The outlook for Macau’s VIP gambling segment remains clouded for the remainder of the fourth quarter, and market consolidation regarding some local smaller-scale junket operators is likely to continue. That is according to Kwok Chi Chung, president of the Macau Association of Gaming and Entertainment Promoters, in comments to GGRAsia.
The association is a trade body for the middlemen that bring to Macau’s licensed casinos many of the city’s highest-rolling gambling customers.
Mr Kwok told us he was “not optimistic” about the prospect for the city’s monthly VIP gross gaming revenue (GGR) in the final quarter of this year, and expected the trend of year-on-year decline to continue. Persisting United States-China trade-war tensions - affecting gamblers’ appetite for Macau trips – was cited as a key reason.
In the third quarter, Macau’s market-wide VIP gross gaming revenue (GGR) declined by 22.5 percent year-on-year to MOP31.09 billion (US$3.85 billion), according to official data. VIP baccarat revenue as a proportion of all casino GGR in the third quarter stood at 43.9 percent. In the preceding period, i.e. second quarter, it had been 47.2 percent.
“People are still pretty reserved in their [gaming] spending. And what the [junket] sector faces now is that the collection of [gaming] debt is difficult, and operators are also having fewer clients,” Mr Kwok remarked to us.
Regarding market consolidation, the trade representative told us some “small- and medium-sized junkets may close”. But he added the situation was “not as serious as what had happened during 2014 to 2015”. At that time a widely-reported anti-corruption drive in mainland China coincided with a significant fall in demand for Macau casino services, particularly at the higher end of the market.
That GGR slump was recorded in the city’s official data as taking effect from circa June 2014 and lasting for about two years. During that time, some local junket firms either scaled down their operations in the city or reduced the number of VIP rooms they operated in the Macau market. A few shut down their business.
Mr Kwok noted to us that since that extended downturn, junket firms had become more prudent in operations terms. A number had managed either to shift some operations “overseas”, or had “sought collaboration with the bigger junkets [in Macau] to co-run a gaming venue.”
‘Stabilising’: Suncity’s Chau
The trade representative added, “This trend is likely to continue.”
Alvin Chau Cheok Wa, the boss of privately-held Macau junket investor Suncity Group, was reported as saying by several local media outlets a week ago that the Macau VIP gaming sector appeared to be “stabilising” at the moment.
“For the VIP gaming industry, there’s not much room for them to further expand their scale [in Macau]. They are stabilising. And the industry does not see a further downward trend,” Mr Chau remarked, in comments aired by the Chinese-language television service of local public broadcaster TDM.
The total number of licensed junkets in Macau – either entities or individuals – fell from 109 in January 2018, to 100 this year, according to data released in January by the local regulator. The latter figure marked the sixth consecutive year of decline in the number of licensed junkets in the local market, according to figures released by the gaming regulator. Such licences are issued on an annual basis.
Mr Kwok said that it was difficult to predict a tally for licensed junkets as of January next year. The junket-licensing process could be impacted by the Macau Special Administrative Region’s change of administration, and a previously-flagged overhaul of the city’s gaming law.
The city’s Chief Executive-designate, Ho Iat Seng, is to take office next month. Mr Ho has on several occasions emphasised amendment of the gaming law framework would be one of the key tasks to be addressed by the new administration.
The Macau authorities’ consultation with the junket sector had flagged “for quite some time” that the “threshold for becoming a [licensed] junket is going to be raised,” Mr Kwok added. He was referring to fresh regulation of Macau’s junket sector, said to be currently at the draft stage.
“As to whether this new regulation only applies to the newcomers in the [junket] sector; this remains a key issue that we are closely observing. We are still waiting for more government guidance on the subject, and how we can adapt to the new rules,” Mr Kwok told us.
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”We believe the positive stance from China towards Macau would help market sentiment in the near term despite limited short term benefit to the [casino] gross gaming revenue”
Kenneth Fong, Lok Kan Chan and Rebecca Law
Analysts at Credit Suisse