Coronavirus pandemic now has infected over one million people all around the world with new hotspots developing in the United States and Europe. Meanwhile in China is slowly getting back to normal, its hard-hit gambling industry may feel the pain for months, if not years to come.
Melco Resorts & Entertainment is a casino operator with a huge presence in Asia. The company has four properties in Macau and one property in Manila, Philippines.
The stock has underperformed the market with a 47% decline year-to-date compared to a 16% decline in the S&P 500. Melco is set to continue underperforming the market as mainland China imposes strict travel measures, this time including visitors entering its borders from special administrative regions like Macau and Hong Kong.
Macau, a special administrative region of China, became the gambling capital of the world after taking the title from Las Vegas in 2007. It is the only area in China where gambling is legal, so it enjoys a virtual monopoly on the country’s vast domestic market.
In good times, the resort city was a cash cow, generating a staggering $36.5 billion in gambling revenue in 2019. But by January of 2020, cracks were already forming as a new coronavirus ripped through mainland China. By February, the industry collapsed as Chinese authorities introduced sweeping internal travel restrictions to contain the new pandemic.
February gaming revenue fell 87.8% from 25.37 billion patacas ($3.2 billion) to 3.10 billion patacas ($388 million). And in March, the trend continued with an 80% decline from 25.8 billion patacas ($3.2 billion) to 5.26 billion patacas ($658.7 million). While some might take March’s “less bad” results as a sign of recovery, the pain may be just beginning.
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