The closure of Macau’s satellite casinos, or most of them at the very least, by year’s end creates a headache for the already embattled SJM Resorts S.A. given that it will now need to try and rehome more than 4,000 displaced employees as per government guidance. However, it also creates an opportunity for the company to finally realize the full potential of its flagship Cotai resort, Grand Lisboa Palace (GLP).
According to analyst estimates, SJM’s nine existing satellite casinos currently house around 440 gaming tables which the government confirmed on Monday will be allocated back to SJM upon the closure of its satellites. Even accounting for the combined 176 tables at Ponte 16 and L’Arc that will presumably remain where they are should SJM achieve its goal of fully acquiring those properties, that still leaves 264 tables at the company’s disposal to do with as they please.
Of course, space constraints will play a role in dictating how these tables are allocated, but certainly the main gaming floor at GLP could benefit from more tables to fill in its plethora of open space – and even if SJM could only fit another 100 or so tables in Cotai, the difference would be palpable. After all, a gaming table located in an integrated resort is far more valuable than one in an old-school satellite – many of which have barely seen a new lick of paint since the 80s and in some cases never bothered to offer a ratings program for their players.
As a reference point, another of Macau’s concessionaires, MGM China, has seen its Macau market share grow from around 9% pre-COVID to more than 15% today thanks in part to the addition of 198 new gaming tables as part of the government’s allocation under the 10-year concessions issued in late 2022.
MGM will rightly argue that their recent success is also due to innovation and better optimization of their gaming floors – and in that regard there is no guarantee that SJM will be able to replicate MGM’s impressive performance – but certainly the higher table allocation hasn’t hurt! No doubt SJM sees new tables as an opportunity to lift GLP’s market share from 2.8% as of Q1 to the 6% it is targeting.
What is of some intrigue is the choice of Ponte 16 and L’Arc as acquisition targets. It is no secret that of the entire SJM satellite stable, Landmark and Fortuna consistently ranked as the best performers on a turnover and revenue basis, and IAG understands there were some within the company pushing hard for those two properties to be retained, despite whatever other failings or deficiencies they may be perceived to have. It may well be that the decision came down to personalities rather than performance. Time will tell if tables at Ponte 16 and L’Arc can generate a yield that justifies the acquisition of those properties by SJM.
In the meantime, analysts anticipate that the company will face significant headwinds in the short-term due to excess staffing costs, similar to the situation faced when its first batch of half-a-dozen satellites closed their doors in early 2023.
How SJM navigates this period may well determine its fortunes long into the future.
