Las Vegas Sands raises the commission stakes
In an aggressive push into Macau's lucrative high-roller market, the Las Vegas Sands casino has raised the commissions paid to local gambling-junket operators to unprecedented levels, according to industry sources.
The move will sharpen competition in the sector and threatens to unsettle rival casino operators, including former gaming monopolist Stanley Ho Hung-sun, who has said that such a step would mean 'war'.
Junkets are responsible for bringing most high rollers to a market where VIP baccarat alone accounts for about 70 per cent of all gaming revenue.
In exchange for their services, junket operators receive a commission from the casinos that traditionally amounts to less than 1 per cent of turnover of VIP gaming chips.
Of Macau's three casino operators, Mr Ho's Sociedade de Jogos de Macau gives junkets a commission ranging between 0.5 per cent and 1.1 per cent. Both Galaxy and Sands generally paid more but until now capped commissions at 1.1 per cent.
However, the Sands recently raised its commissions and now pays as much as 1.3 per cent, according to a source familiar with the situation.
VIP chip turnover at the Sands doubled between the first and second quarter to US$2 billion. Last month, VIP chip volume rose to US$930 million, 40 per cent more than the monthly average during the second quarter.
'We are doing this ... by offering competitive commission rates as we build our commissioned-representative network [in Macau],' Las Vegas Sands Corp chief operating officer William Weidner said earlier this month.
'In fact, we brought on more reps in the second quarter and we are seeing a ramp-up continue this summer.'
After the Sands opened in May last year, Mr Ho warned against major increases in junket commissions.
'As long as our competitors do not offer commissions much higher than the normal rate, then we do not mind,' he told Macau Business magazine.
'But if, in an unfriendly way, they increase their commission to double what we offer or something like that and try to get our customers, it will mean war. And we will have to fight. And I warn ... once we fight, it will be very bad for Macau.'
But while the Sands may be taking existing business away from rivals, it is also credited with attracting new customers.
'[That includes] affluent gamblers from South Korea, Thailand and Malaysia [who] would have traditionally gone to other gaming markets such as Las Vegas or Melbourne,' CLSA Asia-Pacific Markets analyst Aaron Fischer said.
Macau's junkets have operated in grey areas of the law for decades and have acquired reputations for loan sharking, money laundering and links to organised crime.
The Gaming Inspection and Co-ordination Bureau is now formally licensing all the territory's junkets and has so far handed out licences to 60 of 88 applicants, according to a spokesperson.