GGRAsia – Rules push Macau junkets to foreign players: scholars

Rules push Macau junkets to foreign players: scholars

Aug 23, 2023 Newsdesk Latest News, Macau, Top of the deck

Macau’s licensed VIP gaming promoters, or ‘junkets’, are facing challenges under the city’s more stringent regulatory framework for the sector and China’s “anti-gambling policies”. Sourcing more foreign players is a way for the Macau junkets to cope with the new reality, suggested local gaming scholar Ryan Ho Hong Wai, in comments to GGRAsia.

Mr Ho, of Macao Polytechnic University, contributed to a recently-published academic article in Gaming Law Review, on the current status of Macau’s junkets under the new law regulating their licensing terms and business practices, known as Law No.16/2022.

As of July 18, Macau had 36 registered gaming promoters, according to data from the city’s casino regulator, the Gaming Inspection and Coordination Bureau. At the start of 2018, there were 109.

Compared to Macau’s two-decade gaming concession regime in place following market liberalisation at the start of this century, the position of junkets – and their “marketing role in casinos” – during the 10-year concessions that began this January was likely to be “gradually curtailed to a level similar to, or even lower than, their counterparts in Nevada and Singapore,” suggested the Gaming Law Review article. It was co-written with Jenny Phillips, a scholar at Macau’s University of Saint Joseph.

The diminishing scale of the Macau junket sector is not only due to the city’s tightening of regulations on its gaming sector, but also China’s “anti-gambling policies” that run at odds with the junkets’ gambler-recruitment model, the writers suggested in the article.

“While seeking to maintain social and economic stability domestically, the recent amendment to China’s criminal law that penalises the organisation of cross-border gambling trips has broader global implications. The penalisation of junket trips has accentuated the irreversible divide between the national interest and the gambler recruitment model traditionally upheld by the junket community in Macau and across Asia,” Mr Ho and Ms Phillips wrote.

Macau junkets were also facing “market cannibalisation” in the local VIP play market, as their partnering gaming concessionaires are respectively expanding their in-house VIP programmes, the writers also suggested.

“Macau casinos typically offer premium players a rebate ranging from 0.7 percent to 1.1 percent of their rolling chip purchase, alongside other complimentary privileges,” the scholars noted in the article.

The authors added: “… junket licensees are currently obligated to pay a 5 percent tax on their rolling chip commissions with no exemptions. The reintroduction of the 5 percent commission tax on gaming promoters could be interpreted as a sign that Macau is attempting to discourage the expansion of the junket business.”

The Macau government had not planned to offer any relief on the burden of the 5-percent withholding levy on commissions paid by casinos to junkets, despite lobbying from the sector, veteran local junket boss U Io Hung, told GGRAsia in a May interview.

The scholars concluded in the article that Macau junkets would probably need to look beyond the Greater China market for their customers.

“Macau and the six [gaming] concessionaires are currently pitching the international gaming market to complement the local casino market. By leveraging the networks of junket promoters and their associates, concessionaires can effectively reach a diverse range of foreign patrons and expand their business opportunities beyond the Greater China region,” Mr Ho and Ms Phillips wrote.

Mr Ho additionally remarked to GGRAsia: “Sourcing and financing foreigner [players] will be junkets’ alternative way toward survival, given the anti-gambling measures in China.”

The recovery of the tradtional Macau junket segment was “limited by lower profitability as revenue sharing is banned,” observed a recent note from brokerage Morgan Stanley Asia Ltd, on the earnings outook for the city’s casinos amid China’s macro-economic challenges.