Macau's casino operators began operating under new licenses on Jan. 1, 2023, Reuters reported, after the contracts were formally awarded in December. The six companies are Sands China, Wynn Macau, MGM China, Galaxy Entertainment, Melco Resorts and SJM Holdings, which have run casinos in the Chinese special administrative region for the last 20 years1.
The new licenses run for 10 years, shortened from the previous terms, and carry a commitment to invest a total of $15 billion over the coming decade, 90% of which must be spent on non-gaming1. After the contracts were awarded in December, the operators set out non-gaming plans including indoor waterparks, health and wellness centers, art exhibitions and a large garden attraction by Sands, similar to Singapore's Gardens by the Bay1.
The government has set a target for that spending to translate into revenue. Non-gaming revenues averaged around 5% of overall gaming revenues before COVID-19 and must grow to more than 30% in the next decade, according to Ben Lee, founder of Macau gaming consultancy IGamiX1.
"For the past 20 years, none of the operators have managed to establish any significant progress in non-gaming."
The contracts took effect as the industry absorbed its worst year on record, with 2022 the weakest annual performance since the former Portuguese colony liberalized the industry in 20011. Net debt increased four-fold to $23 billion in 2022 and may only peak by the end of 2023 at $24 billion, Morgan Stanley said in a December note1.
The new terms also add oversight. Companies must routinely submit to the government the progress of their investment projects, the value of their investments and the execution period1. Because more than 90% of Macau's visitors come from greater China, the government required operators to attract foreign tourists as part of the new contracts1. Macau is the only place in China where gambling in casinos is legal1.
| Item | Figure |
|---|---|
| Contract length | 10 years1 |
| Total investment committed | $15 billion over the coming decade1 |
| Share that must be non-gaming | 90%1 |
| Non-gaming share of gaming revenue pre-COVID | around 5%1 |
| Non-gaming share required within a decade | more than 30%1 |
| Industry net debt, 2022 | $23 billion, up four-fold1 |
What it means for players
The gaming floors that locals, expats and visitors in Macau can enter are run by the same six companies as before, under licenses that now expire sooner and carry investment conditions attached to non-gaming facilities1. The non-gaming plans announced in December, from indoor waterparks to art exhibitions, describe attractions outside the casino floor rather than changes to table games or baccarat1. The government's requirement that operators draw foreign tourists, alongside the fact that more than 90% of visitors come from greater China, indicates the licensing terms are aimed at changing who visits Macau, not what is offered inside the casinos1. The rules inside Macau casinos, including entry requirements, are unchanged by the contract award as reported1.
What happens next
Operators must report the progress, value and execution period of their investment projects to the government on a routine basis1. The non-gaming revenue share is required to rise above 30% within the next decade, from around 5% before COVID-191. Morgan Stanley expects industry net debt to peak at $24 billion by the end of 20231. No further dated steps were reported1.
