While Macau’s casino market has well and truly rebounded from the 2014-16 economic slump, the junket industry, once the oil in its cogs, continues to decline.
According to new figures from the enclave’s gambling regulator, DICJ, there are currently 109 licensed junkets operating in the market, representing a 13.5 percent fall from 126 a year ago. The industry has now shrunk year-on-year for five consecutive years. In 2013, the year the casino market was at an all-time peak, there were 235 operators.
Macau’s slump was largely attributable to Chinese President Xi Jinping’s anti-corruption drive, which sought to prevent capital flight by stemming the flow of high rollers from the mainland to Macau.
“Broken” Junket Model
Beijing put the squeeze on the junkets, which organize trips for wealthy VIPs while lending them gambling cash to circumvent restrictions on the movement of the money from the mainland.
Suddenly bereft of the VIPs that once accounted for some 60 percent of its revenues, the casino market has undergone a period of adaption and readjustment, pivoting towards the mass market segment.
In September 2015, president and COO of Las Vegas Sands Corp, Rob Goldstein, declared the junket business model to be “broken.”
But while the VIP segment has been rebounding in Macau, experts say the junket industry isn’t likely to grow in the coming year, but it isn’t likely to continue to shrink either.
“Some of the junkets are simply not fitting the [licence] renewal conditions; while some others just give up,” president of Macau’s Association of Gaming and Entertainment Promoters Kwok Chi Chung told GGRAsia of operators who had recently folded.
While the major junket operators here have been expanding their operation venues, those smaller ones that have not been able to meet the turnover requirement were just naturally kicked out from the market.”
“Even if we are seeing a further decrease, it will not be to a great extent,” he added. “The consolidation amongst the junkets here has already largely stabilised.”
No Room for Start-Ups
The junket industry has been undergoing a period of consolidation, particularly in the face of tightened regulations, which means existing operators have now achieved the kind of scale that makes it nearly impossible for new companies to enter the market.
Speaking at an event organized by the British Business Association of Macao earlier this month, former Hong Kong police chief Steve Vickers said that the crackdown on junkets had ultimately been a good thing for the gambling hub because “it has helped cull a large number of unhelpful… junket operators with strong triad connections and this squeezed them out of the market.”