Macau Renews 6 Casino Licenses for 10 Years, Genting Loses Bid

On Saturday, the Macau Government announced it has renewed licenses for six casino operators: Wynn Resorts, Las Vegas Sands, Galaxy Entertainment, SJM Holdings, MGM Resorts, and Melco Resorts & Entertainment. Unfortunately for Genting Malaysia, their surprise last-minute bid as the seventh contender was rejected.

The casino licenses will take effect from January 1, 2023, after regulators negotiate the final terms, and will be in operation for the next ten years. André Cheong Weng Chon, Macau’s Secretary for Administration and Justice, said:

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“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 addition, based on a report by the Las Vegas Review-Journal, André Cheong Weng Chon noted that the government would start drafting contracts to be signed by the casino operators next month.

Macau Government’s Expectations from the Casino Operators

The former Portuguese colony, home to 700,000 people, is the most tourist-dependent location globally. However, it has been receiving a lot of pressure from the Chinese government to diversify from gambling as its primary source of revenue to entertainment, retail, and other industries. In agreement with Mainland China, Cheong Weng Chon noted:

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“The operation and development of our gaming industry has come to a certain scale today, but there are also some problems. For example, the source of our tourists is too concentrated. It’s not healthy.”

With that in mind, according to Reuters, non-gaming projects were among the things that Macau officials took into consideration before awarding licenses to the six casino operators. Thus, the officials also checked out the operator’s ability to develop non-gaming projects locally, provide overseas tourist markets, and create local employment. Cheong, the Secretary for Administration, pointed out that:

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“The six companies that have been provisionally awarded will be developing the non-gaming and gaming sectors for Macao. They have all submitted plans to the government for future investments, but no details can be announced at this stage.”

And although Genting Group did not receive a casino license, it was still considered a good candidate for the Macau casino license. The Malaysian gaming operator has an impressive mass-market appeal and solid non-gaming track record, which would have perfectly fit the Chinese government’s criteria for diversification to non-gaming activities.

Gaming Stocks Respond Well to License Approvals

Last year when Macau launched its gambling review, investors were backed into a corner, worrying that the number of casino operators would be reduced along with their gaming concessions. Later, the Chinese government implemented its zero-COVID policy lockdowns when casino operator licenses were about to expire, leading to more negative movement on gaming stocks.

So, following the Saturday announcement for license approval, share prices of some Macau casino operators recorded some positive movement. For example, Wynn Resorts Ltd’s share price increased by 5.7%, almost reaching an eight-month high. Likewise, Las Vegas Sands Corp shares jumped 3.7%, about a nine-month high in premarket trading, and MGM Resorts International’s share price increased by 2.9%.

Of course, it is also worth pointing out that the three stocks have been rallying based on the hopes that Macau would renew their contracts. For instance, in the past three months, Wynn Resorts Ltd’s stock price has climbed by 20.2%, MGM Resorts by 6.4%, and Las Vegas Sands Corp by 13.8%.

Effects of the Pandemic on Macau’s Gambling Market

Over the past 20 years, the six operators have invested $20 billion, with a few reports suggesting they are expected to spend about $12.5 billion to cater to non-gaming projects. The six operators run a total of 41 casinos across the China Special Administrative Region (SAR).

In 2013, the yearly revenue from dice tables, slots, and other games stood at $45 billion, more than tripling that of Las Vegas, which was previously the global gaming champion. However, Macau’s revenue dropped after Beijing put restrictions on the number of times mainland bettors would visit. As a result, in 2019, even before the COVID-19 pandemic, gambling revenue had fallen by 19% compared to the 2013 levels to $36.4 billion. Come 2020, on the onset of covid; gambling revenues stood at $7.6 billion, an 80% decline compared to 2013.

In 2021, however, there was a slight increase year-on-year to $10.8 billion, although it was a 75% decline compared to 2013. Unfortunately, this year, thing’s haven’t been looking up for the gaming mecca either. Owing to lockdowns imposed after COVID outbreaks in June, the region’s economy declined further by a third in Q3 2022, compared to 2021’s levels. In addition, the gambling revenue dipped by a staggering 72.5% as the tourist arrivals slid by 50.8%.

When the six gaming licensees go all in on introducing non-gaming activities, we expect Macau’s non-gaming economy to flourish like that of Las Vegas. In Sin City, casinos have found ways to attract non-bettors and offer family-friendly activities like water parks, roller coasters, art exhibits, sports, shopping centers, and music concerts.