The deadly new strain of pneumonia known as coronavirus has already claimed the lives of 106 people and counting. Amid the spread of the disease, casino companies have also suffered from a historic drop in visitations to Macau and share price decline.
Coronavirus’ Spreading Causes Casino Shares to Fall Again
Amid China’s efforts to contain the spread of the coronavirus, a deadly pneumonia that has already killed 106 people as of the time of reporting and has infected 4,500 people, the stocks of flagship casinos in Macau have come tumbling.
With the Chinese New Year celebrations marred and a pandemic spreading, Sands, Wynn, and MGM have all marked a rapid decline in their value amid falling visits. Just over the first three days of the holiday, there was a 60 percent drop in visitations.
January is now believed to further precipitate the gambling prospects for Macau, after the special administrative region posted a 3.4% year-over-year (YOY) decline for 2019. Moving forward, casinos in the area should brace themselves for double-digit declines and slumming casino revenue in 2020.
No relief is in sight until the coronavirus has been contained, market observers have cautioned. The coronavirus has left over 35 million people on lockdown. In the meantime, casino giants have continued to incur losses, with Las Vegas Sands Corp. taking a 6.6% tumble or $4.51 and Wynn Resorts falling by $10.86 or 8.06%.
MGM Resorts has been somewhat more moderately affected with 3.86% drop, thanks to the company’s better exposure in the United States unlike Sands and Wynn which both draw 60% of their revenue from Macau.
Yet, Deutsche Bank analyst Carlo Santarelli believes that while the short-to-midterm will be pessimistic, all the pent-up demand should lead to spikes in the activity once the coronavirus has been dealt with. U.S. exposure to the virus has remained low nevertheless, although cases have been confirmed in the United States with at least five individuals infected.
A Massive Plunge in Macau Visitors Numbers
While previous numbers noted down the drop in Macau visitation at 60%, Bloomberg has reported a far more disheartening overall number, with the drop being closer to 80%. The 80% drop accounts for only the Chinese visitors to Macau, but it is nevertheless a blow.
A new regulator, the Novel Coronavirus Response and Coordination Centre, has been established to help tackle the spread of the coronavirus in Macau after five cases have been registered. Macau has even stepped up its efforts and will now seek to get in touch with some 1,113 tourists who have flown in from Hubei province, one of the two states where the disease originated.
Meanwhile, Las Vegas Sands will probably take one of the heaviest hits, said Barry Jonas from SunTrust Bank who explained that the company’s reliance on high-roller baccarat players in Asia could negatively affect the bottom line of the company.
Santarelli explained that analysts were simply trying to “put some parameters” and come up with reliable business models for the gaming industry in the next month as governments and health organization from around the world are throwing their weight to contain the outbreak.