Macau to See 80% Drop in Tax Revenue as Junkets Exit

Posted on: January 4, 2022, 06:21h. 

Last updated on: January 4, 2022, 08:41h.

With casino junkets possibly looking at the end of their run in Macau, the revenue they once provided will be dramatically reduced. The government anticipates an almost 80% loss from the segment in fiscal year 2022.

Galaxy Macau
The Galaxy Macau casino in Macau, one of several that is severing ties with junkets. The breakup could cost the city as much as 80% in tax revenue from the junket segment (Image: Asia Times)

Junkets have been a regular part of Macau’s gambling industry for years, but that abruptly changed late last year. There had already been talk of junkets losing favor last year. The legal debacle surrounding former Suncity boss Alvin Chau accelerated the issue.

Analysts predicted that the loss of the junkets would impact the city more than casinos, and that assertion has been confirmed. When Macau’s Financial Services Bureau (FSB) published the new budget plan for fiscal year 2022, it spelled out how much that impact will be.

The FSB’s report shows that the city will pick up around MOP43 million (US$5.35 million) in tax revenue from the money casinos pay to junkets through commissions. That amounts to 79.5% less than it estimates will have been collected when the final numbers for fiscal year 2021 are provided.

Macau has constantly revised its budget figures the past couple of years, thanks to COVID-19. For 2020, casino revenue plummeted as the gambling properties were shuttered for months at a time. By the end of that fiscal year, the city had lost millions in tax revenue from gambling.

It also took in just MOP66.54 million (US$8.27 million) in tax revenue from the junket commissions. This was 68% lower than what it had projected at the start of the 2020 fiscal year.

More Losses Could be Coming

Junket operations in Macau have been slipping for years. In 2013, there were 235 licensed junkets. This dropped to around 100 in 2019. By the beginning of 2021, there were only 85.

In December, that number dropped more after casino operators acknowledged they were breaking up with the VIP promoters. Galaxy, Melco, MGM, Sands, SJM and Wynn have all seen a future that doesn’t rely so much on junkets.

In spite of the shift in attention, Macau’s gaming industry isn’t expected to be turned upside down. Casino operators were already prepared to deal with a reduction in junket-driven VIP activity in favor of mass market gaming. It’s also possible that the junkets will continue to feed gamblers to Macau, but under a different business model.

A Rebirth of Junkets Could Emerge

Edmund Loi Hoi Ngan, associate professor of the Social, Economic and Public Policy Research Centre of Macao Polytechnic Institute, sees junkets sticking around. He believes that the pressure being placed on junkets will allow them to reemerge as “travel agencies,” according to Inside Asian Gaming. This is also more beneficial to the Macau economy.

The IRs are here already and as long as the clients are not organized to come (by operators or promoters), it is a normal operation. This way, the line is drawn so that everyone is clearer,” said Edmund Loi.

By changing how the junkets operate, Macau’s gaming operators can show the city (and, in turn, China) that it is addressing concerns about capital movement. Loi expects that the industry will reduce its reliance on VIPs and increase non-gaming components. This will also appease government officials.

He adds, “Countries like Singapore, Thailand, Malaysia, South Korea, and Japan are not opposed to cross-border gambling. The ways for junkets are not completely blocked, as long as they stay away from mainland China. I think the bottom line is very clear.”

Loi is also optimistic that Macau will rebound in 2022. The city added 44% to its 2020 revenue figures in 2021, and this year could bring more. He calls the Macau gaming market the “most promising.” He explains, “The reason I’m optimistic about Macau is because I cannot find any better place.”