Inside Asian Gaming

inside asian gaming August 2015 12 Feature In Focus Macau’s policymakers in a quandary. Government lawyer Jorge Oliveira, who became Macau’s point man on gaming liberalization, says he proposed granting a subconcession, in effect giving both Galaxy and LVS permission to operate casinos independently. The government eventually decided that the other concessions also had subconcessions. SJM sold its subconcession to a partnership of MGM and Pansy Ho for $200 million. Wynn sold its subconcession to Melco Crown for $900 million. Six has proven a lucky number for Macau. “Six operators allows for an appropriate mix of healthy competition but sufficient returns to encourage long term investment,” Mr McKnight says. “Competition from six licensees prevents one or two of the licensees becoming too dominant and dictating terms to the government.” The subconcession status of otherwise full-fledged operators remains an anomaly that expiration provides an opportunity to correct. “I have for years contended that subconcessions should length shortened from the current 20 years. “Shorter licenses could impede the inevitable property reinvestment that will be needed over the 2025-2030 period, at which point the Sands Macao will be 20- plus years old, Wynn Macau 20 years old and Sands Cotai Central 13 years old,” Mr McKnight, who is based in New York and visits Macau regularly, warns. “One thing that we’ve learned in the US from the experience of Atlantic City and other destination markets is that reinvestment in the physical properties and keeping amenities fresh and current is absolutely critical to competing effectively.” SIX SIGMA Macau stumbled into having six operators, and the number could change. In February 2002, the government granted concessions to three operators, STDM’s successor SJM Holdings, Wynn and a partnership of Galaxy and Las Vegas Sands, Sands China’s parent company. Galaxy and LVS couldn’t agree on partnership terms, leaving Experts say it’s too early to speculate about what conditions might be attached to new concessions. Increased tax or investment requirements beyond gaming could be added and concession length shortened from the current 20 years. Six has proven a lucky number for Macau. “Six operators allows for an appropriate mix of healthy competition but sufficient returns to encourage long term investment,” Wells Fargo Securities Senior Analyst Cameron McKnight says. “Competition from six licensees prevents one or two of the licensees becoming too dominant and dictating terms to the government.”