Typhoon Mangkhut’s Impact on Macau Casino Profits

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In Chinese Macau and Hong Kong, the Pacific typhoon, Manghut, which came from the Philippines, was incredibly destructive. At the local airport, about 1000 flights were canceled. Also, the railway connections were paralyzed too, which meant that almost 500 people were stranded at the railway stations.

In some areas of Macau, electricity was cut off, and more than 20,000 houses were damaged. Most of the destruction can be seen in the elite residential area of La Cite, where the wind tore out the windows. Wind speed reached 100 miles per hour, about 2.4 million people were evacuated in the provinces.
The local administration instructed to close all gambling centers on Saturday, September 15, to secure casino employees, as well as guests, and residents of Macau. There have been no such situations since 2002.

However, according to Union Gaming, the overall level of damage after Mangkhut is much lower than after last year’s Hato. There were floods in the old districts of Macau, but almost all the leading casinos suffered the previous storm more effectively than last year.

Gambling VS. Typhoon

However, the hurricane Mangkhut had no severe impact on the eastern Las Vegas casinos’ profits. At first, it was even expected that the income of the administrative district in September would be 10% higher compared to the same period last year. Nevertheless, contrary to the earlier announced data, casino gross gaming revenue (GGR) rose by 2,8% amounting to $2.72 billion. This number was close to the data previously published by Sanford C. Bernstein, which forecast was based on the increase in the average daily GGR, expected for the last week of September.

Bernstein Zhen Gong analysts Vitaly Umansky and Kelsey Zhu noted that the casinos suffered almost no material damage, even though the government closed all gambling facilities for 33 hours.

Japanese financial holding company Nomura had also published its forecasts, and they too were optimistic. According to the company’s specialists, the GGR in Macau in September 2018 had to be 10% higher than in September 2017. The company’s specialists also noted that if there were no cataclysm, this figure could have reached 15%. They were wrong. According to Nomura, by 2019, Macau’s gross gambling revenue will increase by 6%. So, let’s see how accurate their predictions for the near future are.

Back to Business

The Macau government ordered to open all gambling establishments in the district on the morning of Monday, September 17, so it did not take much time to open the doors of Macau casinos which suffered the typhoon Mangkhut. The largest casino area in the world proceeded its operation.

Note that earlier in Macau, casinos were not closed during the natural disasters, but the typhoon Manghut caused the first halt to operations since 2002 when the licenses for foreign operators were issued. Typhoon Manghut carried investors off their feet. Currently, such ruinous situations happen more often. For example, the impact of the US-China trade war on VIP players visiting the region is not positive.

Last year, the tropical storm Hato led to similar destruction in Macau. Hato claimed eight lives in Macau and caused power outages, floods, and a delay in the opening of MGM Cotai.

What to Expect?

On the whole, within nine months since the beginning of the year, the Macau GGR amounted to almost 224.06 billion yuan, which, according to official figures, is 15.9% more than in the previous year. The typhoon influenced the initial expectations, but its impact on Hong Kong was more severe than on Macao which was spared by the disaster.

Meanwhile, Golden Week kicked off in Macau, which will last until October 6th. The celebration is dedicated to the National Day of the People’s Republic of China.
Golden Week is the leading national holiday of China, which is celebrated every year in October. During this significant period, the flow of visitors increases drastically, which contributes to obtaining super-profits in the entertainment, tourist, and hotel businesses. Perhaps this year this holiday will provide help to Macau casinos increase revenues, making the consequences of a typhoon even less noticeable.

Recall that Macao is an open port, a substantial financial center, and a unique administrative region of China. It is famous for its casinos, gambling industry, racecourse, and nightclubs. In the territory of the autonomous administrative region, there are 33 casinos, the most famous of which are The Venetian, Grand Lisboa, and Galaxy. Since 2010, the gambling business brings the Macau budget more than 70% of revenues, which can be compared with Nevada gaming revenue. Maybe that is why the Macau casinos are usually never closed.