Opinion: Casinos Must Prepare for Impact of Omicron COVID-19 Variant as Stocks Tumble

  • A concern for the WHO, the Omicron variant of COVID-19 is now spreading all across the world
  • The US has not locked down just yet, but multiple European markets have reintroduced measures
  • Casino stocks have taken a tumble for operators in the US and Macau, such as Wynn and Melco
  • However, the resilient casino industry should now have the tools to handle the variant’s impact
Omicron COVID-19 variant
Across the globe, the Omicron variant of COVID-19 has caused concern, and casinos must ready themselves as a decline in stock prices potentially foreshadows issues further down the line. [Image: Shutterstock.com]

A new concern for operators

The COVID-19 pandemic has created chaos and disruption for businesses across the globe – not least for the casino industry. In 2020, US casino gaming revenue dropped by more than 31% for the full year, to a total of $30bn. It represented the first time overall revenue had fallen since 2014 and the lowest total since 2003.

Partly this was due to COVID-19 forced closures, with casinos losing 27% of their normal operating days. Fast forward to 2021, however, and casinos across the world have resumed at least some level of normal service. The bright lights of Las Vegas are shining once more and Macau high rollers have returned to the gambling hub in their droves.

there’s a new kid on the block when it comes to coronavirus

Casino operators have begun to experience recovery from the impact of a disastrous 2020, but there’s a new kid on the block when it comes to coronavirus. The Omicron variant, first detected in South Africa, is causing concern across the world. As it continues to spread, the World Health Organization (WHO) is attempting to gather evidence on whether it is more transmissible or causes more severe disease.

While US infectious disease official Anthony Fauci has affirmed that it is too early to consider lockdowns, multiple countries in Europe have reintroduced their strict measures. Sadly for still recovering casinos, this has cast another unknown over the future of the industry, and there are already signs that Omicron could have a significant impact on the sector.

Stocks take a tumble in Macau, US

On Friday, the WHO released a statement declaring Omicron a “variant of concern.” The body advised countries to increase their surveillance of the variant and up efforts to combat its spread. With investors clearly fearing the impact of this news, casino stocks took a tumble that day.

Melco Resorts stock took the steepest hit, dropping 10%

This is particularly true for casino operators with a focus on the Macau market, where existing travel restrictions are already creating issues for the gambling hub. Wynn Resorts fell 6% on Friday, while Las Vegas Sands took a 5% tumble. Due to its heavy reliance on the Chinese market, Melco Resorts stock took the steepest hit, dropping 10%.

It’s a similar story for casinos in the US market, although the declines are more gradual. On Friday, Caesars Entertainment took a 3% hit, Boyd Gaming fell more than 1%, Century Casinos declined by 8%, Rush Street Interactive fell 5%, and Penn National Gaming dropped less than 1%. Bally’s Corporation, meanwhile, actually saw a marginal increase.

Since Friday’s announcement, the WHO released another statement Monday. The health agency has declared that the Omicron variant poses a “very high” global risk of infection surges that could have “severe consequences” in some areas. Now, operators must wait and see over the coming months whether these fears come to fruition.

No time for casinos to panic

Despite this unsettling news, it isn’t time for casino operators to panic just yet. After all, they are in a much better position than when the first wave of coronavirus rolled around in March 2020. Most already have measures in place to counter the spread of infection, and the vaccine continues to roll out in countries all across the globe with many people already double or triple jabbed.

Speaking with CDC Gaming Reports last week, John Swissman, a partner and gaming consultant for The Strategy Organization, expressed faith in the industry’s ability to continue to perform well. He noted that despite the impact of the Delta variant earlier this year, gaming revenue across the world still remained high. The analyst also suggested that vaccinations will help maintain travel figures.

Similarly, Andrew Klebanow, a principal with Klebanow Consulting, believes that the Las Vegas tourism industry has demonstrated its resilience throughout the pandemic. However, Klebanow warned that Macau could see a steep hit from the Omicron variant due to China’s zero-tolerance policy towards infections. “Those governments are willing to shut down travel and their economies if even the smallest outbreaks occur,” he explained.

China’s COVID-zero strategy sees the government subject citizens to compulsory quarantines, with wide definitions of those considered close contacts to infected people.

For now, it’s too early to tell what impact the Omicron variant might have on the global gaming sector, but it’s definitely time for casinos to prepare themselves for the worst. At least the industry should now have the tools to mitigate any damaging impact while hoping that the variant will not necessitate such actions.