Inside Asian Gaming

INSIDE ASIAN GAMING | February 2013 24 In Focus Business Basics In its authoritative report on the Macau gaming industry, “Still Raining Cash,” leading regional independent brokerage and investment group CLSA Asia-Pacific Markets details the workings of the still-dominant VIP sector VIP Gaming Business Model Source: CLSA Asia-Pacific Markets T here are four key parties involved in the junket VIP gaming cycle, including the casinos, junkets, agents and the players. Casinos provide the gaming facility (gaming floor and tables) and the dealers, while junkets are responsible for filling up the VIP gaming rooms with players from across the region. Credit and commissions are given to the junkets for bringing in VIP players. Junket operators seldom engage the VIP players directly. Normally, the agents are responsible for liaising with the players and, most importantly, collecting cash fromthem. To incentivize and remunerate the agents, junket operators often extend credit and share commission with the agents. To attract VIP gamers, agents often offer rebates and free hotel rooms to the players. Rolling/Non-Rolling Win Rates The win rate is one of themost important operating metrics, whose fluctuation has a significant impact on casino revenue. Two win rates are regularly reported by casino operators: the rolling-chip win rate and the non-rolling- chip win rate. Rolling-chip win rate is usually reserved for VIP play and is the net win divided by the “non-negotiable gaming chips wagered”. VIP bets are wagered with “non-negotiable chips” and winning bets are paid out by casinos in cash chips. As commissions are paid based on the total amount of “non- negotiable chips” purchased, junkets will,