Share price of leading casino operators – Las Vegas Sands Corp. LVS, MGM Resorts International MGM, Melco Crown Entertainment Limited MPEL and Wynn Resorts Ltd. WYNN – surged on the easing of tourist restrictions in Macau. This is possibly the only good news for the companies over the past one year. Macau is a key operating region for them. The new system will be effective immediately.
New System
Per the new system, if travelers holding mainland China passports use Macau as a transit to other destinations, they are eligible to stay for seven days in Macau, up from five days at present. However, the seven days rule is only applicable only if the mainland passport holder didn’t enter Macau in the past 30 days, compared to 60 days mandated earlier.
According to UBS Securities, high-frequency gamblers are now allowed to visit Macau twice within a span of 30 days compared to the earlier timeline of 60 days.
Also, the government stated that if mainland passport holders breach the new transit visa rules once, they will be granted only two days of stay, while a second instance of breach would deny them entry into Macau for 30 days.
Past Rules
The government had shortened the duration of stay beginning Jul 2014 from seven days to five. This rule was implemented due to the fact that transit visa holders though claiming to visit another destination stayed back in Macau. Cutting short the duration of stay was a part of the anti-graft corruption campaign imposed by the government since May 2014. It sought to impose strict restrictions on VIP gamblers to stop billions of dollars from being siphoned off illegally from mainland China to Macau.
Notably, restrictions like these have significantly dampened Macau gross gaming revenues generated since Jun 2014. In fact, gambling revenues from the region have declined in double digits since Sep 2014. The revenue decline in May 2015 marked a year of decline.
Mixed Reactions
Most of the market analysts expect the move to somewhat alleviate the free fall in Macau, the only destination in China where gambling is legal.
Per a couple of analysts at UBS Securities, this is an attempt by the government to provide a stimulus to boost demand and stop it from falling any further.
However, analysts at Wells Fargo sounded quite negative and stated that the changes are short term in nature and do not expect them to significantly mitigate the effects of the anti-corruption campaign. Moreover, they see significant slowdown in China’s economy as a headwind for Macau’s gaming industry.
We’ll have to wait and see whether the new system provides relief to the casino companies operating in the region over the long term.
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