Macau's six casino operators are preparing to bid for new licenses by next month, with their existing contracts expiring at the end of this year1. The rebidding comes as the government is set to shut casinos on July 11, 2022, for the first time in more than 2 years, after a COVID-19 outbreak1.
The current six gaming concessions and sub-concessions were all slated to finish on June 26, 2022, but a six-month extension has already been agreed upon by Macau SAR authorities to allow for the new gaming law amendment to be passed and a new gaming license tender to be carried out2. Macau's government has rewritten the gaming law to strictly control casino operators, including the right to terminate a contract for reasons including public interest. It also raised the taxation rate payable to 40% from 39%, and halved the duration of casino licenses to 10 from 20 years1.
Analysts estimated the casinos were burning through some $600 million each month because of COVID restrictions, even before the July 11 closure1. The sector had already been reeling since the start of the pandemic, with revenues tumbling 70% in 2021 compared with 2019 to $10.8 billion, from a business that generated $36 billion in revenue in 20191. Macau casino shares have sunk between 21% and 76% since 20201. Sands China on July 11 said it secured a $1 billion loan from parent Las Vegas Sands to support its working capital, which JP Morgan analyst DS Kim said would give Sands enough liquidity to keep going for 15 months. Wynn in June announced a $500 million loan from its Las Vegas parent1. Excluding money set aside for rebidding, $600 million, SJM has about one month left in cash reserves if casinos remain closed, according to Kim, who expects the company to tap its parent STDM for a HK$5 billion ($637 million) loan1.
Since 2002, the casinos have paid more than $160 billion in taxes to Macau's government, and the industry accounts for more than 80% of government tax income1. It remains unclear how authorities will choose the six new operators in a decision not expected until the fourth quarter, and whether U.S. companies Wynn, Sands and MGM can continue to make up half of the sector1.
Satellite casinos have also been affected. Galaxy Entertainment Group closed the three satellite casinos under its gaming license and City Club brand at the Rio, President and Waldo hotels, with staff to be transferred to other properties within the group; the three employ around 600 employees, most at the Rio and Waldo2.
- The Rio and President casinos have suspended operations since June 15, and TDM Radio reported that Waldo has submitted a request to do the same by the end of the month2.
- Rio Entertainment Ltd, responsible for the Rio Hotel, published an advertisement stating that Galaxy never attempted to negotiate a possible renewal of the cooperation agreement2.
- The Grand Emperor Hotel casino, previously set to close on June 26, will continue operating until December 31 after an agreement between hotel owner Emperor Entertainment Hotel Limited and concessionaire SJM2.
- Two satellite casinos at Macau Fisherman's Wharf will also continue at least until December 31 under extended SJM agreements2.
What it means for players
Macau is the only place in China where gambling is legal1. The license rebidding and the rewritten gaming law set the terms under which the city's casinos will operate, including a 10-year license term and a 40% tax rate1. The closure of satellite casinos such as the Rio, President and Waldo removes venues that players could previously visit under Galaxy's license2, while the Grand Emperor and two Fisherman's Wharf casinos remain open until at least December 312. Under the new rules, satellite casinos that continue as managing entities will only be able to charge managing expenses and will not be allowed to share a percentage or commission of gaming revenues2. How the six new licenses will be awarded, and whether U.S. operators keep their share of the market, has not been reported1.
What happens next
Bids for new licenses are due by next month1. A decision on the six new operators is not expected until the fourth quarter1. The existing contracts expire at the end of this year1.
