Competition Forces Scramble For Mega Macau Casino Investment Pledges

The seven casinos bidding to win one of six casino licenses in Macau are stepping up their pledges in an effort to court favor with Chinese authorities.

The casino operators – which include the likes of Sands China (1928.HK) and MGM China (2282.HK) – have promised to spend a combined $12.4 billion in the territory over the next 10 years. They hope that by flattering the authorities they will be granted a license to continue operating in the lucrative enclave.

Macau is renewing its casino licenses that were first set out in the early 2000s. Whereas before the licenses lasted for two decades, now each casino operator will have to apply for a new permit every 10 years.

It’s just one of the numerous reforms that the Chinese authorities have imposed on Macau’s casino industry during a re-application process for licenses in 2022.

And the operators aren’t leaving anything for chance here.

The Macau casino industry is regulated by China

Macau Casino Pledges

According to local reports, seven applicants are gunning for six licenses. These are the pre-existing six:

• Wynn Macau
• Sands China
• MGM China
• SJM Holdings
• Galaxy Entertainment
• Melco Resorts

The seventh company, GMM Limited is part of the Genting Group and means there is now competition for licenses.

All seven casinos have got to work making pledges for what they can offer under the new licensing agreement. Galaxy Entertainment and Sands China hope to each invest more than $2,4bn into the region should be they granted permission to remain. The others are all pledging around $2bn in investment.

“The reported investment commitment of $1.9bn to $2.5bn per operator is very reasonable,” said JP Morgan analyst DS Kim. “The amount is only about a third of the $35bn that the six operators have invested over the past 10 years, but suggests one big renovation or development project plus some flagship events or shows over the next decade.”

This is good news for Macau and China. The government wants more investment in the region to cover for the money that flows out of Macau and back to US-owned operators. One of the core elements the Chinese government has requested is casinos invest in non-casino operations, and work harder to attract non-Chinese tourists.

Who Will Lose Out In Macau?

The Chinese government will have the final say on which casino operators get one of the six licenses available from 2023. If an established casino loses its license it will relinquish its assets.

This means the incumbent six are scrambling to ensure they don’t fall on the wrong side of the authorities. JP Morgan estimates that all six stand a good chance of renewing their licenses, while Genting’s best bet is to either partner with another bidder, or hope an established operator withdraws their bid.

Another big issue for Genting is the fact the government won’t grand any additional land in Macau for gambling facilities. So, should Genting take up a license, it may need to move in to one of the pre-established casinos.

“The question, however, remains for Genting, which does not have any assets in Macau. This means it will have to acquire existing assets and commit to additional capital expenditures if it receives the concession,” Kim added.

Macau Collects Gambling Tax Revenue

Meanwhile, Macau’s casino industry has reported strong fiscal improvement across October. The territory collected $150.4bn in tax revenues last month, up 31.7% from September.

It takes total tax revenue for the year to $2bn – a 44/7% increase on this point in 2021.

The boost has a lot to do with lifted Covid-19 resections in Macau, which has meant junkets from China have been able to return. And while there are still some mini lockdowns in the territory, 2022 is proving to be a far more profitable year than 2021.

Macau charges a 39% tax rate on casino games, of which 35% goes directly to the government.