Could Macau’s junket industry be on its last legs?
Numerous industry sources IAG has spoken to in the past 48 hours are speculating as to the future of Macau’s junkets and it appears to be increasingly accepted that the industry as we know it may well not last beyond 31 December 2021.
Their trepidation follows last week’s arrest of Suncity Group CEO Alvin Chau by Macau authorities and the closure of the group’s Macau VIP rooms – seemingly ending in an instant the operations of a company that not so long ago controlled 45% of Macau’s VIP market, and in turn a sizeable chunk of the entire GGR of Macau.
However, the Suncity situation casts shadows across the entire junket industry with senior gaming industry executives telling IAG that this may well be the end for the once lucrative sector.
Their views were expressed in response to unconfirmed rumors circulating Macau on Monday and hastily reported by at least one Chinese-language media outlet in Hong Kong, that further junket rooms in Macau may soon cease to operate. While specifics remain unclear, it is believed that all six Macau concessionaires are considering their options given the scrutiny junkets are now under and the looming issue of concession re-tendering in 2022.
According to a Monday note from brokerage Bernstein, Macau’s gaming regulator – the Gaming Inspection and Coordination Bureau – has issued a directive for junkets to stop issuing credit and allow cash play only.
It should be noted too that Macau’s junket operators are licensed annually, on 1 January each year, and it seems the DICJ has quite a decision to make at the end of this month, given recent developments. It could be, based on current sentiment, that the concessionaires help make that decision for them.
Once the kings of the castle when it came to Macau’s casino industry, concessionaire figures show the contribution to Macau’s GGR from the VIP sector has fallen from a high of 77.2% in 2002 and from 72.9% in 2011 to just 38.7% in 2019, with segment GGR of US$14.0 billion – less than half that of its halcyon days. Industry executives have told IAG that during the pandemic the VIP sector’s contribution to overall GGR has dropped to well below 20%.
Likewise, the number of DICJ-licensed junkets has fallen from 235 in 2013 to just 85 in 2021. Time will tell whether any of those 85 survive into 2022.