GGRAsia – Macau satellite profit model still in doubt: industry

Macau satellite profit model still in doubt: industry

May 16, 2022 Newsdesk Latest News, Macau, Top of the deck

The Macau government’s decision to drop a condition that the gaming areas of so-called satellite casino hotels in the city must in future be owned by any one of the casino concessionaires, is a positive signal for the industry, but doubts remain on satellites’ economic viability in future, due to other proposed constraints, suggested Kwok Chi Chung, head of a Macau junket trade group, in comments to Chinese-language media.

“I think the revision [the government now proposes] is good, as that enables the satellite casino venues a renewed chance to run their business… If the satellite casinos are closing, that effectively results in a lot of unemployment,” suggested Mr Kwok. His own sector has recently seen a dramatic contraction of business, with local casino operators having ended collaboration with most of the city’s junket brands.

In late March, Chinese-language media outlet Macao Daily News reported – citing sources it did not identify – that at least seven Macau satellite casinos might withdraw from the sector by mid-year.

But how the “management companies” of such satellites – as designated in Macau’s gaming law amendment bill – will be able to make a living without being allowed a share of gaming revenue – a restriction planned under the bill curently passing through the Legislative Assembly – is still not clear, said another industry figure, Melinda Chan Mei Yi.

She was speaking at the weekend in her capacity as leader of a local small and medium-sized enterprises trade chamber. She is also the chief executive of Macau casino services firm, Macau Legend Development Ltd, which controls several satellite casinos under SJM Holdings Ltd’s gaming licence.

There was still a lack of clarity on the definition of a “management fee” that could be paid by a gaming concessionaire to any management company designated as in charge of a satellite, and how such a fee would or could be calculated, said Ms Chan in comments to local public broadcaster TDM. Under the bill, there will be a three-year grace period for such a management company to be established in each satellite business.

The government’s proposed ban on casino revenue sharing at satellites raised doubts about the economic viability of such gaming venues in the long term, said Mr Kwok, in comments to local Chinese-language newspaper Exmoo.

Revenue sharing had in the past been a “profitable” business model for the local satellites – that piggyback on a gaming licence of a local concessionaire – Mr Kwok noted.

One satellite – the gaming operation at the Grand Emperor Hotel in downtown Macau under SJM Holdings’ licence – is to end casino business on June 26, said the hotel’s promoter Emperor Entertainment Hotel Ltd, in an April 1 filing in Hong Kong, citing the “gloomy outlook of the high-end gaming segment,” and protection of shareholder interests.