- All 41 of Macau's casinos are up for license renewals, due September 14.
- At pre-pandemic levels, Macau's $ 36 billion gaming revenue accounted for 70-80% of the annual GDP.
- The extension of the operating license from June to December cost each casino $ 5.7 million.
With gaming revenues six times that of the Las Vegas Strip, it's not hard to see why Macau is often called the "Las Vegas of Asia." The tiny island in the South China Sea known for its glitzy casinos and shopping malls. Macau's GDP in 2019 stood at $ 55.19 billion, of which $ 36 billion came from gaming revenues. The GDP starkly dropped to $ 29.91 billion in 2021, Trading Economics data shows.
Its future as a gambling den, however, hangs in the balance, as bidding to extend gaming concessions — the licenses to operate casinos — for casino operators ends today, September 14, at 5:45 p.m local time.
On June 26, the gaming licenses expired for Macau's six major casino operators: Galaxy Entertainment, Melco Resorts & Entertainment, MGM China, Sands China, SJM Resorts, and Wynn Macau. Collectively, these six operators manage each of Macau's 41 casinos. They were granted a short extension until December 31 to accommodate the bidding process, according to a June 23 report from Inside Asian Gaming, or IAG. Without a gaming concession, these venues will not be allowed to operate in Macau.
On September 13, one day before the application deadline, Wynn Resorts announced it had requested a 10-year gaming concession contract from the Macau government. If approved, the license will start on January 1, 2023. Wynn was the first casino to publicly announce its application.
DS Kim, a research analyst for JPMorgan, wrote in a note on September 13 that the participation of all six incumbents is a "given" as the licensing extension draws to a close. Kim added that the government is likely to announce the six winners by the end of the year.
The extension of the operating license to December cost each casino Macanese pataca (MOP) 47 million, or $ 5.7 million, per the IAG report. This expense is a drop in the water for the casinos, but it comes at a time when casinos have bled red for months. Revenues have come under pressure from China's stringent zero-Covid policy, which has drastically reduced visitors from mainland China, and a shift in Chinese regulatory policy, which is now cracking down on corruption.
In July, Macau's gaming revenues — called gross gaming revenue, or GGR — sank to new lows at MOP $ 398 million, according to data from Macau's Gaming Inspection and Coordination Bureau. That's down 95.3% on-year and down 83.9% on-month.
"The sharp decline in Macau gross gaming revenue (GGR) alongside a new requirement for casino operators to pay gaming taxes based on a minimum annual target GGR has had and will have a negative impact on their profitability," Leon Leong, a senior analyst at Reorg, told Insider. Reorg provides intelligence on financially distressed companies.
However, the hits just keep on coming.
In 2002, gaming licenses were granted to the casinos for a 20-year period, but the new licensing duration has been slashed to 10 years. Because of the shorter license, "casinos may be relatively reluctant to invest more as there is greater long term uncertainty," Leong said. That's especially in the context of greater US-China geopolitical tension: Most of the concessionaires' parent companies are US based.
Macau's history as a gaming hub goes back three centuries, when Macau first opened its harbor to visitors. Macau's Gaming Inspection and Coordination Bureau now considers gaming a "pillar" industry of the island's economy.
While gaming concessions were once monopolized by Stanley Ho — the late "King of Macau" — and his family, the monopoly was broken in 2002 when five more operators entered the gaming arena. The industry's future now hangs in the balance.