GGRAsia – Macau satellites seek biz model leeway, says Ponte 16 boss

Macau satellites seek biz model leeway, says Ponte 16 boss

May 26, 2022 Newsdesk Latest News, Macau, Top of the deck

The Macau government should consider accepting a more “reasonable” and flexible earnings model for the city’s satellite casino venues than currently tabled under a planned update to the city’s regulatory system, suggested a boss for one of the properties, the Ponte 16 casino hotel, in comments to GGRAsia.

Without such a modified approach, it would be hard to make that segment viable in the future, said Hoffman Ma Ho Man, deputy chairman and executive director of Success Universe Group Ltd. His Hong Kong-listed company is an investor in – and promoter of – Ponte 16, which relies on the gaming rights of local operator SJM Holdings Ltd.

The legal update proposes that entities known as “management companies” would, if running a particular satellite, only be able to earn a fixed “management fee” rather than a share of casino revenue.

That approach is “rigid,” remarked Mr Ma. There was also, he suggested, a lack of clarity on the definition of “casino revenue”.

The Ponte 16 boss added that if the calculation of any management fee were “based on the venue’s earnings in pre- Covid-19 trading time – in 2019 – the concessionaire may not find it acceptable”.

He further noted, referring to a three-year grace period offered by the Macau government before changes occur: “There are questions on when a full swing of mass gaming will return… during the three years, or whether it will return at all. So there are a lot of uncertainties.”

The government should consider allowing the satellite venue owners to earn their management fee “in a model similar to what is commonly adopted by property or hotel management businesses,” Mr Ma suggested.

He characterised this as a management company being able to earn a performance-based fee in accordance to a venue’s turnover achieved in a designated period of time, in addition to a fixed fee they can charge for managing the venue.

The Macau government has already shown some flexibility by flagging it would scrap a proposal that the city’s satellite casino promoters should tie the ownership of their respective gaming floors to one of the next generation of gaming concessions.

A separate consolidating bill is set to regulate Macau’s junket operators and satellite casinos.

Known as the “Regime for the exploitation of games of chance in casinos”, it states that a management company can only charge a management fee from their concessionaire partner. The management company is prohibited from sharing “casino revenue” with the concessionaire, and is also banned from having their management fees calculated in a “commission” format.

A Legislative Assembly committee, led by veteran legislator Chan Chak Mo, has discussed the management fee topic with the government amid the review of the new gaming regulatory framework.

Mr Chan had told local reporters previously, that the so-called management fee should be a “fixed lump-sum”, which could be set between the gaming concessionaires and their partnering management companies based on market conditions and the historical record of the respective satellite venues’ performance.

But deciding a reference point regarding the satellite venues’ track record of earnings performance – when trying to calculate such management fees – could be “difficult” in practice, especially amid the current trading environment, Ponte 16′s Mr Ma told GGRAsia.