Macau, the supercharged Asian city that left Las Vegas for dead in the Nevada Desert dust, is set to overtake oil-rich Qatar next year as the richest place on the planet in terms of per-capita GDP.
That's according to the IMF, no less.
The tiny semi-autonomous Chinese city of Macau, which relies on casinos to provide more than 70% of its GDP, stands on the edge of a new era – one that gaming operators and investors hope will at least be as financially successful as the preceding one.
To all intents and purposes, the new era kicked off last Friday when Macau’s secretary for economy and finance, Lionel Leong Vai Tac, announced that the future of all six existing gaming licences would be decided together, at the same time.
The move removed some uncertainty for investors by extending SJM's and MGM China’s gaming concessions from 2020, when they were originally due for renewal, to 2022, in line with the expiry dates for the four other concessionaires.
Macau's opening up began in February 2002 with the ending of the 40-year casino monopoly of Hong Kong-born mogul Stanley Ho Hung-sun. Gaming concessions were subsequently granted at different points to six players, including three from the United States – Wynn Resorts, Las Vegas Sands and MGM – as well as Stanley Ho’s SJM and Hong Kong’s Galaxy Entertainment and Melco resorts.
But now Macau is on the brink of change both inside and outside its casinos, according to gaming industry insiders and veteran watchers of the city’s political landscape.
The Macau subsidiaries of all the big three American concession holders – as well as Galaxy – are listed on the Hong Kong Stock Exchange and shares in them all reacted positively to the concession extension. In large part this was due to what was seen as reasonable one-off concession extension payments of $25 million and $2.5 million to be paid by US operator MGM to the Macau government and by SJM respectively.
Union Gaming analyst Grant Govertsen said the terms of the two-year extension indicate the (Macau) administration will take a friendlier approach than some had previously anticipated.
“It is a positive sign that the existing concessionaires are still going to be welcomed to remain in Macau and the fees seem pretty modest,” Govertsen said.
Investor fears had been raised by some reports that American casino operators in Macau could fall victim to the ongoing US-China trade war.
JOINED-UP THINKING
The move to bring all six concessions under one umbrella is in effect a bid to bring joined-up thinking in pursuit of the long-stated aims of growing the mass market gaming sector and diversifying an economy that relies almost entirely on the gaming dollar.
It also carries a strong political message, both in terms of domestic Macau affairs and what Beijing believes to be the interests of the wider nation – notably the de-stabilising potential of capital flight through the underground banks connected to junket operators who supply VIP gamblers to the city’s casinos.
Friday’s announcement was carefully timed and crafted to coincide with the end of China’s largest political event of the year when legislative delegates and advisors hold two weeks of meetings in the Great Hall of the People in Beijing, known as the “two sessions”.
In the runup to, and in the days following, secretary Leong’s announcement on Friday, representatives of the casino industry pledged to help the authorities curb illicit currency exchanges in or around the city’s casinos.
And on Tuesday, at a gathering of top mainland Chinese and local Macau officials, the former and first chief executive of Macau, Edmund Ho Hau-wah, stressed the importance Beijing placed on getting the “right” person when it comes to choosing a new chief executive iin August.
“I am fully confident, and I believe that the Macau people have the wisdom, to elect a Chief Executive who meets the requirements of the Central Government and who is also responsible,” Ho said.
In consultation with Beijing, the new chief executive will ultimately decide who gets awarded new gaming concessions.
For Carlos Lobo, a former senior adviser to the Macau Gaming Commission and ex-associate general counsel for Sheldon Adelson’s Sands China, what is also significant is that existing concessionaires and potential new bidders now know there is to be a fresh public tender for concessions.
“It is significant that there a clear path for a public tender for concessions to run casinos in Macau for the next 20 years as opposed to renewals. Potential bidders now know that this is the way and it opens the door for outsiders, such as Genting, Hard Rock International and Ceasers, for example, to ponder a potential bid,” Lobo said.
