Slow boil

The government will limit annual growth in the number of gaming tables to 3 percent from 2013 Once the 5,500-table cap on the number of live gaming tables expires in 2013, growth in the number of tables will be limited to 3 percent per year. This was announced last month by the secretary for economy and finance, Francis Tam Pak Yuen. The growth limit will last for 10 years. This means that by the end of 2021 there could be almost 7,200 gaming tables in Macau. In March last year, in announcing the 5,500-table cap for the following three years, Mr Tam said the government’s long-term goal was to promote a growth rate of around 3 to 4 percent a year. This latest announcement did not catch anyone off guard. SJM Holdings Ltd. director Angela Leong On Kei says the growth limit is “reasonable” but wonders if it will prevent Macau’s biggest industry from meeting demand. The growth limit may delay government approval for the pending casino projects in Cotai, which have been in the pipeline at least since 2008. At the end of June, Macau had 5,237 gaming tables, meaning just 263 new ones may be added before 2013. It is likely that most will be in Sands China Ltd. developments. The company aims to open the first phase of its Sands Cotai Central development in March. It will include a 9,850 square-metre casino and VIP gaming areas. Sands China expects to open a second casino there by the third quarter of next year. Next in line should be Wynn Macau Ltd. The company announced last month that it had agreed to pay the government a land premium of MOP1.55 billion (US$193 million) for the use of about 206,000 square metres of land near the City of Dreams in Cotai, for 25 years initially. Wynn Macau wants to build a resort containing a five-star hotel, gaming areas, shops, food and beverage outlets, and entertainment, spa and convention facilities. The government says it is “still studying” Wynn Macau’s application, but analysts interpret the company’s announcement as a sign that the deal is almost in the bag. Although it is widely expected that the Macao Studio City project,  in which Melco Crown Entertainment Ltd. recently acquired the controlling stake, will include gaming facilities, Mr Tam has said the company will have to apply for a casino licence and then wait and see. The chairman of MGM China Holdings Ltd, Pansy Ho Chiu King, says she “firmly” believes it is possible that her company will be granted land in Cotai this year. Live with it SJM Holdings Ltd. has made two applications for land in Cotai for gaming. And Galaxy Entertainment Group Ltd. still has enough land available around Galaxy Macau to put up three buildings of the same size. Shortly before the government announced the new table growth limit, Las Vegas Sands Corp. president and chief operating officer Michael Leven warned that approving casino projects too quickly in Cotai would be “an unforgivable mistake for the government to be part of”. Las Vegas Sands is the parent of Sands China. Will the growth limit hinder the expansion of the market? Although the 5,500-table cap in effect limited growth to 15 percent between 2010 and 2013, this year alone gaming revenue has increased at three times that rate. One reason is that VIP gaming is the main growth driver, accounting for three-quarters of gross gaming revenue. Since government restrictions do not distinguish between VIP and mass-market tables, casinos may try to turn mass-market tables into VIP tables. However, the government is keen on expanding the mass market. There are no official figures for the proportion of gaming tables that are for high rollers. The regulator has said there are no plans to limit growth in the number of electronic gaming tables and slot machines. These now account for less than 5 percent of gross gaming revenue. Either way, the growth limit is likely to encourage casinos to make better use of the live tables they already have.