Devil lurks in the details of rules capping VIP junket commissions
Macau this week officially capped junket commissions at 1.25 per cent of VIP chip sales, effective immediately, and casinos have until Thursday to turn in amended junket contracts to the gaming regulator.
Seventeen long months since it was first floated by (now outgoing) Chief Executive Edmund Ho Hau-wah, the cap would appear - finally - to be a done deal.
There's only one little problem. The government is capping commissions paid on VIP chip sales, but most casinos in Macau don't pay their junket agents a commission on VIP chip sales. Instead, the majority of casino operators pay junkets a share of gaming revenue, or net winnings from VIP gaming.
The old 'forty-forty-twenty' model is the most frequently cited example of such revenue-sharing agreements: the casino pays 40 per cent of winnings as tax, pays another 40 per cent as junket commission and keeps 20 per cent for itself.
So, for the cap to be relevant to the majority of casinos, the government needs to work out the details of how the 1.25 per cent cap on gross VIP chip turnover translates into compensation agreements based on sharing net revenue.
Doing so will require the government to specify a win rate, or the percentage of VIP wagers that a casino expects to win back.
That's where things get tricky.
Macau's major casinos have reported significant variance in their VIP win rates over the past 18 months (see chart).
In theory, the statistical win rate on VIP baccarat should be around 2.65 per cent if a player bets only 'player' or 'banker', but this edges upwards as 'tie' bets (which are more heavily weighted towards the house) are factored in.
So the current consensus in Macau is that the 'observed' or 'experienced' win rate is something around 2.85 per cent. Indeed, the simple average win rate among the six casinos in our chart comes to 2.85 per cent.
But then again, part of the variance in win rate from one property to the next is down to the fact that not all companies use the same methodology to tally their win rates.
The devil is in the details, as they say. As a result, successfully implementing and enforcing the cap on junket commissions is still not a sure bet.