If the worsening of the trade war leads China to call for a boycott of American companies, the kings of American casinos will be swimming.
Three US companies – Las Vegas Sands Corp., founded by Republican Party donor Sheldon Adelson; Wynn Resorts Ltd .; and, to a lesser extent, MGM Resorts International – rely on their positions in the hub of Macao casinos to thrive. Their two-decade-old licenses expire over the next four years, they need Beijing and Washington to stay on good terms.
Together, the three account for half of gambling revenue in Macau, according to Bloomberg Intelligence analyst Margaret Huang. As Macau is the only part of China that allows gambling, the fate of the city could collapse if Beijing limits the number of its inhabitants, who represent 90% of the players of the former Portuguese enclave. That happened when China cracked down on corruption and extravagance four years ago. Beijing could also bend the ears of Macau to increase the presence of Chinese operators. Thus, when the six licenses of the territory are approved, it will allow a seventh player, require local partners or even eliminate the licenses of Americans.
This is likely to bring power back to the homeland of Stanley Ho's family, who for decades has been the backbone of Macao gambling. Three of the territory's licenses are controlled at least in part by his family: the original company of Ho, SJM Holdings Ltd.; Melco Resorts & Entertainment Ltd., with his son Lawrence Ho as President and Chief Executive Officer; and MGM China Holdings Ltd., whose co-chair and second shareholder is Stanley's daughter, Pansy Ho. The fourth group, Galaxy Entertainment Group Ltd., is headed by Hong Kong's third richest man, Liu Che-Woo. .
Losing a grip on Macau is not a trivial matter. Macau's gross gaming revenue of $ 33 billion last year is three times higher than 2007 and five times higher than the Las Vegas Strip. Wynn, whose founder, Steve Wynn, stepped down as president earlier this year following a sexual harassment scandal, manufactures no less than 70 percent of his Macao Ebitda. The sands represent about half and the MGM about 17% of the semi-autonomous Chinese city.
Nevertheless, the risk of Americans becoming smaller players is mitigated by the fact that the future of the gaming platform is not as clear. According to analysts' estimates, gaming gross revenues increased 8.5% in November, and the longest sea bridge in the world linking Macao to Hong Kong and Zhuhai, the mainland city, is now expected to attract more bettors. the country's economy is slowing down.
Threats to the pre-eminence of Macao are also developing. The Chinese province of Hainan, which has been given the green light to hold an electronic lottery and horse racing in April, is unlikely to be allowed to play in its own right. But Japan is a different story. The country legalized casino games in July and is expected to choose three cities to host casinos that could open by 2025. Sands, MGM and the American company Melco are presumed to be among the first. If the climate in Macao darkens for US investors, they could be happy about this shelter.
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Nisha Gopalan is a Bloomberg Opinion columnist specializing in transactions and banking. She previously worked for the Wall Street Journal and the Dow Jones as a writer and journalist.
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