Inside Asian Gaming

INSIDE ASIAN GAMING | May 2011 14 C ould Macau have generated US$50 billion in actual VIP baccarat revenue in the first quarter of 2011? If it did, where did all the money go? Macau’s official VIP baccarat revenue surged 48.0% year on year in the quarter to 42.6 billlion patacas (US$5.3 billion). The growth in VIP baccarat revenue outpaced growth of overall casino revenue, which jumped 42.9% year on year to 58.5 billion patacas. VIP baccarat accounted for 72.7% of total revenue in Q1 2011. It is widely acknowledged not all VIP baccarat action is captured by the official figures, however, and at least some degree of illegal side-betting takes place in Macau. Where consensus diverges is on the scale and prevalence of side-betting. According to the US Department of State’s International Narcotics Control Strategy Report 2011, illegal side-betting in Macau’s VIP rooms could be ten times greater than the reported revenues. There are many good, practical reasons for side-betting to exist and to thrive in the sometimes dark world of Macau’s VIP sector. Side-betting is in essence a private arrangement between junket agents and their customers, governing the size of the bets placed. Most commonly, it occurs in two basic forms, with essentially the same outcome. The first is when the agent agrees with players that whatever the value of chips placedon the table, the real ante ismultiplied by an agreed number. For example, if the customer placed a HK$1,000 bet and the agreed multiplier is 10, then the ‘real’ bet is HK$10,000. The second common form of side- betting is when it’s agreed that the ‘real’ bet is denominated in a different currency to that of the actual chips placed. For example, the customer places a HK$1,000 chip on the table, but agrees with the junket operator that the bet is in reality denominated in US dollars, so the ‘real’ bet is US$1,000, which represents a multiplier of 7.8 times. Such arrangements appear particularly convenient because the majority of junket customers in Macau hail from mainland China and do not—and in any case cannot— bring money with them to play, and instead rely on credit extended by junket agents. When a customer requests HK$1 million credit, the junket agent can merely request the casino provide HK$100,000 worth of chips, with the implicit understanding between the junket agent and customer that a ten times multiplier is in effect. Where side-betting involves a ten times multiplier, the result is that the government and casino licensee’s share of revenue is reduced to a tenth of what it should be. That means the government is getting only around 4% of the ‘real’ gross, rather than 40%, as tax. Gauging the disavowed It’s pretty much impossible to get an accurate picture of just how much side- betting takes place in Macau. Those directly taking part—junkets and VIP players— obviously deny their involvement. Casino operatorsmaybe able tohazarda reasonable guess, but won’t acknowledge illegal activity takes place on their premises. The local gaming regulator, meanwhile, in response to the most recent claim of side-betting in Macau, reaffirmed its strict supervision of all gaming activities in the city. Thus, when the US Department of State says “observers note that the amount of unreported illegal side-betting could be as much as ten times” the reported figure, it’s hard not to question how well informed those ‘observers’ could be. On 22nd March, Stephen Young, the US consul general for Hong Kong and Macau, conceded to Macau media the claim was “just speculation or a guess.” Mr Young added, though: “I’m Where’s the Money? Speculation about the scale of side-betting in Macau defies common sense Macau Side-Betting