MACAU BUSINESS
“The authorities have pledged no more new land plots will be zoned for gaming purposes in the future… so there is a limited amount of land resources for operating casinos,” academic Davis Fong says. “And some satellite casinos are situated in prime locations”
business model of satellite casinos, or also known as third-party promoted casinos, referring to gaming venues that are managed by independent investors under the licences of gaming concessionaires through a service agreement. Currently there are 18 operational satellite casinos among a total of 40 casinos in the territory, and 14 of these third-party promoted casinos are run under the licence of gaming operator SJM Holdings Ltd while the other four are linked to Galaxy Entertainment Group (GEG) and Melco Resorts and Entertainment Ltd. This proposed change, which was not mentioned in the public consultation on the matter last year, has raised a number of questions across the sector and the community, namely, how is the ownership of the assets by concessionaires defined — whether it requires full ownership, majority ownership or just similar a stake from concessionaires in the properties. Most of the 18 operational satellite casinos here are not located in the assets owned by gaming concessionaires, and one of the exceptions is the Casino Ponte 16, which is situated in the eponymous tourism and gaming complex in the Inner Harbour Area, where an SJM-linked affiliate has a 51-per cent stake.
More details needed
More importantly, the proposed revision also prompts uncertainties whether gaming operators will acquire these assets and with what price in the current economic fundamentals. Asked about the issue in a press conference in February, Francis Lui Yiu Tung, deputy chairman of GEG, remarked “it’s too early to say” whether the operator would purchase all the three third-party promoted casinos that are under the licence of GEG and located at the Rio Hotel, the Waldo Hotel and the President Hotel respectively in the NAPE area of the Macau peninsula. Awaiting for more details from the authorities on how
this new requirement will work, he added the three-year grace period gave them “sufficient time” to discuss the issue with the owners of satellite casinos. Satellite casino owners and investors also request more
details from the government, stressing gaming concessionaires don’t have the financial resources to purchase all the assets of satellite casinos at a reasonable price. The failure to reach consensus between both parties will lead to the closure of some of these gaming venues, they say.
22 APRIL 2022
“We understand the government hopes to strengthen supervision for the healthy development of the [gaming] industry but it also has to take into the considerations of the market needs,” says Chong Siu Kin, chairperson of New Orient Group, which runs the satellite gaming venue, Casino Landmark, at the New Orient Landmark Hotel in the NAPE area.
Economic significance
Commenting briefly on the matter, he underscores the economic significance of third-party promoted casinos to the community. “The satellite casinos support the businesses of restaurants, eateries, retail shops and others in the NAPE area [where a majority of these gaming venues are clustered],” the businessman illustrates “If they are closed it will impact the business environment of the district.” Accounting for nearly half of the casinos in the
territory, the 18 operating third-party gaming venues now boast about 930 gaming tables, or about 15 per cent of 6,198 tables across the market, according to the estimates by local industry representatives and media reports. The gaming revenue generated by satellite casinos now represent about 8-10 per cent of the total gaming revenue, compared to more than 15 per cent in the past, they say.
Melinda Chan Mei Yi, executive director of Macau Legend Development Limited and CEO of the Macau Fisherman’s Wharf, has also stressed in a recent public occasion about the contribution of satellite casinos to the community. Macau Legend Development now manages two satellite gaming venues — Casino Babylon and Casino Legend Palace — at the Macau Fisherman’s Wharf. Underlining satellite casinos have always been strictly
complying with local rules and regulations, she remarked they have been part of the history of the city that “should be respected”.
‘Management firms’
The concept of satellite casinos first emerged in the 1990’s during the era of gaming monopoly held by Sociedade de Turismo e Diversões de Macau (STDM), local studies show. It was an effective business model for STDM — founded by the late tycoon Stanley Ho Hung Sun — at the time, because the conglomerate did not have to invest in the development and management of these casinos while it shared the revenue generated by these venues, the studies say. According to an article penned by Chan Chi Leong, a
local gaming data analyst, in 2013, satellite casinos owners have to be responsible for all the operating costs of the venues, including payrolls to staff, while gaming operators are required to settle all the gaming-related levies that amount to 39 per cent of the gaming revenue. The study, titled “Presence and Future of Satellite Casinos in Macau”, illustrated in general satellite casino owners or investors could pocket about 55-57 per cent of the gaming revenue generated by these venues while gaming operators could share 43-45 per cent. Nonetheless, this revenue-sharing model will soon be over should satellite casinos continue to exist. The draft
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