In this March 5, 2019 photo, visitors take photos outside the Wynn casino resort with a view of the Grand Lisboa (top center) casino resort building in Macao. (ANTHONY WALLACE / AFP)
HONG KONG - Macao said on Friday six casino firms will invest around $15 billion as part of new 10-year contracts they signed to operate in the world's biggest gambling hub, with the spending on non-gaming activities to exceed gaming spend by more than 10 times.
The signing of the contracts eases fears of investors and executives after a lengthy bidding process that had threatened to end one company's run.
Macao's leader Ho Iat Seng and officials including the city's finance and economy secretary presided over the signing at Macao's Government House together with top executives of the casino companies.
The total investment committed by the gaming companies for the development of non-gaming projects is 108.7 billion patacas ($13.57 billion), with the total investment in gaming projects 10.1 billion patacas, the government said
Incumbent operators Sands China, Wynn Macau, Galaxy Entertainment, MGM China, Melco Resorts and SJM Holdings beat off a surprise bid from Malaysia's Genting to win the six licenses on offer in the special administrative region.
The new contracts come into effect on Jan 1, 2023.
Each casino head was invited to sit at a long red table alongside the government officials as they signed. The executives included Pansy Ho, the billionaire daughter of Macao's gambling godfather Stanley Ho, and who heads MGM Resorts' Macao company MGM China.
The operators are expected to focus on non-gaming activities in the new term to diversify away from gambling and attract foreign tourists.
The total investment committed by the gaming companies for the development of non-gaming projects is 108.7 billion patacas ($13.57 billion), with the total investment in gaming projects 10.1 billion patacas, the government said.
"The development of Macao's gaming and tourism industry will enter a new stage," it said in a statement issued immediately after the signing.
The stakes could not have been higher for the six companies, who depend on Macao's gambling industry for their profitability but have been bleeding billions of dollars for most of the past two years due to COVID-19.
Genting, with its strong non-gaming track record and mass market appeal, was a credible threat for the Macao operators, many executives and analysts have said.
Aerial photo taken on July 29, 2020 shows a view of the Penha Chapel atop Penha Hill in Macao, south China. (CHEONG KAM KA / XINHUA)
Macao's government laid out conditions in the bidding that it wants the new license holders to prioritize safeguarding local employment, develop the city's overseas tourism market and boost investment in non-gaming areas
Previous attempts by Macao to diversify have been unsuccessful, with casino operators shying away from investing in non-gaming due to the high costs, particularly as the gambling industry was far more lucrative. Macao's gambling industry currently accounts for more than 80 percent of government revenues.
But Macao's government laid out conditions in the bidding that it wants the new license holders to prioritize safeguarding local employment, develop the city's overseas tourism market and boost investment in non-gaming areas.
While the government's awarding of licenses to incumbents signals stability and continuity for the tens of thousands of local residents employed by them, the companies will face far greater accountability on non-gaming initiatives than in the last 20 years, executives and analysts said.
Operators are expected to invest a total of 100 billion-120 billion patacas in non-gaming over the next decade, with Sands and Galaxy each committing around 25 billion patacas, and the rest putting up 15 billion patacas, DS Kim, analyst at J.P. Morgan in Hong Kong, said earlier in December.
"These projects will bring new players and tourists into the city, who in turn will spend sizable dollars on gambling," he said.
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