volume. “Given the continuous spread of the novel Coronavirus, the number of visitors to Macau is expected to continue declining while the local economy will keep shrinking,” the Association said. “The bleak business climate for local SMEs might last for half a year or more.”

The group also urges landlords to cut rents for the local SMEs and hopes the government could roll out supportive measures as soon as possible; for instance, waiving the electricity and water bills for businesses.

Under great pressure

The city’s economy has been lacklustre since last year. The latest official figures show the Macau economy has dipped for three consecutive quarters with a 4.5-percent decline in the July to September period of 2019, the worst performance since the April to June period of 2016.

Before the virus outbreak, the Department of Economics and the Centre for Macau Studies at the University of Macau predicted the city’s GDP will fall by another 3.7 percent this year, over the debt accumulation and possible real estate bubble in the mainland, the expected ongoing disputes amid the trade war, and other external economic factors.

Kwan Fung, an assistant professor of economics at the University of Macau, noted the GDP of Macau would be subjected to great pressure in the first quarter with the drastic decline in the visitations. “I believe this adjustment period will only be provisional and local businesses could make it through this hardship,” the scholar added. “However, should the epidemic continue to escalate, it will then be difficult to pinpoint how large the economic impact will be.”

Investment bank Morgan Stanley has also explained lately in a research report that assuming the Wuhan Coronavirus peaks in February or March, the economic growth of the mainland could be reduced by 0.5 to 1 percentage points in the first quarter and 0.15 to 0.3 percentage points for the global economy.

Should the virus persist and only peak in three to four months, the GDP of the mainland would be dragged down by 0.6 to 1.1 percentage points in the first half, and 0.2 to 0.4 percentage points for the global economy in the second quarter, Morgan Stanley remarked; adding the negative economic impact could be partly offset by stronger policy support.



In the press conference announcing the 15-day shutdown of casinos, Secretary for Economy and Finance Lei Wai Nong reassured the businesses in the city to remain “unswervingly confident” towards the economic prospect of the city amid hardship. “The government will systematically roll out an array of measures in different stages to stabilise the economy,” the official said.

Not disclosing any forecasted figures for the local economic loss during this epidemic, Mr. Lei only said: “It’s unprecedented in terms of the scale of this economic hardship faced by all industries in Macau, given the absence of travellers and domestic demand.”

He stressed the government will “without any hesitation” launch various measures, including income tax and tourism tax relief programmes, enhancing the public investment to create more jobs, and policies to stimulate the local consumption.

Concerning the economic supportive measures that have been rolled out so far, the government has allowed businesses and entrepreneurs to repay a smaller amount of money for government loans; while the annual cash handout for permanent and non-permanent residents will be distributed in April this year, rather than in July as usual.

“But we have to better control this epidemic first [before rolling out measures to support the economy],” said Mr. Lei.

SARS vs Wuhan Coronavirus

SARS Wuhan Coronavirus*
November 2002-July 2003 Time Period  December 2019 till now
SARS coronavirus  Virus This new strain of  coronavirus shows similarities to the SARS coronavirus (75-80% identical) and belongs to the same coronavirus family
 Fever, muscle pain, cough, sore throat, pneumonia Signs and Symptoms  Fever, muscle pain, cough, sore throat, pneumonia
Yes Human-to-human Transmission Yes
An average of seven days Incubation Period 1-14 days
The first cases were reported in Guangdong province, an economic powerhouse of China. The virus is believed to have originated from the wild animal market. Origin The first cases were reported in Wuhan, capital of Hubei province, which is a major transportation hub in China given its central location. The virus is also believed to have originated from the wild animal market.
9.6 percent Fatality Rate  2-2.1 percent
Less contagious, with about 100 confirmed cases a day Transmission More contagious, with thousands of cases confirmed a day in recent times
Nearly 8,100 cases were reported in 29 countries and regions, including 5,327 cases in Mainland China, 1,755 in Hong Kong and one in Macau Number of Confirmed Cases Over 24,530 cases were reported in 28 countries and regions, including 24,324 cases in Mainland China, 18 cases in Hong Kong and 10 cases in Macau
774 Number of Deaths 492
Southern China, especially Guangdong and Hong Kong Areas Hit Hard by the Epidemic  More widespread in Mainland China with over 16,670 cases in Hubei province
The economy is on a rising path after the handover in 1999. The city’s gaming industry had just been liberalised, ending the monopoly of STDM, but the new players had not officially operated in the city yet and the model of integrated resorts had not been in place. Moreover, Mainland Chinese only accounted for less than half of the city’s total visitors at the time. Macau Economy Before Outbreak The economy has fallen for three consecutive quarters in 2019 over the slowing Mainland Chinese economy, the trade war between China and the United States, and other macroeconomic factors. The city’s tourism industry is now mainly reliant on Mainland Chinese, who account for over 70 percent of the city’s visitors. Beijing has called for years for the city’s economy to diversify from the gaming industry, which contributes to about half of Macau’s GDP.
Number of visitors to Macau declined 7.5 percent year-on-year in the first half of 2003, while the GDP dipped 9.4 percent in the second quarter of the same year, after growing over 13 percent in the first quarter. But the economy quickly rebounded, achieving 21.7 percent growth in the third quarter. Economic Impact on Macau The visitation rate in the CNY period collapsed by over 78 percent, and it might drop another 80 percent in February. Analysts have also expected the epidemic might shave at least 6 percent from the 2020 annual gross gaming revenue.
Beijing rolled out the Individual Visit Scheme (IVS) to ramp up the tourism industry of Hong Kong and Macau and their overall economies. Major Support Measures Details not yet known, but the government pledges to roll out tax relief programmes — such as income tax and tourism tax —, enhance the public investment to create more jobs, and launch policies to stimulate the local consumption.

*The data is up to date as of 4th February 2020

Sources: World Health Organisation, Statistics and Census Service of Macau, Health Bureau of Macau, Chinese Ministry of Health, Morgan Stanley


When Will the Outbreak Peak This Time?

There are mixed views on when the outbreak of this new Wuhan coronavirus will peak and be curtailed, ranging from early February to May.

Zhong Nanshan, a renowned scientist at China’s National Health Commission, who has been greatly involved in tackling the SARS epidemic in the 2002-2003 period, told Xinhua in late January that the situation of the Wuhan coronavirus “should reach a peak in a week or around 10 days,” which means the outbreak could peak in early February.

The outbreak “will not increase at a large scale” and the fatality rate, currently standing at 2.1 percent, would continue to fall, he said to the Chinese state-run news agency.

On the other hand, Gabriel Leong, Dean of the Li Ka Shing Faculty of Medicine of the University of Hong Kong, said in a press conference in late January that the faculty only expects the infections of the Wuhan coronavirus to peak in the period between end-April and early May, when Chongqing, with frequent exchanges with Wuhan, could see as many as 150,000 new cases a day; and Wuhan, Shanghai, and Beijing might also see as many as 50,000 new cases a day.

The expert also forecasted over 44,000 people in Mainland China had been infected with the new virus as of late January, when the authorities only claimed over 6,000 confirmed cases, given that many infections have been unreported and overlooked.