China ‘Zero-COVID’ Policy Response Expected to Remain Through 2022

Posted on: January 18, 2022, 12:42h. 

Last updated on: January 18, 2022, 02:40h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

China is expected to maintain its “zero-COVID” policy approach to battling the ongoing pandemic through most of 2022. That’s according to a recent note from financial services firm Jefferies.

Macau China zero-COVID casino GGR
Macau residents wait in a long COVID-19 testing line last August after the regional government announced a mass testing blitz following an outbreak of new cases on the mainland. China is expected to carry on with its “zero-COVID” policy for the foreseeable future. (Image: Xinhua)

China’s strict policy that requires the implementation of severe operating limitations on most nonessential businesses when COVID-19 outbreaks occur has greatly limited the recovery of Macau’s casino sector. Cross-border travel is severely limited or prohibited when a cluster of new cases is detected.

Gaming has rebounded nicely in other parts of the world, including in the US, where several states are reporting record casino revenue. But Macau operations continue to be severely hampered by the coronavirus because of limited visitor volume.

Gross gaming revenue (GGR) in Macau last year totaled $10.8 billion. That is $25.6 billion less than the casinos won in 2019.

Gamblers Wanted

Unlike in many parts of the US, where pent-up demand for leisure and entertainment is fueling record gaming, Macau’s multibillion-dollar integrated resorts remain rather barren.

More than 39.4 million visitors arrived in Macau in 2019. That number fell to under 5.9 million travelers in 2020. Final numbers for 2021 have not yet been revealed. But the full-year tally is projected to come in around 7.5 million visitors.

Jefferies analysts Simon Powell, Katherine Zheng, and Christopher Lui opined this week that China’s “zero-COVID” strategy will linger longer than through the Beijing Winter Olympics in February — a lot longer.

[China’s ‘zero-COVID’ approach] could continue into 2023 and possibly beyond,” the analysts predict in their Macau coverage.

The analysts believe the highly contagious omicron variant, paired with China President Xi Jinping seeking a third term, will likely result in the mainland keeping the pandemic response in place.

That isn’t exactly good news for Macau’s six casino operators, which received confirmation last week from the regional government that it will not expand the gaming market in 2022. The six concessions are set to expire in June but will receive fresh operating privileges under a new 10-year regulatory environment.

Slow Start

With visitor volume remaining greatly suppressed from pre-pandemic levels, Macau casino operators began 2022 with not much of a bang.

Analysts at Bernstein report from their weekly casino checks that GGR slowed by more than eight percent over the past week. That’s compared with the first week and a half of 2022. The financial services outlet says the casinos were likely generating GGR of around $33.2 million per day between January 1-9. But that decreased to approximately $30.5 million daily for the week of January 10-16.

Bernstein says the slowdown is a result of an all-too-common problem — fewer visitors as a result of “zero-COVID.” Macau recently adjusted the time frame validity of negative COVID-19 tests from 72 hours to 48 hours. Further outbreaks in the Greater Bay Area are leading to test results being restricted to only 24 hours, effective January 16.

Bernstein says the test changes and escalating threat of Macau closing its borders entirely led to a 40 percent visitor drop over the past week from early January.