GGRAsia – Macau hints at performance element for satellite ops

Macau hints at performance element for satellite ops

May 27, 2022 Newsdesk Latest News, Macau, Top of the deck

The Macau government hinted on Friday it might under the proposed update to the city’s gaming framework, permit some kind of performance-related system – linked to “turnover” – between management companies seeking to run a satellite casino, and the concessionaire holding the gaming rights.

A senior executive at a Hong Kong-listed promoter of one of Macau’s satellite venues had told GGRAsia earlier this week, that a form of performance incentive would be needed, in order for the segment to be viable.

But in the Friday update on the topic, the government side did not clarify whether any aspect of the gaming operation itself, could be a factor in performance incentives. So said veteran legislator Chan Chak Mo, in a briefing with the media, following a closed-doors meeting his Legislative Assembly committee had with Macau officials, including Lei Wai Nong, the Secretary for Economy and Finance.

Secretary Lei left the Legislative Assembly without speaking to the media.

The discussion was in relation to the city’s gaming law amendment bill, which is likely to get its second and final reading in the assembly, in June. Elements of the bill relate to the future framework for satellites – that have been controlled by third-party investors, but have piggy-backed on the rights of one of the city’s gaming concessionaires.

A second new bill going through the assembly, the “Regime for the exploitation of games of chance in casinos”, also has things to say about satellites.

In particular, it states that in future what it terms a “management company” of a satellite would be permitted to charge a “management fee” from their concessionaire partner. A three-year grace period would be allowed for that to happen.

But such a management company would be prohibited from sharing “casino revenue” with the concessionaire, and would also be banned from having its management fees calculated in a “commission” format.

Nonetheless, Mr Chan – whose committee is steering that bill and the gaming law amendment bill through the assembly – indicated in his Friday briefing, that the government might permit, additionally to the satellite management fee, a lease arrangement between site manager and casino licensee, whereby positive economic performance of the site could be recognised by the casino licensee paying more.

Mr Chan stated regarding the Friday meeting of the committee and government officials: “There were questions raised on whether the gaming venue owner – or the so-called satellite casino operator – can charge [the gaming concessionaire] a lease for the premises they run.”

He added: “To that, the government said it did not disallow the practice: both parties can form a lease contract… in accordance to the prevailing Commercial Code.”

‘Turnover’ element possible

Any lease deal that a management company struck with a concessionaire partner could include a fluctuating rate based on certain turnover level achieved at the premises, as agreed by both parties, Mr Chan said, citing the government’s latest thinking.

However, there was no “clear explanation” from the government on whether such lease can be tied up to casino gaming revenue performance achieved at the satellite venues, the legislator told reporters.

The government has already drafted provisions whereby a management contract for a satellite would have to be ratified by an incumbent chief executive of the city.

But regarding the suggestion of an additional lease arrangement, the government “did not say whether they would review the lease contract,” said Mr Chan.

The veteran legislator also cited government officials as suggesting during the Friday meeting, that the gaming law amendment bill would not prevent a management company and a gaming promoter firm from having shareholders in common.

The new legal framework would not however allow the management company and its partnering concessionaire to have governance-body members in common.

During the Friday meeting, the government side also gave some colour on the topic of possibly cutting as much as 5 percentage points from the aggregate effective tax rate on casino gross gaming revenue (GGR), if the casino industry were able to bring in foreign players.

There would be supplementary regulation stating how any tax reduction could be determined. It would be relative to a designated range of gaming revenue generated by any such foreign players, Mr Chan said, citing the government officials.

A concluding opinion on the gaming law amendment bill will be signed off by Mr Chan’s committee by around June 10, before the bill is passed back to a plenary session of the Legislative Assembly for a second and final reading.