The concession awards mark a renaissance for Macau’s casinos

Macau’s government depends on casinos for more than 80% of its revenue, with the majority of the population directly or indirectly employed by the casino industry.

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With the easing of mandatory quarantines, the resumption of ferry and airline service and renewed licenses, casinos are hoping that 2023 will be a fresh start for the world’s leading gambling destination, Macau.

The Macau government awarded six new companies 10-year concessions to operate its integrated casino complexes. A concession is essentially an operating agreement with the government, which in turn licenses the operators.

To get the permit, casino companies agreed to collectively invest nearly $15 billion in Macau to meet government goals of diversifying the local economy away from gambling and boosting international tourism.

CNBC has also learned that MGM will benefit from the allocation of 200 more gaming tables, although the award comes at the expense of competitors, including Wynn properties, according to multiple sources.

Las Vegas Sands and based in Hong Kong Galaxy Entertainmentt have the largest real estate footprints in Macau and have committed to the largest investments.

Sands’ deal for an investment of $3.75 billion, or MOP 30 billion, will be roughly split between capital expenditures and operating expenses. Most of the investment will go to non-gaming projects, such as a new conference facility and a luxury yacht experience that appeals to overseas visitors, according to a company statement.

A company executive who asked not to be named characterized the financial commitment as a win because it involves investments that likely would have been made anyway, as opposed to a forked operating fee in exchange for a license

The sentiment is similar to MGM Resortswhich plans to invest its $2.1 billion commitment in three main areas: culture, entertainment and medical tourism.

This month, Macau has seen a surge in tourism from mainland China of visitors trying to get a Covid mRNA vaccine. The BioNTech The vaccines have not been approved in mainland China, but in Macau, a Special Administrative Region, or SAR, the Macau University of Science and Technology (MUST) Hospital offers vaccinations for tourists.

Wynn Resorts“The $2.2 billion investment commitment over the next decade will incorporate plans for state-of-the-art theater and restaurant experiences. It also plans to expand its commercial presence in Asia and North America to boost international tourism.

Melco Resorts and Entertainment announced the return of its House of Dancing Water extravaganza, which has been suspended since the start of the pandemic. It will also build an indoor water park. The company also plans to focus on medical tourism by building a clinic with MRI and other advanced imaging technologies.

Galaxy will build Macau’s first high-tech amusement park. SJM Holdings will renovate its defunct floating casino to offer non-gaming entertainment options.

As the government works to usher in a new era, the days of junkets that bring big players to the island are over. Crackdowns had shrunk that segment of the gaming business even before the pandemic began. This week, Macau’s finance secretary and gaming enforcement agency DICJ announced they will step up monitoring and enforcement around even tighter limits.

A surge in Covid infections in China led to Macau’s November gaming revenue falling 23% from October and plummeting 99% from pre-pandemic levels in November 2019, according to government data.

Even with the resumption of the e-visa program, where Chinese travelers can apply for travel documents electronically, and the easing of quarantine requirements, the Macau government said it expects gross revenue from gaming, or GGR, in 2023 mirror the 2022 GGR of approximately $16 billion, as Macau struggles with continued Covid excess.

But Macau’s loss may be Singapore’s gain. Sands reported third-quarter results that showed an impressive jump in visits and spending after Singapore lifted its Covid travel restrictions.

Fitch estimates that Singapore will reach 80% of its pre-pandemic gaming revenue by 2022 and 95% by 2023.

Correction: This story has been updated to reflect that Macau has eased mandatory quarantine rules.

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