Macau Casino Suspend Operations as Typhoon Mangkhut Approaches
Macau officials suspended casino operations as Typhoon Mangkhut approaches the Chinese gambling enclave. The suspension of operations began at 11pm Saturday Macau time. It is the first suspension of operations due to natural causes in the history of Macau.
The decision is a reaction to the destruction caused by Typhoon Hato, which struck Macau in late August 2017. Official reaction to Typhoon Hato was slow, as it appeared officials did not want to scare away tourists by categorizing the approaching hurricane as dangerous.
Typhoon Hato was the strongest to hit Macau in 53 years. It was the first time in 18 years the Macao Meteorological and Geophysical Bureau categorized a typhoon as a No. 10 tropical cyclone — the equivalent of a Category 5 hurricane. Hato caused Macau to lose power and water services on a citywide basis for 24 hours, and more in some places.
Typhoon Hato’s Impact
Eventually, Typhoon Hato caused 12 deaths and over 200 injuries in Macau alone. The head of the Macao Meteorological and Geophysical Bureau reisgned in the wake of the storm, because officials had failed to predict the typhoon’s ferocity. The Chinese People’s Liberation Army Macau Garrison was called in to help with disaster relief.
In response, the major U.S. and Chinese operators in Macau contributed millions of dollars to disaster relief. At the time, the casino companies were given high marks for their response, even as Macau officials searched for answers.
Typhoon Mangkhut Shutdown Orders
The shutdown of Macau casinos in response to Typhoon Mangkhut therefore is understandable. The decision will be a financial disaster to US casino companies operating in Macau, including Las Vegas Sands, MGM Resorts, and Wynn Resorts. Macau’s gaming revenues are triple Las Vegas’s revenues, so Venetian Macau, Wynn Palace, MGM Cotai, and other local US-owned casinos are a huge part of the Las Vegas companies’ revenue stream.
No time table is set for the resumption of casino operations. Once the typhoon has passed, officials will review the situation and issue a resumption order.
Grant Govertsen Predicts 7% Decline
Grant Govertsen, a gaming analyst for Union Gaming Securities Asia Ltd., speculated that casinos might reopen on Monday, saying the economic impact will continue after operations resume. Govertsen said it will take “a day or so” for traffic to return to normal, because many flights and ferries into the city were canceled due to the storm.
The Union Gaming analyst added, “This robs the month of one important weekend day.”
Weekday shutdowns are less impactful, because casinos do not welcome nearly as many casinos on those days. In material terms, Grant Govertsen predicted that revenues for the month might be cut by 7%. That would cost the casino almost one-half of their earlier-precicted September growth year-to-year of 15%.
Macau’s Economic Recovery
Macua is two years into its recovery from a period with 26 months of decline. The opening of a series of multi-billion dollar mega-resorts on the Cotai Strip helped the recovery. Studio City‘s opening in October 2015 was considered a disappointment, but the Wynn Palace grand opening in August 2016 was considered a big success.
The opening of Parisian Macau by Las Vegas Sands in September 2016 continued the recovery, and is seen in retrospect as the moment when Macau’s gaming industry began its turnaround. In the months following the opening of Wynn Palace and Parisian Macau, the city’s gambling revenues began to grow by 15% most months.
The Cotai Strip’s Integrated Resorts
MGM Cotai pushed back its opening several times, but its eventual grand opening in February 2018 continued the growth cycle. Of course, recovery is a relative term. Macau has $44 billion in revenues in 2013, which was 7 times what Las Vegas generated the same year. The decline from 2014 to 2016 still left Macau as far-and-away the largest casino destination in the world in terms of gaming revenue.
The Las Vegas Strip’s non-gaming revenue contributes 60% to the local economy, which is far better than Macau’s non-gaming revenue performs. That is why Galaxy Entertainment, Melco, LVS, Wynn Resorts, and MGM Resorts have invested money in new integrated resorts, because they diversify the local economy and generate massive amounts of non-gaming revenue.