Genting Makes Play for Macau License

Last week, Macau’s six incumbent gaming concessionaires formally submitted bids for new concessions, to start in January. The Big 6 were joined by a potential spoiler—a seventh bidder controlled by Genting Group Chairman Lim Kok Thay (l.).

Genting Makes Play for Macau License

Last week, seven companies bid on up to six gaming concessions in the Chinese special administrative region (SAR) of Macau.

All the current concessionaires were represented: Wynn Resorts, Sands China, Melco Resorts, MGM China, Galaxy Entertainment Group and SJM.

They were joined by a surprise seventh bidder: GMM Ltd., an entity controlled by Genting Group Chairman Lim Kok Thay. GMM’s bid makes it possible that one of the existing Big 6 could get knocked out of the box.

The Genting subsidiary was incorporated in September. Genting now operates casino resorts in its home base of Malaysia as well as Singapore, the United States, the U.K. and the Bahamas. Genting is the power behind the US$4.6 billion Resorts World Las Vegas, which opened in June 2021, and is majority owner of both Genting Malaysia, operator of Resorts World Genting, and Genting Singapore, operator of Resorts World Sentosa.

The seven bids were received on September 14, and the bidding process officially opened two days later. Members of the tender committee, the Public Prosecutor’s Office and the bidding companies were present.

As pointed out by Reuters, the seven current bids constitute just one-third of the 21 bids received in 2002, when the first concessions were granted. The second round of concessions will be subject to amended gaming laws designed to reduce Macau’s reliance on gaming as an economic driver, bring in more tourists from around the world and refashion Macau as a multifaceted international destination.

In order to apply, the bidders had to prove they have ready capital totaling MOP$5 billion (US$618 million) and also agree to install a managing director who “shall be a permanent resident of the Macau SAR and shall hold at least 15 percent of the capital stock of the concessionaire.”

The total number of gaming tables across the market has been capped at 6,000 for 2023, and slots at all gaming halls may not exceed 12,000.

In addition, under the new gaming law, junkets may longer operate VIP rooms at casinos, and both junkets and satellite casino operators may not have revenue-sharing agreements with concessionaires.

The current 20-year terms expire December 31, and the new 10-year terms will begin the following day.

According to a Genting spokeswoman identified as Ms. Chan, GMM is “confident” it will win a Macau license, historically the world’s top-grossing casino hub. She said the firm hopes to “bring new impact” to the jurisdiction, which has been battered by Covid-19 and strict government restrictions to contain the virus. She added that Lim could not join other gaming company leaders in Macau due to Covid-related travel restrictions.

Genting’s last-minute entry was not anticipated by industry analysts, who predicted that only the incumbent “Big 6” would take part in the re-tender given the impact of the pandemic and the shorter concession length.

In late 2020, Genting looked like it was exiting Macau when Genting Hong Kong sold half its stake in Genting Macau. At the time, Genting Macau owned 75 percent of Treasure Island Entertainment, which was developing a hotel on the peninsula called Resorts World Macau. Genting Hong Kong is currently in liquidation, and according to Yahoo News, its stance in regard to the remaining 50 percent interest in Genting Macau is unclear, though it originally planned to sell the balance.

With the exception of Lim, casino executives came out in force for the historic moment last Wednesday, when bids were formally submitted. They included Melco Resorts Chairman and CEO Lawrence Ho, who said, “I would like to thank the Macau government for this opportunity. Our proposal reinforces our commitment to Macau and the further diversification of its economy. We look forward to playing a leadership role in partnering with the Macau government to execute on the government’s vision.”

MGM China Co-Chairman and Managing Director Pansy Ho said she was confident the company would be successful in its re-tender efforts.

Galaxy Vice Chairman Francis Lui chimed in, saying, “GEG has done a lot of work over the past 20 years and believes it has done a satisfactory job for Macau’s economy, peoples’ livelihood, investment and construction, and youth training.”

Lui agreed that attracting visitors beyond Mainland China is “something that should be done” and “the only way to show Macau’s positioning as a world center of tourism and leisure.”

“The source of visitors (after the pandemic) has really changed, and I hope to attract more MICE and public entertainment guests in the future,” he said.

According to Macau Business, at a chamber of commerce webinar called “Macau Gaming at Crossroads: The Public Tender and Beyond,” gaming analysts suggested that “limited hotel room growth capacity and low attractiveness in its offerings limit the capacity for the Macau SAR to expand its international tourist pool.”

The discussion featured Jorge Costa Oliveira, former commissioner for legal affairs for the Macau Gaming Commission; Vitaly Umansky, managing director and senior gaming analyst for Sanford C. Bernstein; and Alidad Tash, managing director of 2NT8 Ltd.

Umansky said the push for Macau to remake itself as an international destination is “unrealistic in the short to medium turn.

“It is probably unrealistic in the longer term as well, unless the Macau infrastructure or economy is somehow completely transformed, which is not a two- or three-year process,” he said.

Under Macau’s updated gaming regulations, the city’s chief executive can reduce the taxes on gross gaming revenue as an incentive for operators to bring in more customers from overseas.

It’s a big job. Of the 7.7 million visitors reported in 2021, about 91 percent came from Mainland China due to pandemic-related travel restrictions. But even before the pandemic, as late as 2019, mainland visitors represented two-thirds of the total 39 million visitors reported at the time.

“On the Chinese government front,” said Umansky, “we can debate all day long if they will open up and when it happens. But nobody knows. … My assumption is that after the borders reopen things will happen and then we will have a whole new discussion around what the Chinese economy will look like, (and if) people are still willing to spend money.”

With only 38,000 hotel rooms, the city could grow “a little bit more,” but not much, in terms of inventory. Hotels were running at 92 percent occupancy in 2019, “which doesn’t give a whole lot of room to grow unless you get rid of Macau gaming customers,” said Umansky. “But then nothing could replace its economic contribution and then no diversification can happen.” Macau must also compete for customers with other destinations in the Asia Pacific, he noted.

Meanwhile, Tash said local dealers, who speak Cantonese and Mandarin, are not of international caliber, and may not be able to adequately serve Japanese, Korean, Singaporean, Filipino or English-speaking gamblers. “As long as Macau continues to have these areas which require a more welcoming culture it will continue to not be so attractive to foreigners as other jurisdictions,” he said. “It just will not be going to happen.”

Meanwhile, Oliveira said Macau was “never a place for gamblers of other jurisdictions” outside Mainland China, including Hong Kong. “Wealthy players coming from Indonesia, for example, were lost in the 1990s because casinos in Las Vegas could provide better deals for junkets,” he said.

He said it’s not “wise” to try to immediately replace mainland gamblers for international guests. “However, if you put pressure enough on the concessionaires, they will find junkets in India, Japan, Southeast Asia and many other places” that may help to fill Macau casinos. “It’s a matter of putting pressure and offering the conditions, something that has never been done in Macau.”

The analysts noted that meetings and conventions are also a hard sell for Macau, due to the difficulty of obtaining visas, the lack of international flights to the SAR, and the competing cities in the region with well-developed MICE sectors, such as Hong Kong, Singapore and even Zhuhai in the Pearl River Delta of Guangdong Province.

As for Genting’s bid, Forbes magazine called it a “long shot” given the more than $50 billion in investments already made by the existing concessionaires.

Citigroup analysts George Choi and Ryan Cheung said in a research note, “Genting in our view does not possess any attributes that are outright superior versus the incumbents.”

Umansky suggested that Genting may not expect to secure a license in Macau, but could be “positioning themselves for the future, in case one of the concessionaires pulls out or needs some financial assistance.”