According to local news, at least one Macau concessionaire is allegedly planning to discuss increasing the gaming revenue share of satellite casino operators by 5%, from the current 45% to 50%.
In this regard, some sources from satellite casino operators told Macao Daily News that the adjustments would make it even more difficult for them to make ends meet, especially under the current economic downturn.
Currently, satellite casinos operate under the license of a gaming concessionaire, under a third-party agreement where the concessionaire keeps 45% of the gambling revenue, and the remaining 55% goes to the satellite casino operator. Thus, the gaming concessionaire secures 5% of the overall gaming revenue, as it has to pay almost 40% in direct taxes and contributions on gross gaming revenue.
According to Allin Media, SJM Holdings plans to increase its share from 45% to 50%, effectively increasing its net income in satellite casino operations after taxes and levies to at least 10%. This would see a large impact on the majority of the satellite casinos in operation, as out of the current 16 satellite casinos, 14 are under the concession of SJM, while one is under Galaxy Entertainment and another one is under Melco Resorts & Entertainment.
Satellite gaming venue Casino Golden Dragon
Satellite casino operators’ sources said that if the gaming concessionaires raise their gaming revenue share, the difficulty for the satellite casinos to survive under the pandemic and economic slowdown will increase, and may eventually cause the casinos to cease operation, according to Macao Daily News.
They further pointed out that the SAR government ought to pay more attention to the impact the shrinking of satellite casinos has had on the unemployment rate, as a considerable number of the casino employees are middle-aged workers who have difficulties in finding other jobs.
The satellite casino operators expressed their hope for the government to allow them to change their cooperating gaming concessionaires during the three-year transition period.
Grand Emperor Hotel
As reported by Macau Business, gaming industry insiders stated that many satellite casino operators felt disappointed and have already made their decision to leave, as they will only be allowed to continue to operate satellite casinos as a management company after a three-year grace period set under the gambling hub’s new legislation.
As a management company, the satellite casino operators will only be able to receive management fees from the gaming concessionaires, instead of the current gaming revenue share arrangements. The management fees will also not be possible to be calculated in the form of commission.
Earlier, Macau’s government announced it has fixed a limit of 6,000 gaming tables and 12,000 gaming machines for new casino operators, set to enter into force early next year, along with minimum income levels for each one of them.
This marks the first time authorities have set a formal cap on the number of tables and minimum income requirement, as officials look to tighten control of casino operators who raked in MOP 36 billion ($44.5 billion) in 2019 before COVID-19, a point in which the Chinese city held the title of the world’s biggest gambling hub.
The territory’s six licensed operators -including Sands China, Wynn Macau, Galaxy Entertainment, MGM China, SJM Holdings, and Melco Resorts- are set to rebid for their spots as their contracts are set to expire at the end of the year. The bidding process kicked off in July, and operators can submit their proposals until September 14.
The gaming industry is facing tough challenges in what used to be the world’s biggest gambling hub. Pestered by the largest Covid-outbreak since the beginning of the pandemic, all of Macau’s 41 casino operators reported half-year losses. This and the strict amendments to the gaming law have made it difficult for the industry to stay afloat. According to Jefferies analyst Andrew Lee, Macao is unlikely to see a firm recovery until 2023.