Little info is anticipated from the administration on the way forward for Macau gaming earlier than incumbent Chief Government Chui Sai On arms over the keys to his possible successor Ho Iat Seng in December. However because the 2022 concession expiry date looms nearer, analysts are beginning to weigh in on the potential eventualities.
Moody’s Traders Service stated final week that it expects Macau will renew or reissue the concessions for its six gaming operators after they expire in June 2022. Whereas there could also be modifications made to the prevailing agreements, analysts on the agency concluded that “an outright rejection of concessions may be very unlikely.”
Gaming ‘bosses’ Alvin Chau, David Chow and Chan Meng Kam, who function on the fringes of Macau gaming, have all signaled an curiosity in pursuing a license ought to one open up within the 2022 tender. The chance has additionally piqued curiosity additional overseas from Jay Chun’s Paradise Leisure Group and Genting Bhd, headquartered in Malaysia.
A lot is at stake for everybody concerned.
The sector accounts for about half of the town’s financial output, instantly employs about 15% of its workforce, and generates greater than 80% of the federal government’s fiscal revenues. The trade pulled in additional than MOP300 billion ($37.15 billion) in gaming income in 2018. 5 out of Macau’s six on line casino operators name the SAR their main market or derive the vast majority of their income from the town. The sixth – MGM – nonetheless earns nearly 20% of its income from the town, in line with its annual assertion final yr.
By advantage of its measurement, Macau is already a aggressive market the place even a share level drop in market share can sign thousands and thousands in misplaced income.
One frequent measure of market competitiveness is the Herfindahl-Hirschman Index (HHI). It examines the variety of operators in a sector and their relative market share and calculates a measure of competitiveness between zero and 10,000, the place zero signifies good competitors and 10,000 implies an ideal monopoly.
In some nations, resembling the US, the measure is utilized by the authorities within the technique of reviewing merger and acquisition requests. The U.S. Division of Justice considers a market with an HHI of lower than 1,500 to be a ‘aggressive market,’ an HHI of between 1,500 and a pair of,500 to be a ‘moderately-concentrated market,’ and an HHI of two,500 or larger to be a ‘highly-concentrated market.’
In Macau, mergers and acquisitions of native on line casino operators are restricted by a legislation that forestalls one market participant from proudly owning 5% or extra of one other.
The native gaming sector is managed by six non-discreet gamers: Sociedade de Jogos de Macau (SJM), Galaxy Leisure Group, Wynn Resorts, Las Vegas Sands, MGM and Melco Resorts and Leisure.
Utilizing knowledge from the primary quarter of this yr, the Instances calculated that the HHI rating for Macau’s gaming sector would stand at 1,819, indicating a ‘moderately-concentrated market’ as per the U.S. Division of Justice qualification.
In contrast, in Singapore, the place Genting’s Resorts World Sentosa and Marina Bay Sands co-exist in a duopoly enforced by the state, the HHI was 5,162 within the first quarter of this yr.
The HHI doesn’t take into consideration the character of presidency concessions, which some argue generally is a assure of service high quality and client care by themselves.
Native economist Albano Martins stated the entry of latest gamers into Macau’s gaming panorama is not going to rely upon whether or not the market is deemed aggressive or not, however quite the restricted accessible land for on line casino growth.
“For certain, the index shouldn’t be decrease as a result of the market shouldn’t be open,” Martins instructed the Instances. “However this doesn’t imply that the market shouldn’t be aggressive between the six concessionaires. We’ve no situations to have a extra free market due to [limited] entry to sources, each land and human.”
Martins additionally stated that extra on line casino operators – and by extension casinos – would possible entail rising salaries and value inflation within the Macau SAR. Each would have a unfavorable impact on small- and medium-sized enterprises.
Union Gaming Group analyst Grant Govertsen agreed that the Macau gaming sector was already aggressive, even with simply six gamers.
“The market is already fairly aggressive and over time will solely turn out to be extra aggressive as sure operators proceed to outperform others and thus inflicting the under-performers to turn out to be extra aggressive,” he stated. “If Macau have been to introduce extra competitors, the place would they construct? There merely isn’t a lot accessible land that’s accredited for gaming growth.” Daniel Beitler & Lynzy Valles