Decisions on gaming concession renewals need to be taken now, mainly to assure bondholders that casinos are going to be in business in years to come, says American gaming law professor Nelson Rose. Mr Rose, alongside Professor Jorge Godinho and lawyer Oscar Madureira, presented their 5th Annual Review of Macau Gaming Law at the Rui Cunha Foundation this week.
“If you lend large sums of money, hundreds of millions of dollars to a casino, you want to know that they’re going to be in business when they are supposed to pay it back in 20 years. So really the decision has to be made now,” he told reporters on the sidelines of Monday’s event.
Mr Rose, a professor at Whittier Law School in California, added, “This year I don’t see how they can put it off anymore. If they don’t make a decision really soon about whether they’re going to renew these contracts, I think there’s going to be a problem with getting lenders, the bondholders to lend them money, because they want to know that they’re going to be paid back.”
Current gaming concession contracts expire between 2020 and 2022. The Macau government will conduct an interim review of current gaming concessions this year, according to the Secretary for Economy and Finance, Lionel Leong.
Speaking of the gaming industry’s current challenges, Professor Rose acknowledged that “Macau should be cautious,” now that the gaming revenue has declined for the 11th straight month in April.
Nevertheless, he recalled that such a downturn was expected even among operators, after Macau experienced exponential growth.
“The growth year to year in Macau was so large; there were months that it was 80 percent larger than the gaming revenue of the same month a year earlier. That’s almost a speculative bubble. You can’t continue to grow [like that]. And even the industry did not want to grow at 80 percent (…) it was too fast and too much,” he recalled.
Acknowledging that the downturn in gaming revenue is significant, Professor Rose said that a shift from the VIP to the mass market was the right move, following a decline in VIP market revenue. “They are replacing the VIPs with the mass market, which is good for everybody because it eliminates problems with junkets. It’s probably healthier to have a diversified market,” he stated.
Jorge Godinho, a visiting professor at the University of Macau, also said during his presentation that Macau had seen gigantic growth in terms of gaming revenue. There are challenges that now lie ahead – for instance, he pointed out, the smoking ban. In his opinion, “It is going too far, as there’s no reason for them to consider eliminating airport-style smoking rooms.”
He also advocated for the development of a sports betting system inside casinos as a potential and additional source of revenue.
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