For Macao casinos, nothing will be the same

Mark O'Neill October 05, 2021 08:44

The world is about to change for the six casino operators of Macao, whose licences expire in June next year. On September 14, the SAR government announced a new gambling policy and a 45-day public consultation period.

The announcement caused a plunge in the market value of the casino companies, which include Sands China, MGM China and Wynn Macau.

In 2019, the last year before the Covid pandemic, the casinos earned 292.4 billion patacas (US$36.6 billion) in gambling revenue, more than five times the US$6.6 billion earned by Las Vegas casinos. Macao is by far the most lucrative gambling centre in the world.

Under the policy, all six must rebid for their licences, known as concessions, when they expire next June.

Announcing the policy, Lei Wai Nong, Macao’s Secretary for Economy and Finance, said that the government might reduce the number of concessionaires and was open to modifying the current concession period of 20 years. He did not give details.

“The gambling industry has caused problems in society and shown deficiencies in its supervision,” said Lai.

The policy includes the selection of government representatives to take part in the daily operations of the casinos to increase supervision and giving the government a say in whether operators pay out dividends to shareholders. It also calls for an increase in the voting shares of Macao permanent residents in the concessionaires.

Allan Zeman, non-executive chairman of Wynn Macau, said that the casino operators would have to change the way they do business.

A week after the policy announcement, the government held a 70-minute meeting with senior casino and junket executives, their only scheduled meeting during the consultation period. Buddy Lam, Galaxy’s senior vice president for public relations, said his company was confident a balance could be reached between national interests and the demands of operators.

The biggest impact will be on the management of junkets and gambling by wealthy individuals from the mainland. Beijing wants to control better the outflow of money from China and sees such spending as a weak spot.

Beijing also wants more of the profits from casinos to be spent at home and not sent as dividends abroad. This has become more urgent with the sweeping reform of the management of the Hengqin zone announced last month.

The zone, part of Zhuhai city and adjoining Macao, will be jointly managed by a committee chaired by the governor of Guangdong and the Chief Executive of Macao. Its management committee will be headed by an Executive Deputy Director appointed by the SAR government. Casinos are not permitted in Hengqin.

Beijing wants the six casinos to invest in non-gaming projects in Hengqin and make the zone a diversified tourism district, in order to persuade visitors to stay longer than one or two nights at the gambling tables. With 106 square kilometres of land, it is three times larger than Macao.

The intensifying Sino-U.S. Cold War has fuelled speculation that the Macao government might withdraw a concession from one or more of the U.S. licence-holders – Sands, MGM and Wynn.

But this is not likely. The three companies have invested billions of dollars in Macao, including hotels, casinos, theatres and other performance venues. They have trained thousands of Macao people in the gambling industry and, over 20 years, have built up close relations with the SAR government.

They have fulfilled the mission given to them in 2002 – to turn Macao into a world-class gaming and entertainment centre. The rapid increase in gambling revenue has made Macao one of the richest cities in the world.

“My forecast is that the six will retain their licences,” said one gambling analyst. “In exchange, they will have to accept a higher level of Chinese ownership, lower income especially from junkets and smaller dividends. More of the profits must be re-invested in Macao and Hengqin.

“They will have to accept a level of government oversight and supervision they did not have before. But, even with a reduced income, Macao will remain the most lucrative gambling franchise in the world,” he said. “It is the only place in China where gambling is legal and Chinese are the world’s most eager gamblers.”

-- Contact us at [email protected]

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.