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Chinese personality Guo Meimei jailed for running illegal casino

High-profile Chinese internet personality Guo Meimei has been jailed for five years and fined 50,000 yuan ($7,800) for running an illegal casino. The 24-year-old rose...

“Supply will create the demand” says Adelson on Macau

Las Vegas Sands CEO said at a conference in New York that the key to lifting Macau out of a slump is to build...

Crime spikes in 15Q1 as revenues fall

Casino-linked crimes in Macau rose in the first quarter of 2015 as revenues plummeted, with the number of illegal detentions involving forced collection of...

Chinese police track down suspect in Australia

Taking China’s anti-graft campaign one step further, Chinese police discretely traveled last year to the eastern suburbs of Melbourne to get a Chinese-born tour...

Organizer pulls plug on Macau jewelry show

A Hong Kong-based jewelry company has blamed China’s anti-graft campaign for its decision to pull the plug on a trade show in Macau next...

Macau junket market to shrink further amid closures, expansion elsewhere

Macau’s junket market is expected to shrink further in 2015 amid tight liquidity and falling VIP revenue, with some analysts warning that the system that helped create the world’s biggest gambling hub may be near broken. The number of licensed gaming promoters in Macau – also known as junkets – shrank by 34, or almost 16 percent last year, from the previous market total of 217, according to figures updated earlier this month and obtained by public broadcaster Rádio Macau. Manuel Joaquim das Neves, director of Macau’s gaming regulator – the Gaming Inspection and Coordination Bureau (DICJ) – attributed the reduction partly to the loss of some smaller players, which were largely inactive and had not applied for their licenses to be renewed. He stressed the reduction should not be a cause for special concern. However, analysts are less sanguine and expect more shrinkage in the system that still accounts for the majority of the VIP market in Macau.   "We beg to differ with the common perception that the latest junket closures should weed out weaker players and spur healthy VIP segment consolidation, as: 1) we have not seen junket capital shifting from smaller to larger junkets, 2) surviving smaller junkets have adopted a cash-only model with low costs, little credit risk, and no incentive to consolidate, and 3) larger junkets still face a deteriorating climate and plan further cuts in VIP room numbers,” Daiwa Securities analysts wrote in a recent note. Although the dominance of the VIP market has been on the decline in Macau in recent years as the more profitable mass market sector has grown, it still accounts for about two thirds of total revenue, with junkets bringing in the majority of that amount. Market-wide, Daiwa estimates there are 1,876 VIP tables in Macau. There were 5,711 gaming tables recorded in the Macau market by the gaming bureau as of December 31 – so assuming an apples-with-apples comparison, VIP tables are 33 percent of the total table inventory. Daiwa further estimates that there are 1,679 junket tables, indicating junket tables are 89 percent of all VIP tables. One Malaysia-based analyst told AGB that he expected one third of the current junket tables to go by the end of the year. "They can't do much about salvaging the macro situation... Their livelihood is up to Beijing," he added. Recent casualties among junket operators have included, Gold Moon Group and David Group, which announced within the span of a week in January that they were pulling the shutters on some high roller rooms. Smaller player Gold Moon shut down VIP rooms in Sands Cotai Central, which had a total of 16 gaming tables and had been operational since April 2012. Its other VIP rooms, located in Altira (35 tables), Galaxy Macau (14), Wynn Macau (12) and the Landmark Hotel (9), will continue their operations. The fifth-largest junket operator in Macau by chip roll David Group, on the other hand, ceased operation of three of its seven VIP rooms, located in L’Arc, MGM Macau and Four Seasons Hotel. The closure came as David Group said it will expand into overseas markets. It is to start VIP operations in the Philippines, Vietnam and South Korea this year. In addition, it plans to expand its businesses in Australia and Europe. As well as the anti-corruption drive, the industry has been hit by a general slowdown in China’s economy, tight liquidity and a crisis of confidence with several high-profile scandals regarding junkets in 2014. Levels of debt in the system are also mounting. Heng Sheng, one of the largest junket operators, told investors in October that 30 percent of the outstanding debt owed to its agents was over a year old. Many gamblers are making monthly installments rather than the standard practice of paying in full. It is difficult to establish how much credit the junkets have extended, because much of the business is done informally, but one Hong Kong-based analyst at an international bank estimated there was 100 billion Hong Kong dollars ($12.9 billion) of outstanding debt. The pressure on the junket system has become so great that Standard Chartered in a report in November said the system was “near broken.” According to the UK-based bank, the issues are likely to persist well into a China easing scenario and some junkets are beginning to sell properties in Macau to keep their books in order. Macau's junket industry, which accounted for nearly $30 billion of the Chinese territory's $44 billion gambling in revenue last year, is itself bigger than every gambling hub except Macau and as a result will continue to be the main focus for the junkets. "We are still betting on the prospect of Macau gaming industry. Yes, there have been some setbacks in terms of the industry performance, but overall speaking, Macau will have to grow with the gaming industry, because the fact is, Macau is nothing without gambling," one junket operator named Wilson was cited by the China Economic Weekly as saying. However, to diversify away from Macau and Beijing’s scrutiny, many have been taking their VIP business to other Asian markets from Cambodia to the Philippines. Recent interim reports from the operators have reflected this increased level of business, though it has also come at a price. While commission in Macau is just 1.25 percent, in Cambodia and the Philippines it's as high as 1.7 percent. Both NagaCorp and Australia’s Echo Entertainment recently warned that the cost of bringing in the VIP business had squeezed margins. “The downturn in Macau offers the group further opportunities to further penetrate the Chinese gaming market in both the VIP and mass gaming segments, by being able to offer attractive commercial terms to junket operators and agents as a result of our low-cost structure,” NagaCorp said in a statement when announcing its 2014 financial results in early February. As a result, the group reported a 41 percent increase in total VIP GGR to $188 million. However, its profit margin from the VIP business declined from 40 percent to 37 percent in 2014, largely due to incentives paid to junkets. Echo reported international VIP rebate business turnover surged 97 percent to a record $23.2 billion. The group said that junkets accounted for 84 percent of turnover in its high roller business in H1, 2015, up from 66 percent the prior year, with commissions rising to 0.84 percent of turnover. CEO Matt Bekier told investors on a conference call that the increasing junket presence “has implications for margins, which are under pressure.” He said Australia was favored by the junkets because of the relatively low tax rate at around 10 percent, compared with 40 percent in Macau.  

MGM Q4 results miss forecasts, MGM China to pay special dividend

MGM Resorts International posted worse-than-expected Q4 results as Macau revenue fell, but said its MGM China unit will pay a special dividend. The company reported...

Macau sheds 1,000 VIP jobs since July

At least 1,000 staff of VIP gaming rooms have been laid off since July as a result of China’s anti-graft tactics that have sparked...

Casino companies join push to diversify Macau

Macau’s six licensed casino operators appear to be to jumping on the bandwagon to help China diversify the gaming hub’s economy towards entertainment pursuits...

Macau Economic Association’s Chang says industry heyday over

The best years of Macau’s gambling industry are over as China’s policies affect profits and player levels and the likelihood of the government allowing...
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