Casinos relying more on junkets
Macau's booming casinos are now more reliant on VIP gambling junkets and their high-rolling customers than at any point during the last six years, data released yesterday shows.
The city's 34 casinos booked a record 74 per cent of their gambling revenue from the high-stakes VIP segment in the second quarter, more than at any time since regulators began releasing quarterly data in 2005, according to Gaming Inspection and Co-ordination Bureau figures.
VIP baccarat revenue rose to 48.54 billion patacas in the April to June period, up 50 per cent from a year earlier. Mass-market revenue from public gaming tables rose a more modest 36.2 per cent to 17.07 billion patacas, while slot machine revenue rose 39 per cent to 2.83 billion patacas.
Macau's growing reliance on the high-volume, low-margin VIP segment means the success of casino operators - and of the city itself - is increasingly susceptible to liquidity trends on the mainland, as most high rollers are brought in by junket agents and gamble on credit.
The casino industry is Macau's biggest employer, and direct taxes on gaming accounted for 84 per cent of total government revenue in the first five months of the year.
The rising prominence of the VIP segment increases regulatory risk for Macau's six licensed casino operators, as outsized growth of high-stakes revenue means they are growing even more dependent on the loosely regulated junket agents.
Junkets are the middlemen who bring VIP players to casinos, issue them credit for gambling and collect their debts - often by resorting to extrajudicial measures in places like the mainland, where casino debt is not legally enforceable.
Analysts reckon junket agents are responsible for 90 per cent or more of Macau's VIP gaming revenues.
'It's very simple: the junket reps own Macau - period,' Sheldon Adelson, chairman of Las Vegas Sands and Sands China, told a group of investors in January.
In exchange for their services, and for shouldering credit risk, Macau's junket agents receive commissions from casino operators equal in some cases to more than 45 per cent of casino revenue. Much of this is passed on by junkets to players as a rebate on the amount gambled.
The taxman takes 38 to 39 per cent, leaving the operators with 15 per cent or less of VIP revenue to cover the cost of building and operating the casino.
Macau added 384 new gaming tables (an 8 per cent increase) in the second quarter, for a total of 5,237 units, following the addition of the HK$15.5 billion, 2,200-hotel-room Galaxy Macau casino resort on Cotai, which opened in May.
In order to rein in the runaway growth of the gaming industry, the government has said it will cap the number of casino tables in operation at 5,500 units until 2013.
Sands China plans to open its US$4.2 billion Cotai casino complex towards the end of this year or early next year.
Executives said last year the property, which will have 6,000 hotel rooms, including 3,000 in a new Sheraton, would open with 670 gaming tables.
Executives said at the time that about 400 of those tables would be new and the rest would either be traditional gaming tables relocated from its Venetian, Four Seasons or Sands casinos or electronic gaming tables, which are classified as slot machines.
But the government's table cap implies there is now room to add only 263 new gaming tables in Macau between now and 2013.