Genting Could Be a Spoiler in Macau

Genting Malaysia may be a long shot to win an “outright” concession in the Macau gaming license retender, but the company’s bid, which took the incumbents by surprise, has its merits. For one thing, Genting has been all-in on non-gaming, a fact that should impress the retender committee.

Genting Could Be a Spoiler in Macau

In mid-September, a unit of Malaysian casino giant Genting staked its claim for one of up to six Macau gaming licenses, submitting a bid “for the operation of casino games of fortune” in the Chinese gaming hub.

Initially, the bid wasn’t perceived as a threat to the incumbents, and most gaming analysts stood by their belief that the current concessionaires would renew their licenses and keep doing business for another 10 years.

But Genting has a few things going for it: for one, a history of investing in non-gaming attractions, in line with President Xi Jinping’s demand that Macau diversify its economy to be less reliant on gaming. For another, the Malaysian company purportedly enjoys a strong relationship with the Chinese government.

Genting sponsored the Genting Snow Park ski resort in Hebei Province, which was used as a venue at the 2022 Winter Olympics in Beijing, and according to a September note from brokerage Sanford C. Bernstein, “there are other ties in China that could prove valuable to Genting’s pursuit of eventual entry into Macau.”

Ben Lee, gaming industry veteran and managing partner of consultancy iGamiX, agrees that Genting’s bid should be taken seriously.

“Genting has several things going in its favor,” he says. To wit:

  1. Non-gaming as a basic precept of business. Genting hasproven themselves adept at running a diversity of entertainment offerings, not just gaming,” says Lee. “Theme parks, live concert entertainment, ski resorts, cruises etc. have all been part of their offerings all around the world.” Take Resorts World Sentosa in Singapore, with its Universal Studios park, S.E.A. Aquarium, Adventure Cove Waterpark and Dolphin Island, plus multiple hotels, restaurants, retail outlets—even an underground go-kart venue. “These are the sort of diverse non-gaming facilities the Macau government has wanted in Macau.”
  2. Enthusiasm for the integrated resort model that didn’t need prodding or mandates. Says Lee, Genting was “willing to invest in these amenities when others balked at the low returns.”
  3. Increasingly global reach. “Genting has the biggest footprint globally, especially in Asia,” he adds. “With Macau trying to wean itself away from the mainland towards the region, Genting has a strong competitive advantage, having operations in Malaysia, Singapore, Philippines, even Jeju Island (in South Korea) at one stage, and their famous cruises to nowhere. Their database of both VIP and mass players would be unmatchable.” The operator also has resorts in New York and Las Vegas, the United Kingdom, Egypt and the Bahamas.

Some analysts have suggested that Genting could be a white knight, riding to the rescue of a struggling operator even if it doesn’t win a gaming concession. When the company submitted a bid through its subsidiary, GMM S.A., the Bernstein analysts said it was “positioning itself as a prospective partner or buyer of an existing operator, in the event that a concession-holder experiences financial difficulties and may require a partner or could be open to being acquired, with government consent.” They mentioned SJM as the most vulnerable among the “Big 6.”

Lee doesn’t buy that scenario.

“In fact,” he says, “I see the possibility of one or two of the U.S. operators either merging or being subsumed by the others—particularly the ones who have invested the least in non-gaming.”

Among U.S.-based operators, some put Wynn at greatest risk of being nudged aside, which would create an opening for Genting.

With another view, S&P Global Ratings said a win by Genting could “cloud” its own recovery, and “shift the group’s focus to debt-funded growth from deleveraging, if it gets the gaming concession.

“Despite offering a wider geographic footprint and an opportunity for the group to expand,” the S&P team added, “Macau’s gaming market would also imply more intense competition in a highly regulated and scrutinized market versus other markets, such as Malaysia and Singapore.”

In a September note, Maybank IB analyst Samuel Yin said his firm was “lukewarm on this development, as China’s zero-Covid policy has hit Macau hard relative to Genting’s existing operations in Malaysia and the west. That said, our view may change drastically for the better should China lift its zero-Covid policy.”

More recently, Yin said Genting “can offer the Macau government whatever they expressly said they wanted,” meaning more diverse offerings, and tourism that draws from around the world, not just Mainland China, which accounts for up to 90 percent of visits to Macau.

“Macau has been told over and over again to focus less on Chinese VIPs and more on non-gaming,” the analyst told Reuters, “but they pretty much paid lip service to that idea. So now… they have to really make a hard divert to that philosophy.”

With President Xi now in for a third term, it looks like the government’s hardline stance on Covid will continue indefinitely, prolonging the “stop-start” dynamic that has gaming operators burning cash to pay the bills.

Meanwhile, though Macau is down, it’s not out. “It would not take much for Macau to regain its crown,” Lee believes. “Right now, it’s scraping along the bottom, with our projection of US$5 billion for the full year. We will never regain that peak of US$45 billion we saw in 2013, but US$10 billion should easily be achievable, which would put us back on top again.”

Which makes the prize—a Macau gaming concession—worth the fight, despite one of Macau’s most challenging periods. In an interview at G2E in October, MGM Resorts International CEO Bill Hornbuckle made it clear that his company, which owns 56 percent of MGM China, takes the Genting bid “very seriously.”

He hastened to add that MGM, too, is a leader in non-gaming, telling CNBC, “We’re answering the government’s calls about diversification, about entertainment, about tourism, and the kinds of things we think are going to drive that market in the future. And the government has its own choice to make when this process is over.”

Hornbuckle, for one, thinks the six incumbents are “all in really good shape” and will all be present and accounted for when the new concession-holders are announced.

With the new license terms to begin on January 1, that decision is imminent.