Minimum revenue requirements for Macau gaming tables and slot machines, which will take effect along with the new casino concessions in January 2023, are “affordable,” says Kwok Chi Chung, president of the Macau Association of Gaming and Entertainment Promoters.
In comments to public broadcaster TDM, Kwok said the minimums could help lead a “healthier” development of the beleaguered industry, and “better control” the employment forecast for gaming, which has been battered by Covid-19 shutdowns.
According to GGRAsia, before the requirements were made public, some analysts worried that annual minimums could be too high, forcing operators to make up any shortfalls in an already challenging atmosphere. Macau gaming operators are now burning cash to stay in business due to Beijing’s strict zero-Covid policy.
“The minimum GGR target was much better than feared,” said a note from JP Morgan Securities (Asia Pacific) Ltd. “It turns out there wasn’t much to worry about: the target amount appears low and feels like just a formality to us,” wrote analysts DS Kim and Livy Lyu.
The minimum annual limit for gaming tables is MOP7 million (US$867,000). Gaming machines must reap MOP300,000 (US$37,050). The maximum number of gaming tables across the market is 6,000, and gaming machines cannot exceed 12,000.
The minimums are “even below the levels we saw last year: MOP13 million and MOP0.4 million” for tables and slots respectively, “let alone pre-Covid levels,” which had been more than MOP40 million on average per table, and about MOP1 million yearly per slot machine, noted the JP Morgan team. “This seems like a very low bar to clear, even if we assume a very gradual recovery in demand.”
Regarding the cap on table and slot numbers, JP Morgan stated: “There is… enough excess capacity in the market in our view, even after demand fully recovers to pre-Covid levels and beyond.”
According to investment bank Morgan Stanley, Sands China would be the big loser when it comes to table and slot caps if the government requires an even allocation across all six concessionaires.
While the government’s revenue minimum should be “easy to meet,” analysts Praveen Choudhary and Gareth Leung said if operators get 1,000 tables and 2,000 machines each, Sands China would be greatly reduced from the 6,000 slot machines it offered at the end of 2019.
Sands and SJM would be the biggest losers in the table games segment, while MGM China and Wynn Resorts would be ahead under an even-Steven arrangement. Meanwhile, Sands, Galaxy and Melco would all lose slots, with the upside going to SJM, MGM and Wynn.
However, even allotments may be a nonstarter, as operators like MGM China don’t have the space for new inventory.
“This is bang in-line with the current level of industry capacity, which implies the government will not grant new additional tables and instead will reallocate existing gaming capacity for new projects in the next ten years,” the J.P. Morgan report said.
