Special Report – The paradise of paradox

Ongoing investments show that the concessionaires are not afraid of the public tender.  

MB June 2021 Special Report | Gaming: The road to June 26, 2022

Final figures are not yet known, but the Grand Lisboa Palace, set to be inaugurated by SJM in the next few weeks, will have cost more than MOP40 billion. 

Using the pre-pandemic period as a yardstick, it would take SJM four or five years to recover the investment. Post-Covid-19, it will take a few more for Grand Lisboa Palace to become a profitable unit. 

If SJM had another ten years on their concession that wouldn’t be a problem – but SJM, theoretically, has just one more year of concession left. 

Are the directors and shareholders of SJM incompetent, or the banks that lent the money, or even the politicians, failing to warn of the huge possible problem? 

Obviously not. 

Not least because almost all the other concessionaires, too, have many billions invested in ongoing works (see a list on these pages). 

In a sign of this paradox, last month Melco received a seven-month extension from the local government on the deadline for completion of development of the Studio City casino resort. The new date – December 27, 2022 – lies several months beyond the expiry date of the underlying license supporting Studio City’s business. 

“Of the existing operators, only Wynn is not undertaking any works, either new development or renovation work on existing properties. My view is that such investments are being made in order to have a place in the pole-position, in case the public tender takes place next year or at a later stage,” says Pedro Cortés, a local lawyer with gaming expertise. “And I agree with those who state that it would not make sense for the companies to invest, if such investment were not going to be considered among the public tender criteria for awarding the concessions.” 

Jorge Costa Oliveira, the person in charge of the 2001 tender, agrees: “I think that shows confidence on the part of the concessionaires and sub-concessionaires as regards the final outcome of a tender. You can see that they feel comfortable.” 

No wonder, therefore, that even without knowing whether there will be a public tender, with what criteria and when, the majority of observers take it for granted that the six casino operators “are likely to retain their licenses,” even though, says Bernstein Research, the government will likely impose extra economic conditions in return. 

In a context in which the public tender looks like a pro-forma, the contribution arriving from Las Vegas, from someone recognised for gaming law in editions of The Best Lawyers in America from 2004 to 2017, deserves special attention. 

Anthony Cabot understands that “from afar, the Macau gaming concession system’s renewal process appears to be counterproductive to Macau’s gaming industry.” 

Professor Cabot, Distinguished Fellow of Gaming Law, UNLV Boyd School of Law, explains to Macau Business that “public tenders are excellent vehicles for considering who should initially receive a license to build a new casino resort” but not for those who want to maintain the status quo. 

“How a public tender would work where you have three concessions, three sub-concessions and over 40 existing casinos is unknown. I am not sure what the bidders are even bidding on,” he says. 

“The more reasoned approach would be to negotiate extensions with the existing operators. The matters on the table can be more holistic to the government’s vision of Macau’s future in terms of capital improvements or operational changes to the existing resort/casinos, economic diversity, infrastructure improvements and community concerns,” Professor Cabot adds. 

Concluding his interview with Macau Business, he remarks, “For the past two decades, the Macau Government should have been planning for this day consistent with a master plan. That these matters are so unclear at this late date is unfortunate.” 

“For the past two decades, the Macau government should have been planning for this day consistent with a master plan. That these matters are so unclear at this late date is unfortunate” – Anthony Cabot 

Major ongoing investments 

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