By Farah Master
HONG KONG (Reuters) -Macau said on Friday six casino firms will invest around $15 billion as part of new 10-year contracts they signed to operate in the world’s biggest gambling hub, with the spending on non-gaming activities to exceed gaming spend by more than 10 times.
The signing of the contracts eases fears of investors and executives after a lengthy bidding process that had threatened to end one company’s run.
Macau’s leader Ho Iat Seng and officials including the city’s finance and economy secretary presided over the signing at Macau’s Government House together with top executives of the casino companies.
Incumbent operators Sands China, Wynn Macau, Galaxy Entertainment, MGM China, Melco Resorts and SJM Holdings beat off a surprise bid from Malaysia’s Genting to win the six licences on offer in the Chinese special administrative region.
The new contracts come into effect on Jan. 1, 2023.
Each casino head was invited to sit at a long red table alongside the government officials as they signed. The executives included Pansy Ho, the billionaire daughter of Macau’s gambling godfather Stanley Ho, and who heads MGM Resorts’ Macau company MGM China.
The operators are expected to focus on non-gaming activities in the new term, particularly as Beijing is keen for Macau to diversify away from gambling and attract foreign tourists.
The total investment committed by the gaming companies for the development of non-gaming projects is 108.7 billion patacas ($13.57 billion), with the total investment in gaming projects 10.1 billion patacas, the city’s government said.
“The development of Macau’s gaming and tourism industry will enter a new stage,” it said in a statement issued immediately after the signing.
The stakes could not have been higher for the six companies, who depend on Macau’s gambling industry for their profitability but have been bleeding billions of dollars for most of the past two years due to China’s strict COVID-19 rules.
A broader crackdown by Beijing on capital outflows from the mainland in recent years, including arresting well known gambling executives in the former Portuguese colony, has also decimated the once dominant and lucrative VIP sector.
Genting, with its strong non-gaming track record and mass market appeal, was a credible threat for the Macau operators, many executives and analysts have said.
UNSUCCESSFUL ATTEMPTS
Previous attempts by Macau to diversify have been unsuccessful, with casino operators shying away from investing in non-gaming due to the high costs, particularly as the gambling industry was far more lucrative. Macau’s gambling industry currently accounts for more than 80% of government revenues.
But Macau’s government laid out conditions in the bidding that it wants the new license holders to prioritise safeguarding local employment, develop the city’s overseas tourism market and boost investment in non-gaming areas, including conferences and Chinese medicine.
While the government’s awarding of licenses to incumbents signals stability and continuity for the tens of thousands of local residents employed by them, the companies will face far greater accountability on non-gaming initiatives than in the last 20 years, executives and analysts said.
Operators are expected to invest a total of 100 billion-120 billion Macau patacas in non-gaming over the next decade, with Sands and Galaxy each committing around 25 billion patacas, and the rest putting up 15 billion patacas, DS Kim, analyst at J.P. Morgan in Hong Kong, said earlier in December.
“These projects will bring new players and tourists into the city, who in turn will spend sizable dollars on gambling,” he said.
Macau is heavily reliant on Chinese visitors. Tourists from greater China, including Hong Kong and Taiwan, account for more than 90% of total visitation.
($1 = 8.0130 patacas)
(Additional reporting by Twinnie Siu; Editing by Muralikumar Anantharaman)
