A reduction in the number of Macau VIP agents – the people that recruit the high roller players in mainland China and beyond, and crucially make it their business to know how much the players are worth and what they have in assets – may boost their bargaining power with the VIP gaming promoters, says the annual report of Iao Kun Group Holding Co Ltd, one of the smaller investors in Macau gaming promoters.
The promoters are the people licensed by the Macau government to run the VIP rooms. They also extend credit to players, collect on losses and provide accommodation and other entertainment for the gamblers when in Macau.
Recent investment analyst reports have focused on closures of Macau VIP rooms and consolidation among VIP promoters, rather than what is a happening among the foot soldiers – the VIP agents that actually bring the players through the door.
But Iao Kun said in its annual report filed with Nasdaq on Tuesday: “Over the past several years, the Macau gaming industry has experienced a consolidation of junket agents. Although there is uncertainty as to whether such consolidation will become a trend in Macau, any consolidation in the Macau gaming market may provide junket agents with significant leverage and bargaining power, which could result in higher commissions paid to the junket agents, the loss of business to a competitor or the loss of our relationships with our junket agents.”
The gaming promoter investor added: “There have been recent instances of higher commission paid by other gaming promoters to junket agents in Macau. If we need to increase agent commission rates, our profits would be negatively affected.”
Carlos Siu Lam, associate professor at the Gaming Teaching and Research Centre at Macao Polytechnic Institute, gave an insight into the world of Macau junket agents during a conference in August at Macao Polytechnic Institute. He said it was from research based on face-to-face interviews with some of the agents.
“One interviewee said that nowadays young local [Macau] people do not want to be junket operators or representatives because of their ‘miserable’ working conditions. Junket operators do not have fringe benefits, they don’t have medical benefits – they have nothing at all. And they strictly follow the principle of ‘no prey, no pay’. In other words they need to look for ‘prey’ [new players] in order to get paid,” said Mr Siu.
On April 1 Iao Kun reported a full year 2014 loss of US$60.1 million on net income, largely on a change in fair value on three high roller rooms acquired during the period.
The company estimates rolling chip turnover for its five existing VIP rooms in Macau for calendar year 2015 will be between US$8.5 billion and US$10.0 billion.
James Preissler, mentioned in Tuesday’s filing as a director of Iao Kun, is also chief financial officer of an OTC Markets Group exchange-listed firm called Macau Resources Group Ltd which is involved in a plan to build two beachside casino resorts in the Philippines.
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"The MSAR [Macau Special Administrative Region] Government is always maintaining its policy not to have imported labour to work as dealers. This position has not changed"
Lionel Leong Vai Tac
Macau’s Secretary for Economy and Finance