Macau Tells Junkets to Cease Loaning Gaming Funds to VIP Clients
Posted on: December 7, 2021, 10:49h.
Last updated on: December 7, 2021, 12:42h.
Macau’s casino junket industry — the world’s largest — could soon be a thing of the past. That’s after reports surfaced this week that the enclave has ordered gaming promoters to stop loaning money to their VIP clientele.
Macau’s Gaming Inspection and Coordination Bureau (DICJ) has reportedly told junket groups that they cannot continue to loan their customers money to gamble with while they are in the casino town. Brokerage Bernstein broke the news that the gaming regulatory agency is greatly cracking down on junket operations throughout the Chinese Special Administrative Region (SAR).
The six commercial casino operators — Sands, MGM, Wynn, Melco, Galaxy, and SJM — began shutting down their private VIP gaming rooms that were used by such junkets following the arrest late last month of Suncity Group founder, chairman and CEO Alvin Chau. Suncity has long been one of the largest junket groups in Macau and throughout Asia.
End of Junkets
Macau’s six casino licensees are set to see their gaming privileges expire next June. The Chinese SAR is currently amid a comprehensive review of all regulatory aspects of its global-leading gaming industry.
Junkets have become enemy No. 1 of the industry reassessment. Prompted by China President Xi Jinping, there are great concerns regarding how junkets assist mainlanders in moving vast amounts of their money from the People’s Republic to the tax haven that is Macau. Xi says the capital outflows to the casino hub are a risk to national security.
Junket customers typically purchase an exorbitant VIP trip to Macau from a junket on the mainland that includes first-class luxurious travel and accommodations. The mainland travel package says nothing about gambling. But when the client arrives in Macau, they are typically offered a line of credit that mirrors the trip purchase price.
The DICJ, according to Bernstein, has directed such junkets to suspend the credit component. That is the main function of the junket enterprises, meaning the days of VIP groups ushering in China’s wealthiest gamblers to Macau could be numbered.
“If this is true, the junkets will have to operate as a travel agency, through activities such as receiving fees for bringing rich clients to casino operators, rather than receiving commissions from VIP gaming rooms, which has been the main business model for years,” explained Carlos Lobo, a Macau gaming consultant.
Macau casinos haven’t expressed an abundance of concern over the strong possibility of junkets no longer being part of the industry in 2022 and beyond. MGM’s chief financial officer says junkets actually did little for the company’s bottom line in the region, and the premium mass-market customer is today the most coveted consumer.
Despite the regulatory chaos surrounding junkets, Bernstein says there’s been a noticeable improvement in gaming revenue in the first week of December. A note from the brokerage explains that gross gaming revenue (GGR) in December is up around 20 percent from the weekly average experienced in November.
The GGR bump comes as a result of less restrictive border crossings for mainlanders in and out of Macau.
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