Casino Re-Tendering Process Set to Reshape Macau’s Future

Casino Re-Tendering Process Set to Reshape Macau’s Future

Macau’s casino market consists of six casino operators who have held gaming licenses on the island for almost two decades. In 2020, however, those licenses belonging to SJM Holdings and MGM China Holdings are due to run out, followed by Wynn Macau, Sands China, Galaxy Entertainment Group and Melco Crown Entertainment in 2022, at which point the current licensing renewal process will switch to a re-bidding one. This in turn has the potential to dramatically transform the resort’s casino landscape as more operators are granted contracts to enter the hugely lucrative market.

Ahead of the industry’s first major overhaul, a preliminary proposal for amending Macau’s existing gambling law has been submitted to the Secretariat for Economy and Finance, and is now being subjected to internal research. While no further details as to what the changes may include have been released, last weekend the Secretary for Economy and Finance, Lionel Leong Vai Tac, did state that the Macau government would listen to the “social opinions” of residents regarding the gambling market’s future before approving and implementing a “comprehensive analysis.”

Re-Bidding Process

Portugal handed over its sovereignty of Macau to the People’s Republic of China in 1999, with the latter subsequently deciding to continue the island’s casino industry, despite gambling being banned on the mainland. In 2000, a total of 18 gambling firms then bid for a Macau casino contract, of whom just one-third received licenses,  all of whom have enjoyed an oligopoly over the industry ever since. Their profits have been huge, too.

In 2017, for instance, the market generated a massive $33.21 billion in revenue, compared to say $26.2 billion for the whole of Nevada, with the Las Vegas Strip accounting for $17.7 billion of that amount. Furthermore, Macau’s casino market peaked at $45 billion in 2013, and only suffered a dramatic reversal after the Chinese government launched its anti-corruption campaign that hit the industry in 2014/15.

Once the new contract renewal procedure switches to a re-tendering one, though, Macau’s existing operators will have to get used to competing for revenues alongside a number of new casino firms, who will be keen to get in on the action and carve out a slice of the pie for themselves. While existing casino licenses belonging to two casino companies are due to end in 2020, however, the re-tendering process is likely to be delayed until after the other four operators’ licenses expire in 2022.

New Policy and Vision for Macau

Macau’s government will use the re-tendering process as an opportunity to put in a place a policy that more fully reflects the direction it wants the market to move, including attracting a more family-friendly and younger audience, as well as promoting the upmarket Cotai Strip within the Greater Bay Area.

These days, for instance, Las Vegas derives around 40% of its casino revenues from non-gaming related products, which have subsequently helped transform the market and return it to healthy growth. By contrast, Macau’s non-gaming revenue is closer to 12%, although that figure is set to increase exponentially as the local authority’s directive to concentrate on the segment continues to bear fruit. Similarly, new casino licenses will most likely be given to those operators who place greater emphasis on non-gaming options that more closely reflects the framework suggested by Macau’s authorities.

Staying Competitive

In 2006, Macau overtook the Las Vegas Strip as the world’s largest gambling destination, and has stayed firmly on top of the industry ever since. Nevertheless, China is facing a greater level of competition going forwards, be it domestic, such as a proposal to allow gambling on the island of Hainan, or internationally from countries such as the Philippines or Japan.

Recently, Japan finalized legislation paving the way for the country to launch casino gambling within the next few years, and according to forecasts its market could be worth $15 billion by 2025, posing a significant threat to Macau. As major casino operators such as MGM Resorts and Las Vegas Sands Corp lobby to become part of the lucrative industry, Macau will have to adopt a practical approach to its re-structuring process if it wants to remain competitive, and not lose out to increased competition from its Asian neighbors.