Melco Resorts has become one of the first companies in Macau to apply for a license extension, the company chairman and CEO Lawrence Ho confirmed. The company is seeking to extend its concession by another six months in the special administrative region (SAR) as a final draft of binding regulatory and licensing agreements is expected to arrive in 2022.
Extending Concessions as Final Touches to Regulation Are Done
This comes following Macau’s Secretary for Economy and Finance’s decision to extend the concessionaires’ license by six additional months. Lei Wai Nong said that concessionaires would not need to worry about losing their rights until December 31, 2022, at the very least with a final framework on its way.
The government is carrying on with a revised gaming law that would rejuggle the regulatory situation in the SAR. For starters, concessions will no longer be awarded for extended periods of time, with the changes in the law now limiting the licenses to ten years. This means that anyone applying for those licenses would have to conform with regulatory statutes and ensure that they are eligible for reelection at the end of this period.
Melco’s move is probably not a contained event with all other concessionaires already having submitted their own paperwork or having prepared the documents necessary for the license extension. Effectively, the end period is bumped by six months from the current June 26 deadline.
Melco and Operators Face Headwinds in the SAR
However, not all is well in Macau. Ho, who spoke to a Chinese media outlet, stressed that the impact of COVID-19 remained an issue and it has reduced profitability. China continues to restrict cross-border movement for fears that Macau may prove a spreading center back to the mainland. Macau did report cases of COVID-19 earlier this year, for the first time in many months.
Meanwhile, China has locked down Shenzhen, a 17-million city hub, to block the spreading of COVID-19 after several dozen cases have been reported. All of this adds to the financial woes of casino operators who would now need to pay anywhere between $6.2 million and $10 million to renew their licenses.
The Chinese New Year was also not as good as 2019 because of a somewhat limited inflow of tourists. International travel is starting to open up in Macau, but the challenges of controlling the pandemic remain. Melco’s own results have been subdued as well with the company reporting a $160 million net loss in the fourth quarter of 2021.
Macau is still hoping that it can generate massive growth in its hotel and hospitality segment as the SAR wants to revitalize its economy and pull away from gambling as much as possible. Meanwhile, the impact of junkets has been mostly nominal to operators’ licensees.