The future of Macau’s 11 remaining satellite casinos has become a hot topic in the gaming industry, as the transition period for profit-sharing agreements is set to expire at the end of this year. Facing their final year of gaming operations under the current framework, the question of what lies ahead for these satellite casinos is undeniably a critical issue impacting both the industry and Macau’s economy.
Under Macau’s new gaming law enacted in 2022, casinos can only operate within properties owned by one of the city’s six concessionaires. To help satellite casinos, which have historically been located in buildings separate from concessionaire holdings, adapt to the new policy, the government established a three-year transition period from 2023 to 2025. However, once this period ends, satellite casinos will no longer operate under a profit-share model and must instead transition into management companies, earning only a fixed management fee for their services.
Currently, there are 11 satellite casinos remaining in Macau, with nine operating under the concession of SJM Resorts, one under Galaxy Entertainment Group and one under Melco Resorts & Entertainment. From a peak of 23 satellite casinos prior to the new law, this drastic reduction underscores the structural changes within the industry. As the final year of the transition period unfolds, the future of these casinos has become a focal point of industry discussions.
A satellite casino operator who wished to remain anonymous told Inside Asian Gaming that the operating pressures on satellite casinos are mounting, and the uncertainty surrounding their future could trigger a series of economic repercussions.
“The revenues of satellite casinos have not been the same since the pandemic, with the betting volumes of casino patrons and the allocation ratios from the concessionaires showing a significant gap,” the operator explained.
Using Landmark Casino on the Macau peninsula as an example, they noted that the average monthly gross gaming revenue (GGR) last year was around MOP$220 million to MOP$230 million (US$27.5 million to US$28.8 million), yet only about half of this amount actually contributed to the satellite casino’s earnings.
The operator further elaborated that in the past, the revenue allocation structure for satellite casinos designated 40% for gaming tax payments, 5% to concessionaires and the remaining 55% as the casino’s share. Since 2022, however, concessionaires have reduced the revenue share allocated to satellite casinos to 50%, further squeezing their profit margins.
“On the surface, this percentage may not seem low, but in reality, satellite casinos often include additional facilities such as hotels, restaurants and retail shops, whose revenue heavily relies on GGR,” the operator stated. After deducting costs such as staff salaries and property maintenance, the profit margins for satellite casinos have become extremely narrow.
Under the new gaming law, once the transition period ends, satellite casinos will be required to transform into management companies, earning only a fixed management fee as compensation. However, the operator admitted that this model might not be sufficient to cover the operating costs of the entire property.
“Without gaming revenues to support operations, relying solely on income from hotels or restaurants makes it nearly impossible to sustain the entire property’s operations. In fact, even repaying bank loans would become unfeasible,” he explained.
The operator added that many satellite casino operators had taken out loans years ago to construct or renovate their properties. Now, they are facing immense pressure due to their inability to repay these loans and are being forced to negotiate interest-only payment regimes with banks just to stay afloat.
The worst-case scenario, according to the operator, is one where satellite casinos are unable to continue operations, putting the entire property at risk of being sold off at a significantly reduced price.
“If hotel properties are heavily discounted and sold off, that could trigger banks to call in loans (demand early repayment), causing a ripple effect of negative impacts on the overall economy,” he warned.
To mitigate such risks, the operator urges the government to introduce a degree of flexibility when determining management fees for satellite casinos in the future. This would help operators navigate the pressures of transitioning and avoid broader economic repercussions.
At its peak, Macau had 42 casinos, around 23 of which were satellite casinos. These satellite casinos primarily served to provide marketing-related services to their host concessionaires, including promotions, advertising, customer acquisition and the provision of gaming premises. Meanwhile, concessionaires were responsible for the actual casino operations, such as table management, equipment maintenance, dealer arrangements, cage operations and surveillance.
In return, satellite casinos earned revenue by sharing a portion of the gaming income while also absorbing part of the losses. However, with the implementation of the new law, this cooperative model will be abolished. Satellite casinos will only be allowed to operate as management companies, fundamentally altering their business model and leaving many operators in a difficult position.
The challenges surrounding satellite casinos extend to concessionaires as well. SJM Holdings, which operates nine satellite casinos, disclosed in its August 2023 earnings call that it still had 2,150 surplus employees from shuttered satellites due to government regulations prohibiting the dismissal of casino staff. During the second quarter of 2023, the company reported “redundant payroll” amounting to HK$169 million (US$21.6 million).
As the transitional period enters its final year, the future of satellite casinos has emerged as a critical issue for Macau’s gaming industry. The matter encompasses significant implications for the labor market, potentially affecting over 5,000 jobs, as well as the real estate and hospitality sectors.
Balancing economic interests while ensuring the sustainable operation of properties presents a formidable challenge for both satellite casino operators and the incoming government.
