News - August 3, 2022 - by Ray Hagar

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Casinos in Macau, many owned by Nevada operators, will not bounce back as quickly from current covid restrictions and closures as Las Vegas resorts did after Gov. Steve Sisolak ended his March-to-June 2020 shutdown, A.G. Burnett, former chairman of the Nevada Gaming Control Board, said Tuesday on Nevada Newsmakers.

Burnett, while noting a possible pent-up gambling itch with locked-out Macau patrons, said any increases in activity in the world's largest gaming hub will be dictated by the Chinese government.

"This is just me but let's be honest, we've seen a lot of (Chinese government) control over Macau and Hong Kong," Burnett said. "I'm not saying something that is a secret anymore. Beijing is in control."

Discretionary spending on gambling in Macau is mostly in the hands of the Chinese elite and that is at odds with the Chinese messaging of  "common prosperity," according to reports.

"I think Beijing has always had an interesting relationship with Macau because a lot of its upper-echelon in the citizenship of China, on the mainland, like to go to to Macau with various amounts of money," Burnett said. "And that has been something that has been troublesome for (Chinese president) Xi Jinping in the past and he has enacted measures to control that.

"I might be speaking out of turn but I think that the spigot doesn't just go back on," Burnett said. "It is totally up to Beijing and whatever internal politics exist. And that may mean a gradual, incremental increase, not due to covid but due to politics."

Monday, the Gaming Inspection and Coordination Bureau, which tracks casino win in Macau, reported Macau’s casino revenues in July fell to its lowest levels of the pandemic due to a city-wide lockdown. Revenues have declined 95 percent, compared to July of last year when they exceeded $1 billion, according to the Las Vegas Review-Journal.

"What we saw when we reopened in Las Vegas was a huge rebound, with all of that -- quote, unquote -- pent-up demand," Burnett said. "I don't know if you'll see that when Macau comes back."

Macau gaming operators have been reeling much of the year.

China -- Macau’s biggest source of visitors -- tightened outbound travel and toughened rules on visas in March. In mid-June, Macau was hit with a major covid flareup, prompting the mainland to suspend quarantine-free travel there. In July, the government shuttered the casinos for 12 days to help stop the spread of covid. When casinos were allowed to reopen, they were only allowed to employ half of their staffs.

"They are losing revenues right now," Burnett said. "They lost about $500 million this last quarter, if I'm not mistaken. However, I think that is probably short term. Xi Jinping made it clear they have a no-covid policy and they are going to shut down until they get their numbers down to whatever level is satisfactory for them.

"And it looks like the numbers are going down in terms of infections," Burnett said. "As long as that continues, I see Beijing loosening the numbers for travelers coming into Macau, probably in the next quarter, sometime. That would be my guess, unless something really strange happens. So those masses of people, from high rollers all the way down to folks from the surrounding areas in China, will come back."

Volatility in the Macau market is nothing new, Burnett said.

"We've seen the numbers in Macau go off and on over the years, periodically for various reasons," he said. "None as long as this in terms of a lockdown or a shut down. I know they opened back up recently and have 50 percent staffing levels. I think it will start to come back for those guys."

Macau's casinos have been operating hand-in-hand for many years with junket operators, Burnett noted. Junkets provide transportation, luxury lodging and cash loans to thousands of mainland Chinese visitors and operate VIP rooms in Macau's properties.

Junkets have alleged connections to organized crime (Chinese triads) and are known to employ harsh methods to recover debts from gamblers.

In December, Macau regulators outlawed junkets lending money to gamblers. Also late last year, the heads of Macau's two largest junkets were arrested on various charges.

Burnett sees more changes in the future to Macau's junket model, giving partial credit to Nevada regulators. Nevada companies have been involved in Macau since 2002, when casino licenses were awarded to several foreign firms.

"I don't think it (junket system) is dead but I think it is on it way to further changes that started when our operators (first) went over there," he said.

Data reported by Reuters from Macau's gambling regulators shows the number of licensed junkets has shrunk 46 percent over the past 12 months.

"One might argue that it started with the Nevada Gaming Control Board's concern of how junket rooms were operated, how VIP rooms were operated in Macau and whether or not we were comfortable with our licensees operating in that kind of context," Burnett said. "I think that has gradually changed the scenario in Macau."

Burnett was appalled when he first saw the junket system in operation.

"My first time there, it was almost like a movie," Burnett said. "I was in shock. It was amazing and obviously something foreign to us, coming from Nevada. But I was there for many of the same reasons, to do due diligence and to understand what was going on, knowing that the (Nevada) operators would go over there.

Burnett noted junket operators are at the center of a government crackdown in Australia focused on Crown Resorts and The Star Sydney.

"I don't know if you have been following events in Australia but Crown and Star clearly had a junket model that did not work," Burnett said. "That clearly has come under scrutiny.

"In Nevada, we have never allowed that junket model for obvious reasons and we were always a little hesitant about the junket model when our licensees went over to Macau and operated in that sort of environment," he said.

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