Inside Asian Gaming

INSIDE ASIAN GAMING | December 2011 40 Feature increases in foreign visitor numbers and tourism spend that are handily exceeding expectations. If that turns into a long-term trend, and gambling-related social problems don’t increase to the point where they become a political liability, it is entirely likely that more licences will be granted. The issues are more complicated in Macau, where the explosive scale and pace of resort development has saddled the government of the SAR with a host of employment, housing and infrastructure problems that are elevating the potential for social unrest and occasionally drawing unwanted attention from Beijing. Until those issues are resolved, it is difficult to imagine how the government could justify any more licences. At the same time, it might prove legally and logistically difficult not to renew the six existing concessions and sub-concessions when the first of them start to become eligible for early redemption from 2017. The present administration of Chief Executive Fernando Chui Sai On is aware of the need to do a better job of managing market andgeneral economic growth than in previous years. He acknowledged as much in his annual policy address in mid-November. But he has been broadly consistent with his predecessor, EdmundHo, in terms of keeping fluid the government’s relationship with the big resort operators. This approach involves some conflicting signals on just how many more casinos from existing concessionaires will be allowed on Cotai after the completion of Sands Cotai Central (a.k.a. Cotai 5 & 6) and when they will be allowed. Wynn Resorts has indicated it has been granted Cotai land rights in principle—though no timetable for construction has yet been announced. Melco Crown Entertainment is also hopeful of gaining a firm ‘yes’ on a broad brush approval originally given to the stalled Studio City site. SJM recently indicated it had been told it could have a Cotai site, and MGM China also expects to be granted development rights on Cotai. In an effort to get a better handle on whom its licensees actually are, and to stop casino proliferation by the back door, the government says it has banned any more third-party operating agreements. That means in theory SJM can’t issue any more sub-licences from its main gaming licence in the manner that it has been doing since monopoly days. That resulted in a market where 14 of Macau’s current 34 casinos (i.e. 41% of them) are actually managed by third parties. The idea of the policy is not only to prevent proliferation but to improve market transparency. Whether the policy will be implemented effectively, time will tell. The government is also—possibly with an eye on political approval from Beijing— increasingly focusing on measures aimed at responsible gambling and mitigating any negative social effects of gambling within the local population. Promised restrictions on slot arcades in residential areas have yet to materialise, although there is talk of a regulation being published early next year. On the topic of market intervention, the more that is written and spoken about the table cap and its reported extension to 2020, the more confusing the picture seems to become. Most commentators have interpreted the new policy as meaning a maximum 3% compound annual growth market-wide from a first quarter 2013 baseline of 5,500 tables, as set out in the original table cap policy. But Steve Wynn, Chairman of Wynn Resorts, seemed to throw a spanner in the works recently when he said in comments reported by the South China Morning Post his understanding was that the 3% CAGR figure referred to existing casinos, not to any new ones that might be built. His remarks left a nagging impression that people in government were saying different things to different people. Perhaps when officials had more time to crunch the figures following the September policy announcement by Francis Tam, the Secretary for Economy and Finance, they realised that an absolute market-wide 3% CAGR cap in table numbers between 2013 to 2020 would make it nigh impossible to support the number of proposed new Cotai projects. Perhaps that highlights the dangers of government by nod and by wink. James Rutherford is a freelance writer and editor based in Atlantic City, New Jersey. He is a former editor at Casino Journal and a former International Editor and Senior Writer at International Gaming & Wagering Business. Cotai—status quo or major development coming soon?