HONG KONG -- Macao legislators on Tuesday overwhelmingly backed a new gaming law for Asia's biggest casino hub, setting the stage for the city to solicit bidders for new operating concessions later this year even as the enclave's first COVID outbreak in eight months brought business to a near-halt.
The government pushed ahead with the vote on the gaming bill in the Legislative Assembly, barring observers except for media, even as most municipal offices as well as schools, banks and restaurants were shuttered and other items were cleared from lawmakers' agenda. By midday, all of the city's 681,700 residents were to have been tested for COVID-19.
Under the new law, approved after about two hours of concluding debate and nine months of public discussions and legislative review, selected operators will receive 10-year concessions that can be potentially extended for three years. The current operating rights of the city's six casino companies were originally due to expire next Sunday, but are being extended to year-end at a reported cost of 47 million patacas ($5.8 million) per company.
"The government takes into consideration all aspects of (the law) ... in the public tender because this will relate to our future and affect our future development," said Secretary for Economy and Finance Lei Wai-nong on Tuesday.
The casino companies welcomed the long-awaited approval of the new law, which would limit concessions to six. Analysts expect all current operators to be re-licensed.
"As always, MGM China is full of confidence for the future development of the Macao SAR," said a company spokesperson, referring to the city's official title as a special administrative region of China.
With its borders closed to visitors from everywhere but mainland China, Macao had avoided any positive cases since October but suddenly discovered 31 cases on Sunday. The office of Macao Chief Executive Ho Iat-seng said the source of the outbreak was unclear.
The Parisian Macao and most other casinos in the city remained open even as the COVID outbreak closed other business and offices. © AP While Galaxy Entertainment Group's StarWorld Hotel and the Wynn Macau were closed, most other casinos remained open. But analysts quickly began slashing their market forecasts, an ominous move after half the companies reported fresh operating losses in the first quarter.
"Visitation into the city will be severely limited -- perhaps being almost completely blocked -- and revenues are set to plummet close to zero for at least the next week, and quite likely several weeks," said Bernstein Research's Vitaly Umansky. "Some operators may need to get capital injections either from capital markets or controlling shareholders."
At Citigroup, George Choi cut his projection for July gross gaming revenues by two-thirds to 3 billion patacas.
The government relies heavily on gaming operators for funding and has had to tap its reserves for the first time to sustain its budget amid the industry's slump. At 3.3 billion patacas, Macao's gross gambling revenue last month was just 32% of the level a year earlier and compared with 26 billion patacas in May 2019.
Under the latest amendments to the gaming law, casino operators can be granted breaks of up to 5% off gaming taxes due as a reward for bringing in foreign gamblers, but the effective benchmark rate, already Asia's highest, is set to edge up to 40% from 39%.
Another new clause gives Macao's chief executive the power to revoke any gaming concession on national security grounds or for failure to pay taxes on time. Operators who fail to generate enough gaming taxes to meet new minimum standards could be required to pay extra tax or eventually be forced to give up gaming tables or slot machines.
Casino operators will also be required to get government approval for "material financial decisions" which Choi predicted will compel Sands China and Wynn Macau to reduce dividend payout rates from pre-COVID levels. Operating concessions will be subject to official review every three years.
In addition, the revised law will tighten rules on cross-ownership among casino companies. "We note there are several key players in Macao that could be affected by this, including Ms Pansy Ho, Shun Tak Holdings' managing director, who has stakes in MGM China and SJM," said Morgan Stanley analyst Praveen Choudhary. Galaxy also holds a stake in Wynn Macau's parent company that could come under scrutiny.
After encountering resistance from some legislators, the government agreed to soften provisions that would have required all casinos to be housed in properties owned by concession holders amid worries about rising unemployment. The amendment will allow the so-called satellite casinos to remain in operation but bar revenue-sharing with concessionaires.
Galaxy nonetheless this month closed its satellites in the Rio Hotel and President Hotel. But the casino at the Grand Emperor Hotel and others under the umbrella of SJM Holdings that were expected to close this month are now to remain open through year-end under revised agreements with the company.
The Fortuna casino hotel, also affiliated with SJM, was placed under lockdown on Tuesday with more than 700 guests and staff reportedly inside after authorities apparently detected a COVID case.