Inside Asian Gaming

INSIDE ASIAN GAMING | August 2011 32 Cover Story and even bungy jumping at Macau Tower. China has about 1,900 yuan billionaires, according to the 2010 Hurun report—twice as many as in 2009. Goldenway thinks that given the number and variety of China’s rich, there are enough players out there who are willing to view gambling not as an exercise in grappling with fate and fortune, but as a commoditised high-adrenaline pastime like skiing or scuba diving (or bungy jumping). And it thinks they are willing to pay for it up front in cash, just as they would for those other activities. The more traditional voices in the Macau industry regard the notion of a website to recruit Macau high rollers as both amusing and scary. Amusing because they believe it shows a degree of youthful naiveté about how money to fund gambling moves around in the Greater China economy—i.e. circuitously and not always totally ethically. Scary because they think that even if the customer is a cash customer, the use of online marketing is too anonymous and too risk-laden in due diligence terms. Think family home trashed by gate crashers after little Johnny advertises his birthday party on Facebook. The sceptics fret online recruitment of cash buy-in VIPs in Macau could cause due diligence problems regarding the source of the money. US-traded and -regulated operators in particular have to be mindful of US laws on money laundering, racketeering and terrorism funding. Macau’s traditional agent system may not be perfect, but at least the VIP recruitment sub-agents have a personal relationship with their customers. They know where they really live and what they do for a living. Set against that is the argument that a cash VIP model could—as Jerry Tse says—help to ‘clean up’ Macau’s image. “We’re not connected with gangsters. We will guide our players on their gambling. We don’t encourage players to over-extend themselves on their gambling, as I think some junkets inMacau did in the past,”states Mr Tse. If Goldenway proves that a cash buy-in model is sustainable—even if only as a niche VIP product rather than something for the bulk of the high roller market—it will cut out not so much the middleman, but the fourth, fifth and sixth men who work as agents and sub agents in the recruitment of VIPs from mainland China and elsewhere. “With traditional junkets the VIP room shares the commission provided by the casinos with the player agents. With our model the customer directly benefits. In our marketing materials we stress the direct benefit to customers. That we share commission with the players rather than giving it to agents,” states Jerry Tse. “The agency model is about giving a credit line with all the credit management issues that go with that. We don’t have those credit management issues. That’s the beauty of our business,” he adds. But if the online recruitment of cash VIP players is successful, why would the casinos need a middleman like Goldenway to help them? Why wouldn’t they market to cash VIPs directly? The answer probably lies in the due diligence issue. It’s the other side of the same Macau VIP coin as the credit-driven market. The contractual relationship will remain between the cash VIP and the junket, rather than between the casino operator and the player. The argument that credit-based VIP play is essential for the Macau casinos because of the non-convertibility of the renminbi is less compelling than it used to be. There are many legitimate ways that large amounts of money can be moved cross-border from China to Macau. Those currency movements can be done in the name of trade and personal investment. Macau and Hong Kong are currently the only places outside the PRC where personal bank accounts can be denominated in RMB. Since cross-border trade accounts in RMB were launched on a trial basis in July 2009, Bank of China—the official clearing bank for external Chinese RMB trade— had handled globally more than RMB740 billion-worth of business as of 31st March 2011. It’s likely that at least a small portion of that cross-border money found its way to Macau gaming tables. As time goes on the persistence of credit-fuelled play in Macau will be more to do with tradition, habit and player preference than with foreign exchange barriers. Who wouldn’t use someone else’s money to gamble and keep the winnings themselves—if they had a choice? “We understand that tradition is a powerful thing—especially in China,” says Jerry Tse. “But we hope that in time the other junkets will try and follow our steps and work towards a cash model. Then the whole of Macau will become a better place and a more entertainment-based market.” Hong Kong actor Simon Yam hosted the grand opening of Goldenway’s second VIP room at Grand Lisboa