Posted on: December 19, 2022, 11:41h.
Last updated on: December 19, 2022, 12:08h.
Melco Resorts was one of the winners of Macau’s recent bidding war for the Chinese enclave’s six gaming licenses. The City of Dreams, Studio City, and Morpheus owner and operator has since detailed how it plans to spend its required $1.5 billion investment capital, as dictated under the terms of its fresh 10-year concession.
Macau didn’t pull any surprises in deciding to maintain its current gaming industry through at least 2033. The Chinese Special Administrative Region (SAR), the only place in China where casino gambling is allowed, opted to retain its present six operators, with one being Hong Kong-based Melco.
At the bequest of Beijing, Macau’s local government is amid an effort to diversify its economy away from gaming. In exchange for issuing the six casino companies new operating privileges as their current concessions expire at the end of this year, Macau required that the resort giants commit to investing heavily in nongaming during the life of their new tenders.
Melco Details $1.5B Spending
Macau directed its six gaming operators to invest MOP118.8 billion (US$14.8 billion) into their resorts during the life of the 10-year concessions. The bulk of the money is required to be allocated toward nongaming projects.
The government issued each casino operator an investment requirement based on the firm’s gaming market share. For Melco, Macau officials are requiring that the company invest at a minimum of MOP11.8 billion (US$1.47 billion).
Melco revealed in an investor release issued on Sunday that approximately $1.248 billion of the spending — or about 85% — will be allocated to nongaming developments. The budget, the company says, will be used to fund amenities that will increase foreign market visitation by way of more convention and exhibition space, entertainment, sports, arts and culture, health and well-being, gastronomy, and maritime excursions.
Melco pledges its commitment to supporting the healthy and sustainable development of the tourism and leisure industry in Macau as we continue to work with the government over the next ten years to contribute to the city’s development as a preeminent, global tourism destination,” said Lawrence Ho, Melco’s billionaire founder, chair, and CEO.
Melco says the balance of the remaining $1.47 billion spending will go toward improvements to its casino floors.
Along with detailing its nongaming spending requirement, Melco Resorts provided investors with specifics on its casino business under the next regulatory environment. The company said its new concession allows Melco to operate a total of 2,100 slot machines and electronic gaming positions, plus up to 750 table games.
Unlike in US casino markets where slots reign supreme, Macau’s casinos generate more revenue from their table games. Baccarat is the game of choice throughout Asia.
In exchange for its casino privilege, Melco will pay Macau an annual concession fee of MOP30 million (US$3.74 million). The company will additionally pay an effective gaming tax of 40% on its gross income.
Macau also charges MOP300,000 (US$37,000) a year per premium table game. and $19K for each mass market table. The region levies a $100 charge each year per slot machine.