There will be winners and losers in the historically staid process of renewing of casino licenses in Macau, which lost its crown as the world’s largest gambling hub this year due to the Covid pandemic.
(Bloomberg) — There will be winners and losers in the historically staid process of renewing of casino licenses in Macau, which lost its crown as the world’s largest gambling hub this year due to the Covid pandemic.
A total of seven candidates will compete for Macau’s six casino licenses, with a firm linked to Genting Group joining the bid in a surprise move. The competition adds a frisson of uncertainty for the gambling hub’s existing operators, whose permits all expire at the end of the year.
The last minute arrival is GMM Ltd., a company controlled by Malaysian casino tycoon and Genting Chairman Lim Kok Thay. Genting also operates resorts in Singapore and Las Vegas. Representatives expressed confidence in the bid due to the company’s global presence, local media including Inside Asian Gaming reported Wednesday, the last day for interested parties to submit their tenders to Macau authorities.
Genting’s bid poses an unexpected challenge to the existing operators, who have faced months of plunging gaming revenue and are bleeding cash as China’s Covid travel restrictions cut off their main source of tourists, with no end in sight. The latest development could reshape the landscape of the Chinese gambling enclave, which has been dominated by the same handful of establishments for two decades.
The city’s six current operators, including Sands China Ltd., MGM China Holdings Ltd. and Galaxy Entertainment Group Ltd. have all submitted their bids. A decision on the license winners is expected before the existing 20-year casino permits expire at the end of 2022. A maximum of six new licenses valid for up to 10 years will be issued.
A Bloomberg Intelligence gauge of Macau’s casino operators fell 2% in Thursday morning trading in Hong Kong. Wynn Macau Ltd. dropped as much as 7.2%.
Genting Group didn’t respond to a request for comment.
Legitimate Challenger
Genting could be a legitimate challenger, given its reputation for running gaming resorts specializing in family-friendly theme parks, Citigroup Inc. analysts led by George Choi wrote in a note Wednesday.
Yet Macau is in turmoil, suffering from the impact of Covid and China’s crackdown on high-rolling gamblers, which has effectively wiped out the city’s once-dominant VIP gaming sector.
“Genting Group has its own strengths, but we don’t think it offers any unique attributes that would persuade authorities to make a change,” said Choi. “We believe the Macau government needs stable and healthy development of the mass-market gaming business more than ever. The six incumbents appear best positioned to assist the government to achieve this goal with the least risk.”
Others also said Genting was a long shot.
“We think it’s unlikely for a government to choose a new foreign operator over incumbents, who have invested billions of dollars and employed local staff over two decades, including in an unprecedented downturn like this,” wrote JPMorgan Chase & Co. analysts including DS Kim in a note Wednesday.
Casinos are set to face more regulatory restrictions going forward, including caps on the number of gaming tables and machines, as well as a minimum revenue threshold. Companies will need to pay the government extra if they fail to meet a minimum revenue level, on top of the 40% gaming tax that is among the highest in the world.
Leverage
Still, Lim’s ethnic Chinese origins and Genting’s investment in a ski resort in China, which was featured prominently in the Beijing Winter Olympics, may provide some credentials, said Ben Lee, a managing partner at consultant IGamiX in Macau.
His investments in China have yielded mixed results. Genting lost its bid 20 years ago for a casino license in Macau and its Hong Kong cruise operator filed for liquidation earlier this year. Last year, Genting Hong Kong Ltd. agreed to sell its interest in a Macau subsidiary, which was developing a hotel in the city.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
