Macau investment payback period for casinos extend from a year to decades amidst restrictions, uncertainty

November 17, 2021 Casino & Hotel Industry Updates

Investment payback periods for casinos in Macau have now extended from just a year to decades. Whereas a venue like Sands Macau -the enclave’s first Las Vegas-style casino-, opened in 2004, was able to recoup its $256 million construction cost in just under a year, the situation has drastically changed in the last few years.

Even before the pandemic, new casino resorts were likely to see a payback period of more than five years, reports Bloomberg. This resulted from challenges from bulging construction costs to China’s crackdown on capital outflow.

However, now the Covid-19 pandemic, and its hit to visitation levels, have made the situation even worse, adding at least four years to that timeline. Analysts estimate now extended payback periods for operators after gaming revenue plunged 80% last year.

Adding another layer of uncertainty, operators are growingly concerned that new casinos in the gaming hub will no longer be a good investment under the revisions to the territory’s casino law. These are set to tackle the current gaming licenses periods of 20 years, which will be slashed after expiry in June.

“If the new concession term is shorter than 10 years, then it’s really difficult, if not impossible, for new projects starting after the concession to get payback within the period,” said JP Morgan analyst DS Kim, according to the previously cited news source. “The casino operator may end up losing half the concession period without getting anything.”