Inside Asian Gaming

INSIDE ASIAN GAMING | November 2010 30 A n obvious question is how do these third party betting agents make contact ith such potentially lucrative players in the first place? In China—a key source of players for casinos in Macau and overseas—the advertising and marketing of gambling is, after all, illegal. As Inside Asian Gaming reported in our story ‘Winning Friends and Influencing People’ published in December 2008, they do it in many different ways—some of them through introduction or social networking and some of them through a growing system of VIP clubs. “You can think of the junket network as the foot soldiers of a multi-level marketing strategy, rather like that you might find for a company selling consumer products such as Amway,” an industry insider told IAG . “They have thousands and thousands of people in China. In each province and each city, they know all the important people. They know who’s who. They know who are the big factory owners, they know the business people, they know what business they’re in, and by knowing them they have a way to help these ‘customers’ to come to Macau and gamble. “Because advertising of gambling is clearly prohibited in China, the junkets provide an important network,” he adds. The source says the network of VIP clubs is growing within Mainland China. They have many of the luxury facilities found on the VIP floors of Macau casinos—with the crucial difference that there are no gaming tables or machines, and no gambling is permitted. Since that story was written, some junkets have stepped up their VIP marketing effort by issuing stored value cards to players in either China or Macau. Depending on a player’s level of roll, he can be credited electronically with either cash or tokens that can be redeemed for goods and services such as hotels, therapeutic massages or even gifts. It’s another way of locking the players into one particular VIP brand. Network Marketing How are Macau high rollers recruited within China? T here are times in Macau when it seems that life might be imitating art. That’s in terms of the occasionally comic levels of cultural misunderstanding that have occurred between the foreign casino operators and their Chinese host community. Just like in the cult comedy film ‘Borat’, the story of an ill-fated trip around America by a fantastically filthy-minded and ill-informed tourist from Kazakhstan, so the relationship between some Macau operators and locals seems almost an exercise in miscommunication. “The Western operators are very good at building a fancy casino, but they don’t know the Chinese customers. So in Macau they have to rely on the junkets,” says one source. That’s a pretty sweeping statement, but one that seems tobe borne out by the experience of the Las Vegas operators in Macau. Probably the most difficult thing culturally-speaking for the US operators to get to grips with in Macau has been the relative informality of the business relationship between the junkets and sub-agents and their high value players. North American business culture is used to formal contracts and the commoditising of entertainment and even of consumers themselves. It’s virtually impossible, therefore, to expect executives from that kind of commercial culture either to accept or to be comfortable with the idea of doing business on a handshake. Deals between Macau casinos and VIP agents and sub agents used to be formalised on scraps of paper in the old days of Dr Ho’s casino monopoly. Sometimes investors were lucky even to get a scrap of paper. On one famous occasion after the ending of the monopoly in 2002, a Hong Kong company engaging in due diligence on plans to buy an interest in a Macau casino junket operator couldn’t even find a paper trail to confirm whether there was a business to buy. A key point about the handshake business culture found in China is that it relies totally on trust. Anyone breaking that trust can effectively be ostracised by the local business community. In Western corporate culture, anyone wishing to get out of a business commitment typically hands the matter over to lawyers. It then becomes a beauty contest or battle of wills, depending on who’s got the best lawyers or the deepest pockets. There are certainly examples of the latter approach being used in Macau by Las Vegas casino operators. On several occasions, operators have tried to renegotiate deals with junkets retrospectively when they discovered the arrangement wasn’t as beneficial to the house as they had hoped. Culturally-speaking, as taboos go in Macau VIP gaming, this is up there with patting a Buddhist on the head in Thailand, or a man sitting next to an unrelated female on public transport in a Muslim country. Las Vegas Sands Corp’s Sands Macao The Borat Factor The culture gap that makes it hard for foreign-owned casinos to recruit Chinese VIPs In Focus