Macau Junkets Have Future If They Abide China, Hints Economy Secretary

Macau Secretary for Economy and Finance Lei Wai Nong said Monday that junkets can play a future role in the gambling hub’s casino industry, provided they abide by the law, Macau Business reports. That means they need to give mainland China, which accounts for the vast majority of Macau’s VIP segment, a wide berth.

Macau junkets
Macau junkets
Secretary for Economy and Finance Lei Wai Nong says junkets will have to undergo a “cycle of adjustment” to continue to function in the SAR. (Image: IAG)

Lau emphasized there is a legal framework in place that governs the relationship between licensed gaming operators and junkets. He expects these to survive proposed reforms to Macau gaming law. However, there would be an “adjustment cycle,” he continued.

“Junket promoters have always been important, and we will make adjustments in the future. If they fulfil all required conditions, we will accept and evaluate the request. We will proceed according to the existing regulations,” Lei said.

“[…] When they carry out gambling promotion activities, they must respect Macau regulations and if they carry them outside the SAR they must respect the regulations of that jurisdiction,” he added.

Lei was speaking at a ceremony to celebrate the 22nd anniversary of Macau’s secession from Portugal and its establishment as an autonomous special administrative (SAR) region of China.

Junkets Reeling

His words come amid a turbulent period for Macau’s junket industry. Those businesses are still reeling from the arrest last month of Alvin Chau, CEO and chairman of Suncity Group, the world’s biggest junket operator.

Chau was detained by Macau authorities on November 27. He is held on charges of operating a criminal syndicate, offering illegal online proxy betting from the Philippines, and money laundering.

That was just days after a warrant was issued for his arrest by prosecutors in the city of Wenzhou in mainland China.

The warrant suggests China has finally run out of patience with the junket industry. They believe the businesses are  promoting gambling on the mainland and assisting capital flight.

The Chau arrest coincided with a ruling by Macau’s high court, which held that casino operators were jointly liable with junket operators for deposits made at the VIP rooms run by the junkets.

Previously, the relationship between the casinos and junkets has worked well. That’s because the junkets have assumed most of the risk of doing VIP business with China. This may no longer be the case.

There are indications that Wynn Macau, Sands China, and Melco Resorts are gradually closing their junket VIP rooms, although SJM Resorts and Galaxy Entertainment Group are believed to be sticking with the junket model, for now.

From Triads to Travel Agents

Macau Faculty of Business Administration professor Davis Fong recently told Macau Business the junkets would have to turn their focus to markets in Southeast Asia.

I am thinking some of the junkets may change their models, to find good VIPs in Hong Kong, Taiwan, Southeast Asia. This part of the business may compensate for the loss of Chinese VIP players,” he said.

Meanwhile, brokerage Bernstein said two weeks ago that Macau gaming regulators told junket groups that they cannot continue to lend customers money to gamble with in the SAR.

This has not been officially announced. But if true, it would eviscerate the junkets’ business model.

Macau-based gaming consultant Carlos Lobo recently told Reuters this would mean the junkets would have to operate as travel agents. They would receive fees for bringing wealthy clients to casinos, rather than receiving direct commissions from VIP gaming rooms.

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