G2E Asia: Execs say Macau's VIP gaming market hinges on operators' in-house management

2023-07-12

Macau

Reading time 4:18 min

During the Asian IR Expo + Global Gaming Expo (G2E) Asia 2023 in Macau, a panel of gaming executives stated that the future of the VIP market in the gambling hub lies in the direct management of in-house operations by gaming operators. According to the executives, casino junkets, which previously held a significant role in the local gaming market, now represent only a minimal fraction.

On the opening day of the gaming industry trade show, Hubert Wang, the President and Chief Operating Officer of MGM China Holdings, noted: "The significance of VIP operation in this market has far diminished [compared to] two years ago."

Discussing the decline of junkets in Macau after the arrest of junket leader Alvin Chau in 2021 and increased scrutiny from authorities, the executive from the Macau gaming operator emphasized that junket operations now contribute to a mere 3% of the gaming revenue in Macau China.

"In terms of profit contribution, it’s even less, if not negative," Wang said, as reported by Macau Business. "The future of VIP business is really about in-house. We have seen old junket customers converted to in-house or premium mass."



Hubert Wang, President and Chief Operating Officer of MGM China Holdings

Latest data from the Macau Gaming Inspection and Coordination Bureau (DICJ) showed that the VIP segment, including the operations run by gaming operators directly and junkets, accounted for less than 25% of the Macau market in terms of gaming revenue, compared to as much as two-thirds of the market in the early 2010s.

For his part, David Sisk, Chief Operating Officer of Melco Resorts & Entertainment, also acknowledged the situation of the junkets in the city, and said: "The future for the junkets probably lies outside of [mainland] China, maybe more in Hong Kong, Taiwan, and Southeast Asia."

The gaming executive expects the junkets might also help bring in non-mainland Chinese high-rollers to the casinos in the city, as per the wish of the authorities.

Speaking at the same panel on Tuesday, Chen Si, COO of the soon-opening South Korean gaming resort Mohegan Inspire Entertainment Resort, said he had observed a rise of junket activities in other Asian jurisdictions beyond Macau. "Outside Macau, we have certainly observed the surge of junket activities, primarily in Vietnam, and Korea is also very active in that discussion," he said, according to the above-mentioned media.

"We’ve seen many junkets visiting Korea recently. Few operators in Vietnam and the Philippines are also attempting to replicate the past junket model in Macau," he added.

The implementation of Macau's new gaming law last year had an impact on satellite casinos, which are gaming venues operated by third parties under a gaming concessionaire's license. These satellite casinos were no longer able to share their revenue with the gaming concessionaires due to the new regulations.

During the discussion on satellite casinos, Wang mentioned that despite the changes, a few satellite casinos still generate significant revenue and remain important players in the industry. He also highlighted the importance of satellite casinos, like other large resorts, enhancing their offerings and providing comprehensive experiences for customers.

Sisk, referring to a satellite casino operated under Melco's license, noted that these casinos cater to a distinct segment of customers different from those typically found in integrated resorts.

Both Melco and MGM China senior executives acknowledged that the Macau market had experienced a positive recovery since travel restrictions were lifted, and both companies were focused on recruiting more personnel for their non-gaming projects.

During the panel discussion, Chen Si provided an update on the progress of their gaming resort near Seoul, South Korea. He mentioned that the non-gaming facilities of the project are set to open in late 2023, with the gaming operation expected to start in the first quarter of the following year.

He further anticipated that the project's revenue would be evenly split between gaming and non-gaming activities, with a focus on hosting events, conventions, K-pop, Korean beauty treatments, and other services. The resort's casino will exclusively cater to foreigners, targeting gamblers from Japan and the Greater China region.



Ed Bowers, the President of Global Development for MGM Resorts International

Additionally, Ed Bowers, the President of Global Development for MGM Resorts International, discussed the progress of their integrated resort project in the Osaka prefecture of Japan in partnership with Orix Corp. This project, with a budget of JPY1.08 trillion ($7.9 billion), has received approval from Japanese authorities to be developed as the first gaming resort in the country.

He also mentioned that the Japanese project is scheduled to open in 2029, allowing for a timeframe of approximately six to seven years. Bowers expressed optimism about the project's prospects, as it will enjoy a monopoly or duopoly status until the Japanese government approves plans for additional gaming resorts in the country.



 Steve Vickers, CEO of risk consultancy Steve Vickers & Associates

Speaking in another panel discussion about regulatory oversight and gaming control in the Asian gaming market, Steve Vickers, CEO of risk consultancy Steve Vickers & Associates, also addressed the recent demise of the casino junket system in Macau.

The surviving junkets and high rollers have spread to other Asian gaming markets, including Cambodia, Vietnam, and the Philippines, but their betting volume has been “softer” than the past volume in Macau, Vickers noted according to Macau Business. He has spent nearly two decades with the Hong Kong police force.

He also pointed out that the crackdown on the Macau junkets and other regulatory actions against cross-border gambling activities by the Chinese government in recent years underlined its commitments to stem capital outflow from the country, which has threatened national security. "The Chinese authorities still seek a silver bullet to ensure control over the movement of funds out of China," he said. "It’s real. It’s still happening."

But he emphasized that the junkets "will not disappear but they will evolve" amid the "far more control" from the authorities, as there is still demand from mainland Chinese to move capital out of the country, among others.

In the wake of the demise of Macau junkets and the VIP segment, Vickers addressed that “a major challenge [for the Macau gaming operators] will be the financing of the casinos in Macau as the shift towards mass-market gaming takes place” as their operation was built on the VIP model.