It’s been six months since government authorities in Macau promised to disclose more details about the upcoming casino concession retender, which will begin in 2020 and continue into 2022.
But operators, stakeholders and investors still know little about the process, which will determine which of Macau’s Big 6 operators will maintain their licenses to operate in the world’s premier gaming destination, and if a seventh or even eighth operator will be allowed to join them.
Pressed in mid-November for a comment, Paulo Martins Chan, director of the city’s Gaming Inspection and Coordination Bureau, sidestepped the issue. “You all seem quite concerned about this question but I can’t give any related news,” he told reporters at a public event. “Of course the SAR government will make a decision and the DICJ will also participate in this round.”
Two days later, according to Inside Asian Gaming, Macau Chief Executive Fernando Chui Sai On was just as evasive, saying only that the government was “studying how to deal with” the licenses held by SJM Holdings and MGM China, which will expire in 2020, two years before those of Galaxy Entertainment Group, Sands China, Wynn Macau and Melco Resorts. The government does have the option to extend those licenses so the expirations occur jointly.
The dearth of information is making some analysts edgy. “We are becoming more and more concerned over the lack of news surrounding gaming concession renewals,” wrote Brian McGill and Alec Cummings of Telsey Advisory Group. “In last year’s policy address, Mr. Chui had suggested that mid-2018 would be an appropriate time to address this issue. Moreover, last year the Macau government commissioned two studies on the gaming industry concession renewals, both of which were expected to be completed by the third quarter of 2018.
“We are obviously not in the third quarter anymore and we are well past ‘mid-2018,’” they continued. “Given this, and considering the current geopolitical tensions between the United States and China, we are watching this situation closely.”
Michael Zhu of the Innovation Group thinks the government will give “focus and attention” to diversification, the kind of non-gaming attractions sought by both the local government and Beijing.
Jose Alvares, a partner at CA Lawyers in Macau, sounded fairly confident that the current crop of concessionaires will continue to have their license applications accepted. “Very significant weight should be given to an application from a concessionaire that has been operating in the market and has been doing it well. The reason pertains to public interest in that we do not want to rock the boat. I think the logic is ‘don’t change horses in midstream,’” he said. “Without wanting to weigh in excessively, all current operators have proven to be quite beneficial to the market despite pursuing their own selfish interest (as with any company/businessman).
“If the said operators are to be re-awarded the concession, the key here will be the Macau government negotiators ensuring that the said players will continue to bring added-value to the region.”
In a December note, brokerage Bernstein sounded a similar note, saying U.S.-based concessionaires will likely not be imperiled by trade tensions between China and the United States.
“If the Chinese government chooses to take away the gaming concession from U.S. operators, the result would be quite counter-effective to China’s attempts to open up the country for greater foreign investment and the negative PR surrounding such action would be detrimental. US gaming operators can also choose to shut down the entire gaming infrastructure in Macau (a nuclear option) by shutting down the non-gaming elements of the integrated resorts. The result would be unemployment, a drop in tax revenues and a chaotic environment in the city—something that we do not believe the Macau or the Chinese governments would want.”
Bernstein pointed out that the current concession-holders enjoy long-term land leases, some until 2038, with options for renewal—another big reason not to rock the economic boat by evicting them.
Bernstein does not foresee the issuance of a seventh or eighth gaming license but Macau legislator Professor Davis Fong told IAG in 2017 that “from a society perspective we will welcome everybody who can help Macau achieve the world center of tourism and leisure.
“I think society will welcome everybody who can help Macau achieve this new position.”
