Up to 30% of junket business in the casino hotspot of Macau may reportedly soon abandon the more traditional high-value VIP segment of the market to be concerned solely with a clientele more interested in premium-mass forms of gambling entertainment.
According to a report from Inside Asian Gaming, this is the belief of global investments research firm Sanford C Bernstein Limited following last week’s news that junket giants Tak Chun Group and Suncity Group had suffered from having their contracts with Macau’s six licensed casino operators unilaterally cancelled. The source detailed that this latter enterprise moreover hit the headlines recently after its Chief Executive Officer and largest shareholder, Alvin Chau Cheok Wa, was arrested in China on charges that he had helped to facilitate illegal cross-border gambling.
Macau is currently home to approximately 85 junket firms that reportedly receive a commission for promoting partner casinos to wealthy gamblers while simultaneously handling such individuals’ travel, accommodation and foreign banking or credit needs for amounts that can run into the millions of dollars. However, the number of such local enterprises has purportedly been steadily declining since reaching a high of 235 in 2013 on the back of allegations they may often have links to unscrupulous individuals and organized crime syndicates.
Sandford C Bernstein Limited analysts Kelsey Zhu and Vitaly Umansky reportedly used a note filed earlier today to predict that between 15% and 30% of existing junket enterprises in Macau will soon be solely concerned with the premium-mass segment of the local gambling market. To make matters worse and the specialists moreover forecast that other high-value individuals will likely migrate directly to casino-run VIP programs and cut out any middle-men altogether.
Reportedly read the note from Zhu and Umansky…
“As junket business goes away, some players may well shift and we forecast that between 15% to 30% of junket VIP business could shift back to premium-direct and premium-mass. There will also be some negative impact on premium-mass from the disappearance of junkets and we estimate between 10% to 25% of ultra-premium mass and 5% to 10% of premium-mass may disappear due to junket liquidity. However, some of the junket business will in all likelihood migrate to premium-direct while some segments may see some negative impact from the disappearance of junket liquidity.”
Nevertheless, the pair reportedly noted that this state of affairs may prove to be a positive for the gambling market of Macau by bringing increased stability and more direct revenues for the operators behind its casinos. The analysts purportedly furthermore divulged that even though VIP play accounted for roughly 39% of the market’s aggregated gross gaming revenues in 2019, its earnings before interest, tax, depreciation and amortization contribution languished down at less than 15%.
The note from Zhu and Umansky reportedly read…
“Once post-coronavirus recovery materializes, we expect a less volatile gaming industry with better margin potentials albeit with lower revenues. For Macau, the future of the gaming industry is largely in the mass and premium-mass recovery and a shrinking junket business is good for the stability and future opportunities in Macau.”