MACAU BUSINESS
A
ddressing the media in his new US$4.2- billion (MOP33.6-billion) floral-themed integrated resort in Cotai in August, U.S. gaming tycoon Steve Wynn tried to convince reporters on the scene as well
as analysts and investors closely watching the performance of Wynn Palace that the project would do just fine. The assurances of the 74-year old magnate came
as Wynn Palace, which opened on August 22, was only approved 150 new gaming tables by the Macau authorities, 100 fewer than some of its rivals’ new projects. “The table allocation had to do with the cap,” said Mr. Wynn, referring to an initiative by the government to cap the compound annual growth rate of gaming tables at 3 per cent for a 10-year period from 2013, a measure characterised by the tycoon a year ago as “the single most counter-intuitive and irrational decision that was ever made.” Nevertheless, the administration has stood firm,
reiterating on numerous occasions that the table cap will remain impregnable until end-2022. Amid the limited room for expansion in terms of table capacity, observers note this will have no material impact upon the overall performance of casinos here, but urge the authorities to make the table allocation – a major revenue source of the gaming resorts – more transparent, as it has become a guessing game whenever a new project has come on line. The two new gaming projects this year –Wynn
Palace of Wynn Macau Ltd. and Sands China Ltd’s The Parisian Macao in September – were only approved 150 new tables each by the government vis- à-vis the 250 new tables granted, respectively, to the new projects of Galaxy Entertainment Group Ltd. and Melco Crown Entertainment Ltd. The administration
only reasoned that this decision was made in accordance with a number of factors, including the offerings of non-gaming elements of the resort in question, its efforts to develop Macau into a world centre of tourism and leisure, its support for local small and medium-sized enterprises (SMEs) and its international competitiveness.
Consecutive approach “While the government says the number of new
tables is determined on an individual basis by each project’s offerings, we cannot help but think the table grant might be driven more by the timing of opening and the industry’s than the operating environment,” observed D.S. Kim, an analyst at JP Morgan Securities (Asia Pacific) Ltd., in a recent research note. Casino revenue here underwent a historic losing
streak of 26 consecutive months, given fewer high rollers from Mainland China, a slowing economy and the anti-corruption campaign raging across the border, before a 1.1-per cent growth in August broke the spell. Following the visit of Chinese President Xi Jinping at the end of 2014 urging Macau to diversify its economy from casinos, observers have noted the city’s authorities adopt a stricter and more conservative approach towards the gaming sector, including towards table allocation. The JP Morgan analyst said the number of new tables a gaming project receives on average has been in decline every year since 2011. Japanese brokerage Daiwa Securities Group
Inc. remarked that the administration appeared to be “more generous” in allocating tables in earlier times; for instance, the US$5 billion project of Sands China – Sands Cotai Central – opened with 400 new tables in 2012. This shows the unwillingness by
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