Gambling In the Time of Coronavirus: Will Casinos Survive This Hit?
Now that the Coronavirus has had its impact on every other industry, the gambling industry is not an exception. The largest gambling hub of the world has just suffered its record drop in revenue. This kind of bad luck could probably continue for some more time. In February, the revenue of gambling in Macau fell by 90%. This is not a surprise as this semi-autonomous city of China went through an unprecedented 20-day shutdown of all casinos throughout the last month to retain the spread of the deadly Coronavirus.
Although the casinos like the play casino Planet 7, which is an online running casino, reopened more than a week back, the only place in China where gambling is allowed is Macau. The hotel occupancy rate was below 12% at the end of February, as per Goldman Sachs. The bad days are most likely going to continue. For example, there are expectations of more than 50% drop in the gambling revenue of casinos for the initial two quarters.
Thanks to the online casinos that the physical casinos can now diminish their costs due to the present downturn. However, they won’t be able to totally offset the plunge in revenue. This means that there will be barely any profit in this quarter and some casinos may even face huge losses due to this pandemic situation.
How long this situation is going to last will depend on when the virus will start leaving the countries and how the nations can again stimulate their economies. The VIP gambling revenue of the countries are highly dependent on the liquidity and economic situation. The gambling companies of the US with a presence in Macau will face a different kind of risk at home where the virus seems to be spreading. Numerous conferences have been cancelled and there will be very few visitors at the casinos.
Investors have begun to price in this risk and American casino stocks have reversed their relative gains much against the Macau subsidiaries. The shares of MGM Resorts have lost 25% since the beginning of the lockdown period, underperforming the company’s subsidiary that dropped 6% during the same period.
If you think that spreading your bets strategically at various geographical locations will offer you great protection, it is not so. This epidemic is highly infectious and hence it is changing the business industry of several countries all over the world. Even the casino stocks faced a huge challenge during this pandemic as Macao, Las Vegas and Atlantic City started closing down operations. This kind of massive shutdown could signal a period of bankruptcy for few of the major players.
Hence, it can be concluded that this closure has started affecting 95% of the casinos in the US, South Dakota and Deadwood. Las Vegas Sands Corp. (LVS) and Wynn Resorts (WYNN) are the two of the hardest hit ones. However, it is possible that income in Asia will come back online before the US, with the pandemic making the remaining parts of the world wind up their business.
