Junket operators restrictions force more of these companies to drive VIP and high roller players to Macao exclusively at the behest of Beijing. This could be the essence of the administrative region’s recovery.
Tougher Stance on China’s Junkets Could Mean Higher Revenue for Macao
Macao was the first gaming hub in the world to come to a grinding halt back in February, but now it may be the first to achieve a full recovery, although forecasts remain bleak for the foreseeable future.
Yet, according to an article published by Rich Duprey in The Motley Fool, there is much to be upbeat about. Revenue in October was down only 72% year-over-year, a chilling number that was nevertheless better than the 90-per cent-or-worse slump registered on each of the six months prior.
Las Vegas Sands, Melco Resort & Entertainment and Wynn Resorts were all looking at results with anticipation, knowing that recovery was probably starting, however slow.
Now, Macao is pinning its hopes on the government in Beijing which has begun cracking down on junket operators, forcing their hand to send VIP customers back to Macao instead of any of the other available gambling venues across Southeast Asia.
Beijing’s new stance is simple. If you are a junket operator, you want to make sure you are sending gamblers down to Macao, and not somewhere else. Wrongdoers would face severe, albeit unspecified penalties, Duprey writes.
China Wishes to Stem Gambling Cash Outflow
He is correct, as China has been fighting gambling capital outflow for years now, stepping the country’s regulatory efforts in September and hoping to stem what is close to $150 billion in gambling funds going to foreign operators.
China has shown little compromise towards parties who have been actively trying to lure individuals away from its neighboring Macao, a special administrative region under Chinese rule, more or less.
Back in 2016, 18 Crown Resorts employees were arrested on charges that they had been trying to tempt VIP customers into visiting the company’s Australian casinos and play there. They now face up to 10 years in jail. The whole scandal is part of much bigger fallout for Crown Resorts.
China has been actively seeking to prevent people from leaving the country on gambling trips, some of which have resulted in Chinese nationals being kidnapped.
China’s Ministry of Public Security announced in October that it is rolling out a new “blacklist system” of destinations travellers would not be allowed to for fears they might be going there to gamble.
Junket Operators, Do-Gooders in Macao
The goal of a junket operator is simple. Cater to the tastes of high rollers and fly them in a gambling hub so they can shed hundreds of thousands of any available currency, and you can collect a commission fee. Yet, the number of junket operators has been falling. It went from 235 in 2013, Duprey said, down to 95 in 2019.
The numbers are likely to get slimmer still, as Beijing is enforcing a policy of no compromise with a clear focus on the domestic market instead.
Forcible collaboration between junket operators and Macao’s gaming giants has been paying off with the Cotai strip shaping up nicely, powered up by the inflow of VIPs, and even tourists, made possible by this forced matched.
Macao is also on an interesting crossroad right now. VIP customers may be an important part of the recovery in the short-term, but the long-term success will depend on building sustainable models, such as developing tourism, and banking on mass gaming.