The renewal of the six gaming concessions in Macau has been a concern for almost five years. With two due to expire in 2020, the government extended them for two years in line with the other four will expire at the end of 2022. All six concessionaire (and subconcessionaires, a category that will disappear with the new agreements) have invested billions of dollars into their multiple properties in Macau, so the idea that one or more would be left out of the renewal process was almost unthinkable.
But nonetheless rumors persisted, particularly swirling around the American companies and their subsidiaries active in Macau—Wynn Resorts (Wynn Macau), MGM Resorts (MGM China) and Las Vegas Sands (Sands China). Reports that the Chinese government wasn’t happy with one or more of the companies were floated. Why not replace them with other Chinese companies to add to the Chinese companies already active in Macau—SJM, Galaxy Entertainment and Melco Resorts? Or how about the subsidiary of the Malaysian gaming giant, Genting, which was the only outside company bidding for one of the six concessions the Macau government put up for grabs.
In the end, the original six were affirmed and the next phase of Macau gaming will now commence. And the next phase will be totally different than the ones that began in 1961 when Stanley Ho’s SJM was granted a gaming monopoly and 2001 when the industry was opened up to the six operators.
To start, the Covid crisis is still not over in Macau. China is stubbornly sticking to its zero-Covid policies that require extreme measures if even one person tests positive. The policy has strangled the revenue stream for Macau casinos, preventing visits from the surrounding provinces and Hong Kong to this day with such stringent controls like quarantines, anywhere from two weeks to three days. The billions of dollars in revenue that Macau casinos used to report each month has shrunk to millions.
But the concession renewal agreements have the concessionaires agreeing to invest more than $12 billion in non-gaming amenities. In fact, the agreements stress the importance of diversifying the revenues of each company to focus more on non-gaming. The specifics for each company will be announced sometime in December.
As if to emphasize that fact, the agreements also radically change the VIP market. While the junkets may still operate, there are strict licensing requirements, a sharing of responsibilities on the players and where their money comes from, and more transparency. The can be no proxy betting or under-the-table betting arrangements with players that seems to have occurred in the last 20 years.
Taxes have been increased to 40 percent of gross gaming revenues, unless the revenue comes from “foreign visitors”—anyone from outside China—when it drops by a few points. But non-Chinese visitors to Macau are a very small percentage, so this provision encourages companies to put more effort into attracting them.
Also, the term of the concessions have been halved from 20 years to 10 years, putting pressure on the companies to maximize those revenues, and offering no guarantees that the concession renewal process will be any easier than this one.
So what’s next? Each concessionaire will be presented with a contract covering their responsibilities over the next term, according to André Cheong Weng Chon, Macau’s Secretary for Administration and Justice.
“The six companies that have been provisionally awarded will be developing the non-gaming and gaming sectors for Macau,” said Cheong, according to Inside Asian Gaming. “They have all submitted plans to the government for future investments, but no details can be announced at this stage.
“Why were these six companies chosen? The government has chosen these six companies in accordance with the law, and the bidding committee, in accordance with the law, focused on the tenderers’ social responsibility plans, and this condition was accepted by the government.
“In the case of the foreign visitor market and the non-gaming investment program, the government has also given priority to these two areas, and past performance has also been taken into account in the evaluation.”
Cheong brushed off worries that the effects of the pandemic would prevent the concessionaires from fulfilling their commitments to Macau.
“We believe the repercussions of Covid-19 will only be temporary and the normal travel arrangements will be restored after the pandemic so that the concessionaires can carry out different plans and projects in accordance with their pledges,” Cheong told a press conference last week.
“There is also a mechanism that in force majeure circumstances that are not attributable to the concessionaires, such as the travel restrictions at the moment, the concessionaires can temporarily suspend their investment plans and pledges,” he added.
In a Facebook post, Jorge Godinho, Macau attorney and a visiting professor at the University of Macau, said a new day for the SAR.
“Macau has turned a page, but has not initiated an entirely new chapter or era,” he says. “The next years are going to be mostly a continuity of what started in 2001. The six concessionaires have well-oiled systems in place and are now expected to develop non-gaming activities much further than previously. They are also expected not to rely so much or at all on business brought by gaming promoters and should rely mainly on the mass market.
“However, once the dramatic effects of the pandemic are over and the financial bleeding stops, things will not return to what they used to be, given the demise of VIP gaming, which will never again have a very large share of the revenue. It is not possible to move large amounts of money as before. The record GGR achieved in 2013 and 2014 will not be surpassed anytime soon.
“This is also because regional competition is increasing: the tourism magnet of Thailand is apparently about to legalize casino games of chance, a very large casino operated by MGM and a local partner will open in Osaka, Singapore handled the pandemic very well, the Philippines is constantly growing. The irony is that the large expansion of casino gaming underway in East Asia is in fact a by-product of the major reforms of 2001 in Macau, which others copied very well.”
While the bid from Genting Malaysia was rejected, no reason was offered by the government. The scores of the submissions will be reported sometime in December, which will presumably indicate where Genting fell short.
In a statement, Melco Resorts Chairman and CEO Lawrence Ho said, “We are honored to have been selected and granted a provisional award for the concession to operate gaming in Macau and would like to thank the Macau government for running a smooth and transparent process. We are committed to Macau and its development as Asia’s premier tourist destination.”
Sands China President Dr. Wilfred Wong, expressed similar sentiment. “The entire company is elated at the news of our successful bid for a new 10-year gaming concession,” he said. “We are grateful to each of our 25,000 team members for their tireless support and dedication. Our gratitude also goes to the tender committee for its meticulous and thoughtful consideration of the tender submissions. We will do our utmost to further contribute to Macau’s economic diversification and its continuing development into a world-class international tourism destination.”
“In the coming decade and beyond, we will remain steadfast in our strategy of continuous investment in Macau—in its economy, its people and its community,” said Robert G. Goldstein, the chairman and CEO of Sands China.
Lui Che Woo, Chairman of Galaxy Entertainment, said, “We will incorporate innovative elements and our experience to further propel Macau’s development as a world center of tourism and leisure.
