Sands bullish on Macau’s future despite Covid-19 disruption

14 August 2020

Sands China, Las Vegas Sands’ Macau-based integrated resorts subsidiary, saw revenue plummet 81.0% year-on-year in the six months to 30 June, with visitor numbers plummeting due to travel restrictions to the Chinese special autonomous region.

However, the operator said it remained committed to Macau, and predicted that the island’s tourism industry would eventually recover from the effects of novel coronavirus (Covid-19).

Revenue for the half year fell to $848m (£646.2m/€716.6m), compared to $4.47bn in H1 2019.

The business’ five properties - the Venetian Macao, Sands Cotai Central, Parisian Macao, Plaza Macao, and Sands Macao - were shuttered from 5 February as a result of the pandemic. Four opened from 20 February, with Sands Cotai Central following a week later.

All properties remain subject to safeguards, such as limited number of seats per gaming table and increased spacing between slots machines. This resulted in casino revenue plummeting 82.6% to $625m.

Guests must provide a declaration showing a negative Covid-19 test, and undergo a temperature check before being admitted to the properties, then wear a mask in all public areas. Hotel capacity is also limited, while only a limited number of other amenities such as restaurants

Sands China noted that it “is currently unable to determine when these measures will be modified or cease to be necessary”.

Visitation to Macau was also been significantly curtailed by a suspension of the Individual Visit Scheme (IVS) and tour group visas throughout the reporting period. Visitors that did make it to the territory were subject to enhanced quarantine requirements.

As such, hotel revenue dropped 80.5% to $71m, while revenue from integrated resorts shopping malls fell 58.8% to $99m. Food and beverage revenue was down 82.5% at $27m, while revenue from conventions, other retail outlets and ferry services fell 79.0% to $26m.

Sands China paid $336m in gaming taxes for the first half, down 80.9%, though it reported a slower decline for employee costs, which were down 14.9% at $554m. Depreciation and amortisation costs amounted to $338m, while other expenses and losses came to $218m. Its properties also used $11m worth of inventory - such as food, drink and saleable goods - in the period.

This resulted in the business posting an operating loss of $609m for H1, compared to a $1.19bn profit in the prior year.

After $9m in interest income and $116m in interest expenses, Sands China’s net loss for the half came to $716m, down from a $1.07bn profit in H1 2019.

While the operator said it was difficult to predict when the effects of Covid-19 would subside, it said it was encouraged by recent changes to travel policies. These, it said “represent the first steps towards the recovery of tourism in Macau”.

From 15 July, Chinese nations with negative Covid-19 tests from nine designated cities in Guangdong province would be exempt from the 14-day quarantine, a measure then extended to all of the province from 29 July.

From 12 August, it was then announced that mandatory quarantine would be lifted for all of mainland China. IVS and tour group visa applications will once again be accepted from 26 August - for Guangdong only - followed by all of China from 23 September.

“The group remains confident that travel and tourism spending in Macao will eventually fully recover,” Sands China added.

It is therefore continuing to execute a $2.2bn capital investment programme to convert the Sands Cotai Central into The Londoner Macao - a venue themed around the English capital - The Grand Suites at Four Seasons and the Londoner Court.

“The group believes these capital investment programs will strengthen its leadership position in the market and will provide a larger platform for future growth as travel and tourism spending return.

“The Group remains unwavering in its commitment to long-term investment in Macao,” Sands added. “The scale of its existing and ongoing investments enables the Group to play its part in supporting the local economy in Macao, including its support of local employment and for small and medium-sized businesses.”

In July, Sands China's parent company Las Vegas Sands revealed its first half revenue fell 71.3% year-on-year to $1.88bn, with the business posting a $985m loss for the period.