Macau is already running well behind schedule on establishing the legal framework for issuing gambling concessions that would last for the next decade. The current operating rights of the city’s six casino companies were originally due to expire next Sunday, but are being extended to year-end at a reported cost of 47 million patacas (US$5.8 million) per company.
The government has vowed to push ahead with the final debate on the gaming bill in the Legislative Assembly — while barring observers except for media — even as most municipal offices as well as schools, banks and restaurants have been shuttered and all the city’s 681,700 residents have been instructed to test for Covid-19.
With its borders closed to visitors from everywhere but mainland China, Macau had avoided any positive cases since October but suddenly discovered 31 cases on Sunday. The office of Macau chief executive Ho Iat-seng said the source of the outbreak was unclear.
While Galaxy Entertainment Group’s StarWorld Hotel and Wynn Macau were closed, most other casinos remained open. But analysts quickly began slashing their market forecasts, an ominous move after half the companies reported fresh operating losses in the first quarter.
“Visitation into the city will be severely limited — perhaps being almost completely blocked — and revenues are set to plummet close to zero for at least the next week, and quite likely several weeks,” said Bernstein Research’s Vitaly Umansky. “Some operators may need to get capital injections either from capital markets or controlling shareholders.”
At Citigroup, George Choi cut his projection for July gross gaming revenues by two-thirds to 3 billion patacas.
The government relies heavily on gaming operators for funding and has had to tap its reserves for the first time to sustain its budget amid the industry’s slump. At 3.3 billion patacas, Macau’s gross gambling revenue last month was just 32% of the level a year earlier and compared with 26 billion patacas in May 2019.
Under the latest amendments to the gaming law, casino operators can be granted breaks of up to 5% off gaming taxes due as a reward for bringing in foreign gamblers, but the benchmark rate, already Asia’s highest, is set to edge up to 40% from 39%.
After encountering resistance from some legislators, the government agreed to soften provisions that would have required all casinos to be housed in properties owned by concession holders amid worries about rising unemployment. The amendment will allow the so-called satellite casinos to remain in operation but bar revenue sharing with concessionaires.
Galaxy nonetheless this month closed its satellites in the Rio Hotel and President Hotel. But the Grand Emperor Hotel casino and others under the umbrella of SJM Holdings that were expected to close this month are now to remain open through year-end under revised agreements with the company.