By Eduardo Baptista

HONG KONG (Reuters – Macau casinos now face a dismal short-term outlook due to closing many of their lucrative gambling rooms for wealthy gamblers. COVID-19 restrictions on travel prevents the transition to mass-market customers, who they will rely upon in the future.

Portugal’s former colony has been the biggest global gambling hub by money wagered. The revenue it receives from its VIP gaming rooms, where wealthy gamblers place large bets, is a long-standing source of income.

However, the Chinese government has recently cracked down on junket, which provided transportation and accommodation for high-net-worth clients. This is putting into doubt the casino operator’s financial prospects. Wynn Macau (OTC :), Sands China, (OTC 🙂 and MGM China.

Alidad Tash, managing director, 2NT8 Limited a consulting firm specializing international casinos and integrated resorts, stated that Junket-run gaming areas within Macau casinos represented about a third to Macau’s gaming revenues for 2019.

Alvin Chau was arrested in November as the chief of Suncity Macau’s largest junket operator. This led to the closing of all gaming venues throughout Macau. Chau was charged with creating an online platform in Macau to allow gamblers from mainland China (where gambling is prohibited) to place wagers overseas.

Removing VIP revenue depends on casinos’ ability to attract the mass-market gaming players that Bernstein analysts have identified as the “secular, long-term growth story” in the sector. But that all hinges on COVID-19 being controlled.

In a note, analysts stated that “the pace of recovery in the late 2021 or 2022 depends upon COVID outbreaks and travel restrictions coming down. The key to recovery is for mass players returning to Macau in more normal levels.”

“The future is mass and premium mass recovery.”

Mass is a group of mom-and-pop casino players that play slot machines and table games like blackjack or baccarat. Premium mass is made up of players who have placed large sums and are able to earn complimentary meals, transportation, and rooms. They do not lose their money or receive credit at the casinos.

When Reuters reached out to Wynn Macau and Sands China representatives, they did not reply to our requests for comments on the plans of MGM China to replace VIP revenue.

Shares of Wynn Macau plummeted 23% since Chau was arrested, Sands China has dropped 13% and MGM China has dropped 20%.

Suncity was not available for comment.

RESTRICTED ENTERANCE

China’s COVID-19 restrictions on movement have restricted the number of mainland gambling professionals who can travel to Macau. Pre-COVID October 2019 saw 3.2 million people visit Macau. In October 2021, that number plunged to 322,245 visitors.

Despite the fact that most mainland Chinese arrivals are allowed to travel without quarantine, visits remain low.

Since the COVID-19 pandemic, no group visas have been granted to players. Individual visas to Macau, however, have become more scrutinized, says Ben Lee, founder and CEO of Macau gaming consulting IGamiX.

It is also a concern that Macau’s gamblers will not be able bring in funds.

Junkets extended credit to wealthy individuals, but also ran a shadow banking network which helped high-rollers avoid China’s capital flow rules. This meant that players could not take out more than $50,000 in China each year.

The methods of moving funds were also used by premium mass and direct players who bet enough to receive rebates for their losses.

Tash of 2NT8 said that players are now unable to use junkets as a way to get money into Macau.