Casino operations have resumed on a satellite basis at the Grand Emperor Hotel (pictured) in downtown Macau after a six-month period of direct management by the concession holder SJM Resorts Ltd, a unit of Hong Kong-listed SJM Holdings Ltd. The deal is for a term of three years, starting from January 1 this year, according to a December 30 filing to the Hong Kong Stock Exchange.
The gaming restart as a satellite operation – to run until December 31, 2025 – is due to a deal between the historical gaming licence provider for the venue, SJM Resorts; and Tin Hou Ltd, a wholly-owned subsidiary of Emperor Entertainment Hotel Ltd. The latter in turn is approximately 71.63-percent owned by Emperor International Holdings Ltd.
The Emperor Entertainment Hotel’s management said in the filing it was in its “best interest” to strike the deal, so it could “fully utilise its assets and space in Grand Emperor Hotel”.
It added, referring to the discontinuation since the second half of December, of China’s ‘zero-Covid’ policy: “The reopening of Macau’s border and the lifting of quarantine requirement upon arrival will drive an increase in visitation to Macau, which is a catalyst to Macau’s gaming industry.”
Under the deal, Tin Hou will be entitled to get from SJM Resorts a percentage of monthly gross gaming revenue (GGR) from the casino operation, up to an annual cap to be adjusted over the course of the up-to-36 months of the deal.
The cap for the three months ending March 31 this year is set at HKD100 million (US$12.8 million). For the 12 months to March 31, 2024, such cap is set at HKD400 million, rising to HKD600 million for the subsequent financial year to March 31, 2025. The cap for the nine months ending December 31, 2025 will be HKD700 million, according to the filing.
As a point of reference, the filing noted that during the course of the pandemic, the annual share of GGR for each financial year ending March 31 for the third-party promoter of the casino at Grand Emperor Hotel was in 2021, HKD209,306; then in 2022, HKD260,884. For the stub financial year from April 1 to June 26, 2022, it was only HKD24,382.
Emperor Entertainment Hotel saw its net loss in the six months to September 30 rise by 85.4 percent year-on-year, to HKD155.7 million
From January 2026, promoters of Macau satellite casinos will not be able to share in a percentage of gaming revenue with the concessionaire providing the licence. Instead satellite promoters must constitute themselves as a ‘management company,’ and be entitled instead to negotiate a management fee, though the precise format for that – and the implementation – are still to be clarified.
New regulatory arrangements for satellites, including a law passed in December by Macau’s Legislative Assembly, included a three-year grace period for the changes to take effect.
Under the latest arrangement for Grand Emperor Hotel, the Tin Hou entity will be responsible for all operating costs and expenses including: management, decoration and renovation of the gaming area at the venue; providing gaming equipment in compliance with SJM Resorts’ standards; and staff salaries and expenses for the gaming floor.
The deal can be terminated early, by either party giving 21 days’ notice.
The filing noted that due to the outbreak of the Covid-19 pandemic in early 2020, the Emperor Entertainment Hotel group had “faced the most difficult time since its commencement of gaming business and incurred a loss for the first time in the six months ended 30 September 2020”.
Emperor Entertainment Hotel had decided “not to renew the service agreement with SJM upon its expiration on 26 June 2022, and instead, to receive a relatively steady monthly income from SJM [Resorts] for the provision of hotel rooms, catering and other ancillary services… for the period from 27 June 2022 to 31 December 2022,” during which the gaming operation in Grand Emperor Hotel had been run by SJM Resorts.
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”The upswing in visitation and gaming revenue is likely to aid Fitch-rated casino operators with a presence in Macau in reducing their debt levels”