Macau Zero Covid Policy Threatens To Alienate Casino Game Suppliers

As though Macau’s casino industry wasn’t threatened enough by new regulations coming from mainland China, there is now a very real concern that suppliers will turn away from the region due to the Zero Covid policy.

The six big casino operators in Macau – Galaxy Entertainment (0027.HK), Melco Resorts, SJM Holdings (0880.HK), Sands China (1928.HK), Wynn Macau (1128.HK), MGM China (2282.HK) – have endured months of tumult since coronavirus first reached their doors back in spring 2020.

Since then, the casinos have lost billions of dollars combined, have implemented wide-ranging Covid protection systems, opened and closed and opened again, and supported workers through the worst of the lockdowns.

But now there is a new challenge facing the likes of Wynn and MGM: a lack of supplies.

Macau has endured a number of lockdowns in recent months in its battle against Covid

What’s Happening In Macau?

According to Bloomberg, companies that provide Macau with the gaming machines and card tables that make the region such an attractive tourist hotspot are losing interest.

One case in point is Light & Wonder Inc., which provides casino equipment and which is relocating its expatriate staff to the Philippines. Another Japanese company is moving its employees to the Philippines and Singapore.

It is also reported that said Japanese company – which is not named – has moved “half of its inventory out of Macau due to supply-chain challenges”.

The problem, it seems, is that Macau’s casinos just aren’t buying any new equipment. A recent stipulation that fresh licensing agreements will restrict the number of games machines in the industry is an example of why suppliers are turning away from Macau.

Zero Covid To Blame

Instead, suppliers are looking to the burgeoning casino environments of Singapore and the Philippines to offer their wares.

“Singapore and the Philippines are growing exponentially,” said Macao Gaming Equipment Manufacturers Association Chairman Jay Chun. “Macau has already lost its shine.”

China’s stand on Covid appears to be to blame. It is reported that, since the pandemic, China’s travel bans have effectively choked any casino tourism in the region. An industry that generated $36bn a year has suffered a major loss of income, visitor numbers, hotel bookings and everything else that goes with it.

Right now visitors can travel to Macau. But they must isolate for seven days in mainland China first and test negative against Covid for 10 days before entering the territory. That has put off practically all international tourists.

And with it, casinos aren’t buying new machines, repairing current ones or significantly revamping their entertainment offerings.

Looming Problem For Macau

The turning away of suppliers from Macau may not last long. After all, if the government relaxes Covid rules and agrees to the 10-year licenses each of the six casinos have recently applied for, then life could feasibly return to something like normal soon.

But even then, China wants Macau to be less reliant on Chinese players and instead attack foreigners from the likes of Japan, Singapore, Malaysia and Australia.

That is going to be difficult if their main suppliers are now based in these competitive markets, which are expected to rapidly expand their casino operations over the next decade.

Macau still hopes to rebrand itself as a family entertainment destination – just as Las Vegas has done over the past two decades. Building more hotels, aquariums, theme parks, etc will attract tourists – so long as they can get into the region.

Cheng says “the Macau of old is a thing of the past” and that there will soon be a push to boost slot machine use. Currently 5% of Macau’s casino income comes from slots, compared to 50% in Vegas.

But suppliers are wary that China’s recent slot machine regulations, which includes costly new software that developers must adhere to, make it worthwhile. Instead, they may choose to focus on the South Asian Peninsula instead.

It’s a difficult balancing act that Macau is yet to solve.