Macau Junket Operations Continue Declining, Only 100 VIP Groups Remain

The number of Macau junket operators continues to decline, as fewer VIP players from the mainland travel to the world's richest gambling hub.

Studio City is phasing out its VIP room, as Macau junket businesses keep closing. (Image: Philippe Lopez/Getty)

According to data supplied by the Macau Gaming and Inspection Coordination Bureau (DICJ), there are currently 100 junket groups. That's down more than eight percent.

Six years ago this month, the DICJ reported there were 235 licensed junket companies.

The vast reduction comes as a result of Chinese President Xi Jinping including junket groups in his 2013 anti-corruption campaign. The People's Republic leader viewed the touring schemes as convenient ways for the mainland's wealthiest individuals to move their money to the enclave, which is a tax haven.

Xi's clampdown plummeted gross gambling revenues (GGR) by 38 percent between 2013 and 2016. Casino operators have since refocused to the mass general public customer and diversified their multibillion-dollar properties to make Macau appealing to a wider demographic.

GGR has rebounded the last two years, with casino win totaling $37.8 billion in 2018. VIP play accounted for nearly 55 percent.

How Junkets Work

Outside of China's wealthiest citizens who have used junkets to travel to Macau, many are largely unfamiliar with how such operations function. Here's how they do:

Junkets essentially serve as facilitators for Macau's six licensed casino companies – Las Vegas Sands, MGM Resorts, Galaxy Entertainment, Melco Resorts, Wynn Resorts, and SJM Holdings. Potential gamblers are lured to the enclave with free accommodation and private airfare. Junkets then loan the customers nearly limitless amounts of credit to gamble.

Junket agents are responsible for targeting high rollers with proven credit histories. In exchange, the casinos give the travel organizers commissions. It's typically been 1.25 percent of the win the casino made off the patron.

Mass VIP Decline

Though casinos still win the majority of their gaming money in private VIP rooms, the mass market continues to fuel the enclave's financial rebound. And that's good for business, as margins are generally four times higher on the general public player.

Billionaire Lawrence Ho – the founder and CEO of Melco – is so bullish on the general public that he announced earlier this month that all VIP operations will be phased out at Studio City by 2020.

The Hollywood-themed integrated casino resort opened in 2015. It's Melco's second property on the Cotai Strip after City of Dreams, which commenced operations in 2009.

Analysts don't feel Ho is truly ready to fold on high roller play. Instead, they predict the 46 VIP licensed tables will be moved to City of Dreams – and potentially the resort's new Morpheus tower, which opened last summer. The ultra-luxury $1.1 billion hotel tower features 772 five-star rooms.

The DICJ regulates the number of table games throughout the enclave. When Ho opened Morpheus, the agency said no additional tables would be allocated in 2018.

Macau law mandates that the number of table game permits can only increase at a rate of three percent every 10 years. There were 6,588 tables taking wagers last year.

Earlier this month, the DICJ approved 25 mass market tables for MGM, and 50 for Melco.

The post Macau Junket Operations Continue Declining, Only 100 VIP Groups Remain appeared first on Casino.org.

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