Macau’s Casinos Pin Hopes on Everyday Gamblers After Junket Shutdowns

By Reuters
December 21, 2021 Updated: December 21, 2021

HONG KONG—Macau’s casinos face a bleak short-term outlook after shutting most of their lucrative gaming rooms that cater to wealthy gamblers, and along with that, the COVID-19 travel restrictions preventing the shift to mass-market customers that they will depend on in the future.

The former Portuguese colony, that is the world’s biggest gambling hub in terms of money wagered, has long relied on the revenue from the VIP gaming rooms where high-rollers placed massive bets.

But the Chinese government’s recent crackdown on the junket business, which arranged the transportation, accommodation, and the credit necessary for wealthy clients to gamble, is calling into question the financial outlook for casino operators including Wynn Macau, Sands China, and MGM China.

Junket-run gaming rooms inside casinos made up roughly a third of Macau’s overall gaming revenues in 2019, according to Alidad Tash, managing director at 2NT8 Limited, a consultancy specializing in international casinos and integrated resorts.

However, that revenue dried up after the arrest in November of Alvin Chau, the head of Macau’s biggest junket operator Suncity, triggered the shutdown of gaming rooms throughout the city’s casinos. Chau is charged with setting up an internet platform based in Macau that lets bettors in mainland China, where gambling is illegal, place wagers outside the country.

Replacing the VIP revenue will depend on the ability of casinos to draw the mass-market gamers that analysts at Bernstein have said are the “secular long-term growth story” for the sector, which in turn, hinges on controlling COVID-19.

“The pace of recovery in late 2021 and 2022 depends on COVID outbreaks, travel restrictions coming down, and the key to recovery is to have mass players coming back to Macau at more normal levels,” the analysts said in a note.

“The future remains in mass and premium mass recovery.”

Mass refers to mom-and-pop players who play table games, such as baccarat or blackjack, or slot machines. Premium mass includes players who bet large enough amounts that they earn complimentary rooms, food, and transportation but do not have their losses discounted nor have credit extended by the casinos.

Representatives from Wynn Macau, Sands China, and MGM China did not respond to requests for comment on their plans to replace VIP revenues when contacted by Reuters.

Since Chau’s arrest, shares of Wynn Macau have plunged about 23 percent, Sands China has fallen about 13 percent, and MGM China have dropped 20 percent.

No one at Suncity could be reached for comment.

Restricted Entry

China’s strict COVID-19 movement restrictions have limited the pool of mainland gamblers that can enter Macau. In the pre-pandemic month of October 2019, there were 3.2 million visitors that went into Macau—in October 2021 that plunged to 328,245 visitors.

Visits remain depressed even though quarantine-free travel is allowed for most arrivals from mainland China.

Group visas for players have not been issued since the COVID-19 pandemic and individual visas to Macau have come under greater scrutiny, according to Ben Lee, founder of Macau gaming consultancy IGamiX.

There are also concerns as to how gamblers in Macau will be able to bring funds into the region.

Junkets, besides extending credit to high-rollers, also operated a shadow banking network that helped players skirt China’s capital outflow rules that limit taking only the equivalent of $50,000 out of the country in one year.

Premium mass and premium direct players, who wager enough to gain rebates on their losses and receive credit from the casinos, also utilized the methods to move funds.

But with junkets closed down, players have lost the most convenient channel to bring money into Macau, said 2NT8’s Tash.

By Eduardo Baptista