LAST WORD 82
Dark clouds of concession Sharon Singleton
Managing Editor, AGB
Although Japan appears to be taking up a lot of time and energy on the part of global operators, Macau remains the largest gambling hub in the world.
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ast year, the territory’s 41 casinos pulled be the responsibility of whoever is elected to replace in MOP302.85 billion ($37.4 billion), a 14 him to decide on future of the concessions. This feels like kicking the can down the road. percent increase on the prior year. Gross Lawyers have pointed out that the matter is not gambling revenue growth is again slowing in tandem with a slowdown in the Mainland economy, as easy as simply renewing existing contracts and with some analysts predicting the market will shrink effectively, under the law, it will be a re-tendering again in 2019. However, longer term most express process. That raises the question as to whether the confidence in the strength and potential of the market government would open the market further to allow more operators. as it improves its reach into China. Given its stated aim to diversify the economy That said, there is a major wild card facing Macau’s six operators and one which the government doesn’t that seems unlikely, though some local parties have seem to be in any hurry to tackle. The first of the been vocal in calling for a chance to participate in concessions and one sub-concession are now due to Macau’s gambling largesse. It’s also hard to imagine the government failing expire in little over a year and to date there is no clarity to award a new license to the as to how, or if, those licenses current concessionaires who will be renewed or extended. have invested so heavily in SJM Holdings and MGM Markets and their properties. However, China will find themselves the geopolitical landscape has without the right to operate investors dislike changed considerably since the casinos in their properties by the uncertainty and it’s first concessions were given out end of March next year unless and some commentators have action is taken. The remaining hard to fathom why pointed to the risk of the U.S. concessions expire in 2022. the government is operators becoming pawns in Markets and investors dislike President Trump’s trade war uncertainty and it’s hard to dragging its feet with Beijing. fathom why the government on a sector that So far, the operators are is dragging its feet on a sector keeping their cool and whenever that makes up the bulk of its makes up the bulk questioned have expressed revenue. The operators, both of its revenue. optimism about their future local and U.S., have invested presence in Macau, though it billions in building Macau’s appears clear that the government glitzy resorts, transforming is prepared to make them sweat. the former sleepy Portuguese colony. So why then is Macau taking so long to provide The government had promised to provide clarity by the end of 2018 following a review of the the necessary clarity to the sector that has made it sector, but in October, Secretary for Economy and one of the richest economies in the world in terms Finance Leong Vai Tac said the government was still of gross domestic product per capita? There is a view that the government is seeking researching the impact of gaming concession renewal ways to be more specific about what it wants from on the local economy. Heading into 2019 officials have remained tight lipped its gaming operators, such as setting objectives as on their findings and how they plan to handle the issue. to how to achieve greater non-gaming revenue. It’s The most widely accepted view is that the current hard to imagine further direct gaming taxes could administration will extend the licenses of SJM and be on the table, given growing regional competition MGM for two years to bring them in line with the other and the fact Macau already has the highest rates in concessionaires and deal with the problem all at once. the region at 39 percent. However, at the end of the day, the answer is The current CEO Fernando Chui finishes his second and final term in December and then it will probably that the ultimate decisions lie with Beijing.
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Asia Gaming Briefings | Februay 2019
