At the start of 2020, things were looking great for the Asia-Pacific (APAC) gambling market. A report revealed how it was the fastest-growing market on the planet, with a solid rise in gross gaming yield from 2001 through 2019.
The trend was predicted to continue non-stop for the following decade until COVID-19 spoilt the game. Whereas it’s no doubt only a temporary issue and recovery will be possible, the year is now expected to find the APAC casinos reporting an aggregate 70% drop in EBITDA (earnings before interest, taxes, depreciation and amortization) over the 2019 numbers, as per a report just published by Moody’s Investor Services. 2021 may not be a lot better, either.
The ratings agency delved into the various mechanisms that keep the casino industry spinning, breaking down the effect the novel coronavirus has had on international travel and gambling venue shutdowns. Considering social distancing measures that are now being applied across the whole industry, the reduction in the number of available gaming options and players paints a bleak picture.
Moody’s said, “We assume the earnings recovery will start in the second half of 2020, following a very weak first half. Still, earnings in 2021 will be lower than in previous years. Downside risks to our forecasts are significant, particularly if the pandemic is not contained and lockdowns have to be reinstated.”
Dissecting the APAC gaming activity in its entirety and the performance of gambling operators such as Las Vegas Sands, Genting Singapore, Crown Resorts, MGM Resorts International, Wynn Resort, and Melco Resorts, all of who have businesses in Asia, Moody’s was able to deduce where the sector stands and where’s it’s going.
These firms are all struggling to pick up lost revenue, which makes a huge loss when combined, but should be able to rebound with time.
“These companies have sufficient cash equivalents and committed facilities to withstand temporary cash burn, which includes operating expenses, interest payments and maintenance capital spending, as well as meet their debt repayments in 2020,” added Moody’s.
In reality, the loss implies the APAC casino industry will go from an EBITDA of $14.5m in 2019 to just 4m this year. If coronavirus returns and APAC casinos shut down again, like has been the case in some areas in the US, then the numbers could be much worse.
Next year won’t bring too much relief, with the casino industry needing at least through the end of 2021 to muster a resurgence. A spike in COVID-19 cases is still a probability, and the risk of additional revenue drop is “significant, particularly if the pandemic is not contained and lockdowns have to be reinstated,” as per Moody’s.
In the United States, casinos across the mid- and southwest started reopening between May and June. But since then, there have been many fresh COVID-19 spikes, with some involving casino workers. Due to this, some casinos in Oklahoma and Arizona have chosen the shut down once again. If the similar case plays out in APAC, the results are likely to be catastrophic for the gaming sector in the area.