The casino industry in Macau has been asked to temporarily shut down as Chinese authorities attempt to gain control over the deadly coronavirus. The closure will begin econ February 5 for a 15-day period.
The closure would only be the second time since the industry began operating in 2002. In 2018, Macau casinos closed for 33 hours following the devastation wrought by super typhoon Mangkhut, which cost the industry $186 million in revenue.
Analysts at Sanford C. Bernstein estimate the shutdown for the coronavirus could see casino operators have half their quarterly revenue wiped out, and if they were forced to close for longer, they could lose as much as 70% of their revenue.
Going from bad to worse
The casino industry was already feeling the effects of a weakened VIP gambling market that saw last year mark the first time casinos saw gaming revenue come in lower since the rebound began in late 2016.
The coronavirus was already taking a toll as visits to Macau, the only place in China where it is legal to gamble, were down 80% since the outbreak began in mid-January.
Casino operators such as Melco Resorts & Entertainment (NASDAQ:MLCO) and Wynn Resorts (NASDAQ:WYNN) have seen their shares fall the most because they derive most of their revenue from Macau. Rivals like Las Vegas Sands (NYSE:LVS) and MGM Resorts (NYSE:MGM), which are more geographically diversified, have fared better.
According to reports, the coronavirus has killed over 400 people and infected over 20,000 in China. That suggests the casinos will absorb the costs associated with the outbreak rather than allow employees to bear the burden, which will hurt earnings this year.