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Beyond 2022

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The Government hasn’t disclosed whether it will renew the current concession and sub-concession holders’ contracts when they begin to expire in the next four to six years. If logic stands, then analysts believe they will all be renewed, yet it may all depend on the operators’ performance as well as other geo-political factors.

The current gaming contracts will expire on different dates between 2020 and 2022 and analysts are starting to ask what will happen next. Carlos Siu Lam, an associate professor in the Gaming Teaching and Research Centre at the Macau Polytechnic University believes the performance of the current operators will be assessed in terms of “whether gambling activities have been conducted in a legitimate, proper and honest way, whether operators have complied with Macau regulations in terms of gambling revenues and other contractual terms, and how much these operators have accomplished in relation to their bids on their developmental projects.” 

In addition, issues such as corporate social responsibility performance, should also be taken into consideration, when deciding the fate of each license holder in the territory, “such as whether some employees have been laid off due to the economic downturn, the reduction of shuttle buses, how they have promoted upward mobility for local workers, and how these casino operators have worked with the government in terms of Macao’s public policy implementation”. 

Also, Mr Siu says the Government needs to consider that, regardless of what happens to the three main license holders — Galaxy, SJM and Wynn — it is still unknown how the sub-concessionaires — Venetian, Melco Crown and MGM Grand Resort — will be handled. “Following this, there exists the need to introduce some changes when the contracts of these sub-concessionaires expire.”

In terms of Macau’s future gaming development, Mr Siu believes factors such as the city’s “heavy dependence on China,” the economic restructuring of the Mainland, as well as economical and political policies will have a “substantial impact”. 

As a result, with China’s economic slowdown as well as Brexit — the UK’s future exit from the European Union following the recent referendum — and the emergence of new casinos in other nearby countries, the analyst believes it is “unlikely that Macau will introduce additional numbers of casino operators, unless it is dissatisfied with the performance of some casino operators and wants to replace them.” 

The associate professor says it is “crucial” for Macau to “further develop” its non-gaming offerings, as the industry “needs to draw in more business to support its gambling industry with the recent significant contraction of the junket business.”

Two approaches.

Senior partner at the Las Vegas based Global Market Advisors, LLC, Andrew M. Klebanow, says there are “two competing thoughts” as to Macau’s approach to the renewal of the gaming licenses. “Logic and common sense would dictate that the Macau government would seek stability for an industry that has collectively invested tens of billions of dollars in capital and provides billions each year in tax revenue,” he says. Such stability would depend on “a lack of interruption to casino operations”, so the licensing renewal would proceed smoothly. “The government may place requirements that casino operators devote even more capital dollars to non-gaming, family-oriented amenities or it may ask concessionaires to make contributions towards family-oriented tourism infrastructure,” he suggests. 

On the other hand, one cannot ignore the potential “influence” the Central Government might have in the relicensing process. “The Central Government has made it clear that it would like to see Macau further diversify its economy and it may subtly, or overtly, pressure Macau’s regulators to rethink the licensing renewal process.” 

If the licenses are allowed to expire, then Mr Klebanow believes this will have “both short-term and medium-term negative impacts on not only the gaming industry, but funding for Government services as well as a significant loss of jobs.” 

In his opinion, the expiration of the licenses would “be bad for everyone”. But this would only happen depending on “possible geo-political scenarios”, such as the possibility of Donald Trump being elected president of the USA and following through with “the abrogation of trade agreements”. 

“What if Donald Trump is elected President of the United States and he moves forward with his promise to re-negotiate or terminate trade agreements with China? Beijing will not stand idly by as US-based gaming companies continue to enjoy the benefits of operating in this economic zone,” he says. 

But if everything continues on as planned and the licensing renewal process continues “in an orderly and predictable manner”, Mr Klebanow does not expect any major changes after 2020. 

“Of course, 2020 is a lifetime away, given the changes that the Macau gaming industry has experienced over the past four years. Think of where the industry was in May of 2014, and where it is now. Things change fast in this business.”

In May, the Macau Government disclosed its mid-term review report of the local casino industry, but did not mention the possible renewal of Macau’s gaming concessions and sub-concessions. The document did not mention anything about the likelihood or otherwise of Macau’s existing concession and sub-concession holders having their gaming rights renewed when the current contracts expire.

The document covered different topics related to the gaming industry, including its economic impact on Macau, its impact on small- and medium-sized enterprises, its impact on Macau’s society and the relationship between the gaming and non-gaming sectors.

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