Possibly only a “couple” of Macau’s VIP gaming promoters or ‘junkets’ will be left in the local market in future, as the sector continues to face significant headwinds not only from the impact of the Covid-19 pandemic on travel and tourism, but also because of the Chinese central authorities’ concern about gambling activities outside the country’s borders, an industry insider has told GGRAsia.
There is a variety of opinion among scholars and legal experts about whether China’s criminalisation of anyone assisting “cross-border gambling”, that came into effect on March 1, is meant to cover gambling in Macau, a special administrative region of China.
But experts suggested to GGRAsia that in the absence of clarity on that point, junkets and players were being conservative in their approach, and that was putting a chill on the operation of the whole VIP sector.
Kwok Chi Chung, president of a junket trade body, the Macau Association of Gaming and Entertainment Promoters, said it was “impossible” for Macau’s VIP gaming sector to return to pre-Covid 19 levels of business. That was because of the pandemic’s disruption to mainland China’s outbound tourist visa system, and constraints on money flow out of the mainland, as well as the country’s latest criminal code changes, he added.
“In fact, I will not be surprised if there are only a couple of major junket firms left standing in the market in the future,” Mr Kwok remarked to GGRAsia. “Is Macau’s VIP gaming sector on the wane? It is likely.”
Veteran junket investor Luiz Lam believed that Macau’s junket sector has been facing “unfriendly policies”– namely more regulatory pressure – that aimed to lower the significance of the sector.
Macau’s current VIP gambling sector, which involves 85 licensed gaming promoters, had “77 gaming rooms” and “1,566 gaming tables”, Macau’s Secretary for Economy and Finance, Lei Wai Nong, told legislators in late January.
Mr Lam said there was what he termed a public-policy “mindset” that “as mainland Chinese gamblers lost so much money here, this gave rise to various social and criminal problems”.
To “solve these problems,” the thinking seemed to be it was “best to lower the proportion of VIP gaming earnings in the city’s overall gaming income”, Mr Lam said.
But Mr Lam did not think Macau’s junkets would “vanish”, given their “unique” and “irreplaceable” role in the city’s gaming scene.
Many jurisdictions around the world do not recognise gambling debts as enforceable. It is useful therefore, for the casino sector to have a “resourceful” third-party promoter that can handle the issuance of credit, and collection of debts on losses, indicated Mr Lam.
“Casino operators still want VIP junket partners to play these roles,” he said.
“Apparently, [Macau] casino operators understood [took the view] the government wants to have more emphasis on mass gaming. And, indeed, the margin for mass gaming is higher compared to junket play,” Mr Lam added.
“But, when you look at the success of the likes of Galaxy Macau, City of Dreams Macau or Wynn Macau – they have all been helped by VIP gaming,” he added.
The fresh regulatory question marks linked to China’s new legal code might mean Macau junkets could be “struggling for at least three to five years to come,” suggested Mr Lam.
Gaming law expert António Lobo Vilela suggested in a recent article published in Gaming Law Review, that a pending Macau court case could “reshape forever the relationship between casino operators and gaming promoters” in Macau. The case refers to whether a local casino licensee can be held liable for refunding to the public cash deposits lodged with one of the city’s junket operators.
Macau’s major junket firms have been tapping the mass-gaming segment as a hedge against the downturn in the VIP segment, according to Mr Lam and several other junket industry sources. Some of Macau’s major junket operators have in recent years run mass-gaming zones within some so-called satellite casino properties in Macau. The latter derive their gaming rights from one of the Macau casino licensees via what is known as a service agreement.
In 2017, a WeChat account attributed to junket brand David Group, said the latter was to run gaming at the Macau Roosevelt Hotel, Taipa.
Shortly afterwards, Ambrose So Shu Fai, chief executive of SJM Holdings – the firm that supplies the gaming licence for Macau Roosevelt – told GGRAsia David Group was in fact in charge of providing only marketing services and introducing gaming patrons to the gaming venue, under what he termed a “commercial agreement”.
In October that year, David Group said it was ceasing a VIP gaming facility it had at the Macau Roosevelt Hotel.
Nonetheless, Mr Lam suggested to GGRAsia that running mass gaming in satellite properties was “a way that these junket firms have sought to hedge the business risks [of VIP gaming], and give themselves a bit of breathing space”.
Some junket operators have also started to run their business in “mass gaming style”, Mr Lam suggested.
He explained: “It’s basically the reducing of business generated by gaming credit-supported play, in other words, avoiding lending money to players.”
Mr Lam also noted that some junket operators have sought to structure their reward offers – which can include either discounts on food and drink at casinos, or transport arrangements – to be “highly customised” for their gaming patrons, and rival those offered by casino operators.
Major Macau junket firms had also been diversifying either as integrated resort operators overseas, or making investment in tourism-related infrastructure in the city, observed respectively Mr Kwok and Mr Lam.
The most recent publicised case in Macau is the purchase of substantial interest in Hong Kong-listed Macau Legend Development Ltd by junket firm Tak Chun Group’s boss, Levo Chan Weng Lin.
Macau Legend controls and operates the waterfront gaming and leisure complex, Macau Fisherman’s Wharf, in Macau peninsula. Gaming there is via SJM Holdings’ licence.
“The client source for the VIP gaming sector will thin out some day. So expanding business into a different dimension is a right thing to do,” remarked Mr Kwok, referring to the Tak Chun boss’s investment in Macau Legend and its flagship tourism property.
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Aggregate number of licensed junkets in Macau as of January 2022