MGM Finds Novel Solution for Macau Casinos as Junkets Continue to Disappear
Casino junkets used to rule the gambling ecosystem in Macau before their fall from grace several years ago. As the number of licensed junkets continues to dwindle, MGM China is taking steps to adapt to the changing landscape of Macau's casino industry by repurposing areas that were once designated for VIP junkets.
A former Suncity VIP Club gambling room in Macau. (Source: Macau Business)
LISTEN TO THIS ARTICLE:According to a recent report by Goldman Sachs, the company has begun converting former VIP junket spaces at its MGM Macau property into luxury villa accommodations, featuring a total of 28 units. Additionally, MGM China is transforming 200 hotel rooms at its MGM Cotai property into 88 suites.
Related: Industry Experts Analyze Macau's Junket Regulatory OverhaulThe renovation work is expected to be completed sometime next year, with analysts speculating that the changes may be intended to help MGM better compete with other high-end offerings in Macau, particularly those from Sands and Galaxy Entertainment.
Junket operators facilitated gambling for high-rollers by offering credit and arranging travel, but the industry has come under increased scrutiny due to allegations of money laundering and other questionable business practices. As a result, the number of junket operators in Macau has dropped sharply, prompting casino operators like MGM to reimagine how they utilize their properties.
This strategic shift highlights the growing importance of diversification in Macau's casino market, as operators seek new ways to appeal to premium customers without relying on traditional VIP junket services. These junkets, once a key component of Macau's casino economy, have seen a steady decline in recent years.
In 2011, there were over 300 licensed junket operators in Macau, a figure that reflected the prominence of the VIP gaming sector at the time. However, by the end of 2023, this number had dwindled to fewer than 40. By the beginning of 2024, there were less than 20.
The sharp decline in the number of junkets has been attributed to a variety of factors, including tighter regulatory oversight and the fallout from a series of high-profile investigations. Some junket operators have been accused of facilitating illicit financial activities, such as money laundering and underground banking, which has tarnished the reputation of the industry as a whole.
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A New Macau
The erosion of the junket industry has been further compounded by shifts in Beijing's stance on capital outflows and gambling. The Chinese government has implemented stricter controls on the movement of money across its borders and has taken a firmer stance against gambling-related crimes.
This has made it more difficult for junket operators to operate as they once did, leading to a reduction in the number of VIP gamblers traveling to Macau. In turn, Macau's casino operators have had to adjust their business models to cater to a broader customer base and reduce their reliance on high-roller clientele.
MGM China's decision to convert VIP junket areas into villas and suites is in line with this broader trend. By repurposing these spaces for luxury accommodations, the company aims to attract premium customers who seek an exclusive experience, without relying on the traditional junket model. This move also positions MGM to compete more effectively with other major players in Macau, such as Sands China and Galaxy Entertainment, both of which have invested heavily in luxury offerings in recent years.
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