Macau casinos cut out middlemen and recruit gamblers directly from mainland China

Macau's gambling riches sparked bloody gun fights between triad gangsters two decades ago. Today, there's a new conflict brewing, only this time it's being waged with private jets, limousines and loans of up to US$1 million.

The latest battle pits casinos against their long-time allies, so-called junket operators that for years have recruited rich gamblers from the mainland, whisked them to Macau and given them interest-free loans to circumvent limits on cash they can take out of the mainland. Now companies such as Sheldon Adelson's Sands China offer the same services, aiming to cut out the middlemen. At stake are profits from the world's biggest gambling market with US$45.2 billion in revenue last year - almost seven times the size of the Las Vegas Strip's gaming earnings.

"Direct VIPs give us considerably higher profit margins," said Grant Bowie, MGM China Holdings CEO.

A casino can make up to 15 per cent more from big-betting mainland players if it hosts them itself, instead of paying junkets to do the same job in exclusive VIP rooms the casino leases to them, said Karen Tang, an analyst at Deutsche Bank in Hong Kong. Others analysts said the potential earnings may be up to 50 per cent more.

Junket operators, led by Suncity Group and Jimei Group, have a steady grip on the industry. But some are feeling the pressure. "We are being squeezed," said Yu Yio Hung, who operates a single VIP room at Altira casino.

Big-spending gamblers, known as VIPs, account for about two-thirds of Macau's casino revenue. The majority of them are mainlanders who bet on credit because of the country's cash regulations. The laws restrict to 20,000 yuan (HK$25,256) the amount a citizen may take across the border, and a maximum of 10,000 yuan from a cash machine in a day.