Junkets Return to Macau against China's Wishes
LISTEN TO THIS ARTICLE:Junkets are slowly seeping back into Macau's casino market. In the wake of the city's casino boom and subsequent COVID-induced travel limitations, the gambling promoters have joined forces with casino operators to devise fresh agreements aimed at enticing affluent gamblers to flock to their gaming arenas.
Junkets Boost Casino Activity
The outbreak of COVID-19 had a devastating effect on high-profile companies in the gambling industry, which heavily relied on VIP-spending players to generate nearly half of their total revenue. In response to this situation, the authorities in 2022 undertook a comprehensive review of the country's gambling laws and implemented stringent regulations specifically targeting junket operators. This revision aimed to address the challenges faced by the industry and to prevent similar financial setbacks in the future caused by unforeseen circumstances like the pandemic.
Official data suggests that the VIP sector made up over 20% of Macau's casino revenue in 2022, a significant decrease since 2019. However, there has been a recent surge in this percentage as casinos collaborate with junkets to attract VIP customers from their past associations.
In the first quarter, the figure stood at 24.7%, as reported by Macau government statistics. A recent study conducted by IGamiX revealed that the proportion of VIPs has resumed to a percentage equivalent to 30% of what it was before the year 2019, specifically citing the month of July.
Junket operators, schemes that bring wealthy gamblers to casinos, are now directly approached by casinos to entice their previous clientele, and the resulting revenue is directed toward the VIP segment. Rather than enjoying a portion of the players' earnings as in the past, these representatives now receive a fixed commission rate. Although commission fees have significantly reduced, the increased expense of cross-border money transfers has diminished junket operators' profits.
Gaming Revenue Slowly Rebounds
In spite of the difficulties presented by the COVID-19 pandemic and previous incidents of casino junkets, Macau has experienced a comeback in terms of reputation and tourism in the initial half of this year. Ever since the beginning of the year, casino earnings have been on the rise, with the August tally soaring to MOP17.2 billion ($2.13 billion).
According to official government records, the current figures are about 70% of their pre-COVID levels. The financial results for the first half of the year, released in late August, reveal that four out of the six listed casino operators in Macau have managed to generate net profits.
The six gaming operators, MGM China, Sands China, SJM Holdings, Melco International Development, Wynn Macau and Galaxy Entertainment Group, emerged with mixed financial outcomes after the first half of the year. While Wynn Macau and Galaxy Entertainment Group maintained stable profits, MGM China and Sands China managed to bounce back from a loss they faced a year ago and achieve profitability.
As international flights gradually resume from mainland China, Macau has experienced an influx of visitors. However, as connectivity improves over time, there is a possibility of losing these travelers to other competing destinations such as Cambodia, Singapore, South Korea, and various other locations renowned for their casinos.
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