Industry Insider by Ray Poirier | "Big Julie," the legendary junket operator during the early days of Las Vegas’ gambling expansion, would be truly overwhelmed if he were around to hear the stories coming out of Macau.
Recent reports have indicated that gaming in the Chinese enclave, about an hour and one-half from Hong Kong by boat, is growing by leaps and bounds and the casino’s success will probably be determined by its relationship to junket operators.
According to a MarketWatch.com column by Craig Stephen who writes "This Week in China," junket operators are the prime brokerage of these big spenders, who think nothing of dropping several million dollars per night. By Macau law, casinos can’t let the gamblers play on the cuff after establishing a credit line like they do in Las Vegas.
Such regulations have hampered some casino operators such as Las Vegas Sands Corp. (LVS), Wynn Resorts Ltd. (WYNN) and more recently MGM MIRAGE Inc. (MGM). Although they have built the glitziest casinos to attract the gambling-hungry Chinese from the mainland, they have found that the VIP high-rollers end up at the casino that has a relationship with their junket operator.
Recent figures quoted by Stephen in his article indicate that gambling revenues in the first quarter of this year reached $3.8 billion, an increase of 62% over last year.
And the VIP baccarat players were responsible for some two-thirds of that play.
Reportedly, Crown Macau, operated by Melco PBL (MPEL), improved its market share during the quarter because of a deal it cut with one of the most successful junket operators in the area. But, although the casino benefits from the play, it must rebate to the junket people between 40% and 50% of its gaming revenues.
Considered to be a casualty of Crown Macau’s success is the Chinese-owned Galaxy Entertainment Group, a company whose shares trade on the Hong Kong stock market. The company said it plans to become more aggressive in its deals with junket operators.
In February, Las Vegas Sands agreed to increase its junket payments, according to a research note published by Credit Suisse. Attracting more high-roller players at Sands Macau could hurt Wynn Resorts, the analyst wrote.