Business at Macau’s so-called satellite casinos was already precarious amid the disruption to the city’s tourism during the Covid-19 pandemic, meaning their survival is in doubt without other regulatory factors coming into play, say several industry comentators.
Ben Lee, managing partner of IGamiX Management and Consulting Ltd, said the risk to the satellites is even leaving aside the Macau government’s wish to tie in future the ownership of the actual gaming spaces to any one of up to six gaming concessionaires that will be in place in the city during the coming decade.
“Over the past two years, most of those [satellite] casinos have not been profitable and in fact, loss making is probably the better description,” Mr Lee told GGRAsia.
One satellite – the gaming operation at the Grand Emperor Hotel in downtown Macau – 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.
Macau satellites are venues controlled by independent investors, but must piggyback on the gaming licence of an existing casino concessionaire.
The new regulatory requirements mulled for Macau satellite casino operators – as mentioned in the city’s gaming law amendment bill due to be passed prior to a new public tender for Macau gaming rights – say satellites will still be permitted to run in the local market. But they will each be given a three-year grace period to tie the ownership of their gaming premises to a local concessionaire.
Mr Lee told GGRAsia: “Some satelites may have been willing to bear the losses in the short term hoping that in the longer term, once the [Covid-19] pandemic is over, they would eventually recover to profitability and recuperate their losses.”
But he added that with a “declared sunset” of gaming space ownership “in just three years,” then “the maths” from the satellite investors’ perspective, “would be very brutally simple”.
Presently, there are 18 operating satellite casinos in the city, with 14 of them currently tied to the gaming rights of concessionaire SJM Holdings Ltd. A further three are tied to Galaxy Entertainment Group Ltd. The other one is tied to Melco Resorts and Entertainment Ltd.
Only two satellite casino promoters – Hong Kong-listed firms Success Universe Group Ltd, an investor in Ponte 16, and Paradise Entertainment Ltd, an investor in Casino Kam Pek – have so far respectively confirmed to GGRAsia they want their partner casino concessionaire, SJM Holdings, to maintain gaming operations for the remainder of its current concession rights. Such rights are likely to run until December 31 this year, subject to government’s approval.
‘Perfect storm’ for satellites
Late last month, Chinese-language media outlet Macao Daily News reported, citing sources it did not identify, that at least seven Macau satellite casinos – nearly 40 percent of such properties currently active in the local market – might withdraw from the sector by mid-year.
One satellite casino insider, who asked not to be identified, told GGRAsia: “The Covid-19 associated travel restrictions, coupled with Macau’s new gaming law in the making, and mainland China’s crackdown actions on cross-border gambling, all boil down to a perfect storm for the city’s satellites, especially those that have also been featuring junket play in their gaming operation.”
Separately, local gaming scholar Ryan Ho Hong Wai told GGRAsia he believed that Macau’s long-established satellite casino system had effectively “collapsed”, and that this was due to a proposal in the gaming law bill that would “outlaw” any third-party sharing of casino revenue.
The bill states that in future, any management contract related to a gaming venue will need to be approved by the city’s incumbent chief executive. The management company will only be allowed to receive “management fees” for any services rendered to the gaming concessionaire. Any form of commission or profit participation will not be permitted.
Mr Ho, a lecturer in gaming and tourism studies at Macao Polytechnic University, told GGRAsia: “In addition to the new gaming law, the high operating cost and the regulatory requirements for surveillance systems and equipment upgrades constitute considerable challenges for small-scale satellite casinos.”
The scholar added: “More than two years into the [Covid-19] pandemic, it is understandable and inevitable that some casinos with low financial returns choose to cease operations.”
Separately, in an article in the scholarly journal Gaming Law Review, Mr Ho had said satellite casinos had long been a “dilemma” for Macau’s policy makers and the public.
The government’s gaming law amendment bill showed its resolve to address what he described as a regulatory loophole regarding third-party involvement in casino operations, the scholar wrote in the article.
Mr Ho additionally remarked to GGRAsia: “The heyday for most satellite casinos is long past. Focusing on quality over quantity will be the future direction of the Macau gaming industry.”
Assuming the current six casino-operator brands see their rights refreshed after a new public tender, they would be “in a good position to consolidate” the market that had been “fragmented” by the presence of small satellite-casino properties “scattered around the city,” said the scholar.
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