Inside Asian Gaming

December 2015 inside asian gaming 7 Cover Story “Some junkets have a Plan B – buy all or part of casinos. Jimei Group has shown the way, long operating Fontana Hot Spring Leisure Parks in the Philippines plus a Macau casino.” forecast an imminent VIP rebound, Union Gaming’s Grant Govertsen expects more junket closures, possibly including “one of the major players … carried out on a stretcher.” Some junkets have a Plan B – buy all or part of casinos. Jimei Group has shown the way, long operating Fontana Hot Spring Leisure Parks in the Philippines plus a Macau casino. Hengsheng Group is building a hotel in Saipan and has taken steps toward developing an integrated resort in South Korea. Suncity Group, Macau’s largest junket promoter, has invested in a Vietnam IR project as a starting point for larger ambitions. Suncity Chairman Alvin Chau characterizes casino investment, as a partner and eventually sole owner, as a natural evolution of its junket business rather than a reaction to Macau’s woes. “The reason why we invest in overseas markets is not because of the bad business conditions in Macau,” Mr Chau says. “VIP business globalization is a strategy, and a casino hotel chain business is part of that strategy.” (See more of IAG’s interview with Mr Chau on page 10.) PROSPEROUS METAMORPHOSIS “Junkets are going to continue to morph and evolve with the times, by selling or joint venturing part or all of their business to casino owners or becoming casino owners themselves,” Macomber International President Dean Macomber says. “The better junket owners and operators will not suffer; indeed, they will prosper from this metamorphosis.” As China continues opening to the global financial system and adapting to world standard business practices, the unique role of junkets for players from the mainland and other Asian markets will diminish, and casinos will become more willing to take on traditional junket functions, including player finance, Mr Macomber, a former CEO of Jimei’s Fontana resort, suggests. “It may take 10 years, 20 years, 50 years and certain pure boutique style junket companies will still exist, but beside the repercussions of the decrease in VIP play, even more fundamentally, junkets as middlemen can’t survive big company corporate ownership, which does not like sharing their profits with others. This inevitability was put in motion the moment Macau gaming was opened to large Western and Asian gaming operators.” “Junkets don’t want to be the wedding dress,” Pacific Financial Services founder Tony Tong says, citing the Chinese saying that the wedding dress gets used on the day of the wedding then is forgotten. “Sooner or later they lose their customers to casinos.” Industry insiders say it’s no great leap for junkets that operate VIP rooms in Macau to run their own casinos. There’s a range of opinions about junkets’ capital capabilities as investors and whether casino operation or junket promotion is the more profitable business. Jimei, Hengsheng and Suncity illustrate different approaches to junkets becoming casino owners. Fontana Hot Spring Tony Tong