Inside Asian Gaming

IAG JAPAN JAN 2019 24 both the current “Big 6” and any new contenders to state their case on an equal footing. However, he suggests that “very significant weight should be given to an application from a concessionaire that has been operating in the market and has been doing it well. The reason pertains to public interest in that we do not want to rock the boat. I think the logic is ‘don’t change horses in midstream’. “Without wanting to weigh in excessively, all current operators have proven to be quite beneficial to the market despite pursuing their own selfish interest (as with any company/businessman). “If the said operators are to be re-awarded the concession, the key here will be the Macau Government negotiators ensuring that the said players will continue to bring added-value to the region.” In a December note, brokerage Bernstein outlined Macau concession renewal as the number one key risk concern among investors regarding the city’s three US-based concessionaires – Las Vegas Sands, Wynn Resorts and MGM Resorts. But analysts were also quick to allay many of those concerns, particularly in regard to the possibility of any current concessionaires losing their licenses. “If the Chinese government chooses to take away the gaming concession from US operators, the result would be quite counter-effective to China’s attempts to open up the country for greater foreign investment and the negative PR surrounding such action would be detrimental. US gaming operators can also choose to shut down the entire gaming infrastructure in Macau (a nuclear option) by shutting down the non-gaming elements of the integrated resorts. The result would be unemployment, a drop in tax revenues and a chaotic environment in the city – something that we do not believe the Macau or the Chinese governments would want.” Bernstein adds that long-term land leases held by the Big 6, independent of their gaming concessions, also work in their favor. “The government can take back control of the gaming areas (which only includes casino floors and tables, representing a very small percentage of square footage of an entire property), but would not have access to areas outside the casino floor (such as hotels, restaurants, bathrooms, common areas etc), making it virtually impossible to operate a casino without the cooperation of the real estate owner (the current concessionaire). “The land leases do not expire for gaming operators until 2026 to 2038 (depending on the property), but even then are extendable at the option of the lessee through 2049.” One factor that undoubtedly remains to be seen is the level of input from Beijing and how that might influence Macau’s policy direction. On this point, opinions remain divided. With US-China trade relations having dominated headlines through the back-end of 2018, The Innovation Group’s Zhu sees considerable potential for China to flex its muscle. “I won’t be surprised to see more Chinese, Hong Kong, local concessionaires than American ones,” he observes. “At least, they may want to change the current 3-3 balance.” The legal view is somewhat different, with MdME’s Carlos Eduardo Coelho stating, “I do not expect this to happen given the autonomy and independence of Macau legislative and executive power.” Likewise, Alvares explains that while the SARmay consult with Beijing, final decisions will ultimately stay local. “Macau, as a Special Administrative Region of the People’s Republic of China, enjoys a high degree of COVER STORY