Inside Asian Gaming

INSIDE ASIAN GAMING | November 2010 24 enthusiastic about baccarat that they will install their whole family in a suite aboard one of the casino cruise ships sailing nightly out of Hong Kong, says an industry insider. They will even set up part of that suite as an office so they can conduct their business afloat. That way they can visit a casino every night of the week for weeks on end without having to go to the time and trouble of getting a ferry or helicopter to Macau. Most of these players also attend the high roller rooms in Macau. Is Macau’s runaway VIP growth a bubble or a trend for years to come? C an Macau’s VIP boom go on indefinitely? The number of Chinese people qualifying as rich enough to play in those often gilded and finely upholstered casino rooms—usually located well away from the bustle of the mass gaming floor—is certainly rising sharply. Rupert Hoogewerf founded the Hurun Rich List—a cross between a league table of publicly documented wealth for mainland China and a cat burglars’ to-do list—in 1999. In its 2010 edition, it names 1,363 individuals with personal wealth of at least RMB1 billion (US$150 million). That’s a 36% rise on 2009, when there were 1,000 people qualifying. In the year 2000, there were just 24, according to Hurun. Perhaps even more significant for Macau is the fact that Hurun identifies Shenzhen in Guangdong province, just across the border from Hong Kong and Macau, as one of the Chinese cities (along with Beijing and Shanghai) where high net worth people are most likely to live. That suggests there are plenty of potential VIP room customers within less than an hour’s chauffeur-driven ride of Macau. History suggests that in most markets, for every bull run there’s a bear pit waiting just around the corner. The 25 basis point interest rate rise announced by China’s central bank in mid-October seems intended to cool slightly the hotspot areas of the Chinese economy. In particular, it may be designed to combat two issues: i) use of personal bank loans to fund speculation in the property and equities markets, and as a knock-on effect of asset inflation and commodity price hikes; ii) steep rises in the price of basic commodities including food and fuel. But Hong Kong- based analysts seem to think the central bank’s rate rise won’t have a major effect on the Macau gaming market either in terms of junket capital availability or player liquidity. In China’s new five-year economic plan also announced by the central government in mid-October, the country’s leaders emphasised their commitment to creating economic growth by stimulating internal consumer demand, rather than simply serving the less predictable foreign need for electronic and other mass market goods. That could serve to cushion the Chinese economy from external shocks related to recession or currency volatility in Western countries. If anything does slow down Macau’s VIP boom, it’s most likely to be politics. In the heady atmosphere surrounding this year’s revenue numbers, some seem to have forgotten the visa restrictions imposed by China on its citizens visiting Macau during 2007 and 2008. Although Macau can be seen as an effect rather than a cause of China’s economic boom, the general thrust of the country’s new five-year plan due to start in 2011 hints that the brakes could be reapplied in Macau if the gaming market continues to heat up. The plan refers to the need to rebalance the level of development seen across the country. At the moment, most of the growth is in the coastal regions such as Macau, Shenzhen and Shanghai, with inland areas often remaining poor—especially in the far west. For the foreseeable future, however, VIP gambling will remain key to the fortunes of Macau’s six casino concessionaires and sub-concessionaires and their investors. For those readers who have yet to visit Macau, here’s a beginners’ guide to Chinese-style high rolling. Kaboom! T he term junket is defined in the online resource Wikipedia as variously: • a dessert made of flavoured, sweetened curds, or • a cheap or free trip to a casino on the guarantee that players will gamble for a specific period of time or wager a specific amount of money, or • a party, banquet, or outing, or • a trip or tour, especially one taken by an official at public expense, or • a trip taken by a person who is the guest of a business or agency seeking favour or patronage. In the public’s mind, the term ‘casino junket’ tends to be associated with the perks that can accrue to high rollers for their high volume casino play, such as an upgraded suite, or in the most extreme cases, transfer to the casino via private jet. To industry specialists, the focus tends to be not on these headline-making overheads, but on how much of the house’s win on each VIP player can be kept by the people The Sweet Life What is a junket, and how does it work in Macau? In Focus