Senior management from Las Vegas Sands Corp is meeting in Macau on Monday and Tuesday with representatives from the local casino junket industry to discuss the latters’ future role in the Macau gaming sector.
Rob Goldstein, president and chief operating officer of Las Vegas Sands and also interim president and executive director of the local unit Sands China Ltd, gave the news during the JP Morgan Gaming, Lodging, Restaurant and Leisure Management Access Forum in the United States last week.
Mr Goldstein told the audience that Macau remained “the greatest gaming market in the world – and will be forever, in my mind”. That was despite the changed political mood in China with a reported tightening of compliance procedures across the Chinese economy and crackdown on conspicuous spending.
But the executive added that while his company was keen to continue working with the junkets, they would need to be clear about conforming to what Chinese Premier Li Keqiang has referred to as the “new normal”.
“We believe there is a place for junkets… I don’t believe it will be as nearly as important as it’s been…but they remain a part of the overall composition of Macau revenue and EBITDA [earnings before interest, taxation, depreciation and amortisation],” said Mr Goldstein.
“Can they make it work in this environment which for them been very challenging? We are having those conversations on Monday and Tuesday.”
He added: “We have built capacity for them. The magnificent suites and the amenties this [VIP] customer wants.
“Our biggest concern is regulatory. We are big believers in the regulatory process. We embrace it. We believe that is the path of the future. So we want to be the industry leaders in regulatory compliance. If the junkets can agree to that and be transparent and do all the things that we do, we will embrace them and work with them.”
In October, an industry source close to Sands China told GGRAsia that the Macau operator was barring a local industry practice of allowing junket operators to take proxy telephone bets in some Macau casinos on behalf of VIP customers. The source said it was “a continuation of Las Vegas Sands and Sands China expanding their leadership role on compliance-related matters in general”.
Experts in casino industry compliance practices have told GGRAsia that such proxy betting potentially undermines a key protocol of anti-money laundering procedures, which is ‘know your customer’.
But such compliance in Macau could come at a cost to casino operators’ top line, and potentially to the bottom line. A note from Daiwa Securities Group Inc on February 26 claimed the proxy business market wide in Macau was worth an estimated 8 percent of annual VIP chip turnover, and that barring the practice has had an impact on VIP market share.
VIP customers missed
Commenting on the general decline in VIP gambling in Macau and of high stakes mass market play known as premium mass, the Las Vegas Sands executive Mr Goldstein stated: “Would we like to see a return of VIP and premium mass? Of course we would – it benefits everyone including us. But we can live very comfortably in our mass segment and make a whole lot of money.”
The executive hinted that included protecting the payment of dividends to investors.
He added during the investor event that in the Macau mass market, margins remained strong at “40-plus percent”, although the firm was looking to run the Macau business “more judiciously” in the circumstances of the downturn.
Continuing the compliance theme, Mr Goldstein stated: “The [ground] rules have changed, and the junkets have to adhere to this new philosophy. We have heard nothing from the Macau government or Beijing [to suggest] that junkets are persona non-grata. We have heard that practices that are not transparent, are off the table.”
The executive suggested: “You can play this [industry] game two ways, but the only smart way to play it is completely to embrace the compliance issue and run with it.”
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Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China