IAG December 2015 - page 8

inside
asiangaming
December2015
8
PHILIPPINEDREAM
Jimei pioneered casino ownership by junkets with Fontana, an
opportunity that followed theUSwithdrawal fromClarkAirForceBase
in 1991. Locatedabout 80kilometers (50miles)northwest ofManila,
Clarkand surroundingareasand totaling632 square kilometers (244
squaremiles), Clark once housed 15,000USmilitary personnel and
their families. The vast plot was divided into a Philippine military
facility, commercial Clark International Airport and Clark Freeport, a
special economic zone with duty free imports and 5% corporate tax
for qualifying investors, leveraging the airport as amagnet for cargo
andpassenger traffic.
In 1998, Fontana’s original investors acquired a 300hectare plot
including theUSbase’sofficerhousingarea, laidout likeanAmerican
suburb with extensive green areas, a stark contrast to urbanized
Manila or Macau, and just a 10 minute drive from the airport.
Conceived as amembership resort and securedwith gated, guarded
entrances, Fontana refurbished former military duplex homes and
built new villas, nearly 500 units in all, offered on an ownership or
timesharebasis.Pagcor, thePhilippinecasino regulatorandoperator,
granted Fontana a gaming license “to cater to foreign junket players
and certified club members” in 1999. As a leading Macau junket
promoter, Jimei was already doing businesswith Philippine casinos.
Fontana chose Jimei tooperate the casino, withPagcor’s consent, in
2004, the year the resort opened. Jimei eventually took control of the
leisurepark operation aswell.
Fontana has grown into Jimei’s flagship property, open to the
Cover Story
BeatingtheHouse
Casinos complain that junkets get the biggest
share of gaming profits. Junket promoters contend casinos and
the government hold the best hands.
Inside Asian Gaming
asked
UniversityofMacaugamingexpertRicardoSiu tosettle theargument.
Using conservative commission estimates IAG provided, Dr
Siu’s calculations found that junket promoters collect up to 65%
more of VIP revenue than casinos in four jurisdictions where junket
promoters are or hope to become casino owners. Casinos have
revenue streams beyond VIP play, but the numbers are striking
nevertheless.
DrSiufinds thecarping frombothsides inMacauunderstandable.
“Casinooperators and junket promotersmay complainbecausewhat
they each get here is less than their counterparts get in the other
jurisdictions,” the Associate Professor of Business Economics says.
“Theprimary reason is that inMacau, thegovernment shares a larger
portion.”Macau’sgaming taxandother levies reach40%.As tax rates
drop, casinos get more of the gain but
still trail junkets’ percentage.
Those numbers don’t tell the whole
story, junket investor and consultant
Tony Tong says. When junkets prosper,
operators react. “Junket promoters
complain that casinos change the rules,
especially outside Macau,” the founder
of Pacific Financial Services says. “They
raise rents and other charges if they see
junketsmaking a lot ofmoney. If they’re
jealous, they’ll try toget abigger pieceof
the revenue.” Junketsalso facehighcosts
for capital and debt collection issues.
Whathappenson thegamingfloor is the
easypartof the junket business.
DrRicardoSiu
,
UniversityofMacau
Whogetswhat?
Jurisdiction
Tax rate
Commission
Macau
39%
1.25%
Philippines
15%
(1)
1.40%
Vietnam
17%
(2)
1.50%
Saipan
0%
1.7%
(3)
(1) This rate for VIP.Mass rate is 27%
(2) From1 Jan2016 rate is 35%but commissions aredeductiblemaking
estimatedeffective rate17%
(3) Conservativeestimate
Assumptions
1.
VIPplay ispredominantly baccarat
2.
VIPplay utilizesdead chipprogram
3.
Houseadvantage is 2.9%of dead chip rolling (pair bet is available)
Macau
Saipan
Vietnam
Philippines
Junket
Casino
Casino Junket Government
Macau
16.9% 43.1% 40.0%
Philippines
36.7% 48.3% 15.0%
Vietnam
31.4% 51.7% 16.9%
Saipan
41.4% 58.6% 0.0%
Government
1,2,3,4,5,6,7 9,10,11,12,13,14,15,16,17,18,...48
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