Macau satellite casino closures could trigger property and financial instability

The closure of satellite casinos in Macau could cause severe property devaluation and financial instability, with some hotel properties at risk of losing over 60% of their value, a leading property assessor has warned.  

Franco Liu, a Macau-based property valuation expert, cautioned that the loan-to-value ratio for some properties could reach 150%, raising concerns about potential defaults and financial system strain.  

“If there is a lack of a conclusive solution to satellite casinos, it will make property valuation challenging, as factors such as the presence of a casino and variations in management fees play a significant role in determining overall property value,” Liu told Macao Daily News.  

Macau currently hosts 30 casinos, 11 of which function as satellite operations—properties that rely on external gaming concessionaires. New casino regulations introduced in early 2023 require these establishments to transition to a management fee model by the end of this year, ending their previous commission-based structure.  

Historically, hotels with satellite casinos secured larger loans due to their higher valuations. With closures looming, Liu warned that devaluations could render many of these loans unsustainable, impacting banks with significant exposure to the sector.  

“Such loans could dramatically exceed updated valuations following the cessation of satellite casinos, driving the loan-to-value ratio of some properties to as high as 150%,” he said.  

According to data from the Monetary Authority of Macau, commercial property mortgage delinquency rates have surged to 5.4%, the highest on record.  

The satellite casino sector remains a key economic driver in Macau, generating MOP11 billion ($1.37 billion) in gross gaming revenue last year and contributing MOP4 billion in taxes.  

The sector also directly and indirectly supports 13,500 jobs, including 5,500 in surrounding businesses, accounting for 4.6% of Macau’s domestic workforce.  

While the transition may consolidate Macau’s gaming industry, Liu noted that the shift will likely disrupt businesses reliant on the more budget-conscious clientele that frequent satellite casinos.  

As gaming tables from satellite casinos return to their original concessionaires, industry analysts warn that low-stakes gamblers may not follow, potentially reducing overall gaming revenue.  

A financial estimate based on official property records suggests that total loans tied to satellite casinos and nearby businesses range between HK$25 billion and HK$39 billion ($3.2 billion–$5 billion).