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Fast Recovery in Asia Pacific Region Predicted by Fitch

The outlook for the casino gaming sector is in likelihood “improving” for 2021 after the huge pandemic-related disruption of this year, albeit gains are likely to be at different rates in different parts of the world, says a new report from Fitch Ratings Inc.

“Gaming markets more reliant on local visitation will continue to recover faster,” stated the paper, adding that any effects of on-off casino closures due to local spikes in Covid-19 infection were likely to be “less acute in 2021”.

Availability of vaccine against Covid-19 would “allow destination markets like Singapore and Las Vegas to begin recovering more in earnest in second half 2021,” said Fitch Ratings in its Wednesday paper.

The credit assessment institution also noted that cost cutting by casino operators had meant that “coronavirus concerns” had been “offset by healthy balance sheets”.

Fitch Ratings said it maintained a negative outlook for a majority of its “rated gaming universe,” because of the pandemic’s “severe impact” to casino operators and “uncertainty” regarding the “sector’s recovery trajectory”.

Discussing jurisdictions in the Asia-Pacific (APAC) region, Fitch Ratings noted that for the Macau casino market, although the city had an almost-universal quarantine-free travel bubble with mainland China, current continued travel restrictions between Hong Kong and Macau were a “headwind”.

The institution said it was forecasting monthly revenue declines of 50 percent to 60 percent year-on-year through the first half of 2021, with accelerating growth in the second half, “led primarily by the premium mass segment”.

Fitch Ratings noted: “The eventual easing of travel to Hong Kong and potential availability of a vaccine drives our assumption for a stronger second half 2021 performance relative to first half 2021.”

The financial institution observed that while Macau’s current six gaming licences expire in June 2022, the city’s Chief Executive, Ho Iat Seng, had a “multi-year extension option” in relation to the current rights.

“Fitch continues to believe the concession rebid process will be pragmatic,” said the credit rating agency, referring to an anticipated new public tender associated with the expiry of the current Macau gaming rights.

Malaysia, Singapore, Japan IR hopes

Fitch Ratings expects casino revenues in Malaysia – where Genting Malaysia Bhd runs the country’s only licensed gaming complex, Resorts World Genting, near the capital Kuala Lumpur – to recover “gradually” to 75 percent of 2019 levels in 2021, “aided by new attractions” – understood to be a reference to a long-awaited new outdoor theme park – and the country’s “larger and domestic-focused market” relative to neighbouring Singapore.

Singapore has a casino duopoly – involving respectively Resorts World Sentosa, run by Genting Singapore Ltd; and Marina Bay Sands, run by a unit of United States-based Las Vegas Sands Corp – that pre-pandemic had been able to attract many overseas customers.

Fitch Ratings expects Singapore’s 2021 gaming revenues to reach “only 45 percent” of 2019’s levels.

The ratings house further noted: “We also expect this to slow the pace of the two operators’ [aggregate] SGD9 billion [US$6.7 billion] redevelopment” pledge to the Singapore government. “Risks to the recovery in both countries stem from recurring waves of infection and the reimposition of movement restrictions,” added the credit rating agency.

Singapore’s tourism boss said in August that it was “inevitable” there would be delays to the expansion of the city-state’s two casino resorts, due to the disruption to the construction sector wrought by the Covid-19 pandemic.

Regarding the Japanese government’s aspiration to introduce large-scale casino complexes, or integrated resorts (IRs) as they a known there, as a form of economic stimulus to boost inbound tourism, Fitch Ratings noted: “Japan’s IR plans appear increasingly uncertain as the pandemic exacerbates existing challenges, such as a high gaming tax rate, bureaucratic and regulatory hurdles, and a bribery scandal.”

The financial institution noted that during 2020, Las Vegas Sands – which also operates some Macau casinos via its unit Sands China Ltd – had “abandoned its plans to compete for an IR licence” in Japan.