Macau to See 80% Drop in Tax Revenue as Junkets Exit
With casino junkets possibly looking at the end of their run in Macau, the revenue they once provided will be dramatically reduced. The government anticipates an almost 80% loss from the segment in fiscal year 2022.
Junkets have been a regular part of Macau’s gambling industry for years, but that abruptly changed late last year. There had already been talk of junkets losing favor last year. The legal debacle surrounding former Suncity boss Alvin Chau accelerated the issue.온라인카지노
Analysts predicted that the loss of the junkets would impact the city more than casinos, and that assertion has been confirmed. When Macau’s Financial Services Bureau (FSB) published the new budget plan for fiscal year 2022, it spelled out how much that impact will be.
The FSB’s report shows that the city will pick up around MOP43 million (US$5.35 million) in tax revenue from the money casinos pay to junkets through commissions. That amounts to 79.5% less than it estimates will have been collected when the final numbers for fiscal year 2021 are provided.
Macau has constantly revised its budget figures the past couple of years, thanks to COVID-19. For 2020, casino revenue plummeted as the gambling properties were shuttered for months at a time. By the end of that fiscal year, the city had lost millions in tax revenue from gambling.
It also took in just MOP66.54 million (US$8.27 million) in tax revenue from the junket commissions. This was 68% lower than what it had projected at the start of the 2020 fiscal year.
Junket operations in Macau have been slipping for years. In 2013, there were 235 licensed junkets. This dropped to around 100 in 2019. By the beginning of 2021, there were only 85.
In December, that number dropped more after casino operators acknowledged they were breaking up with the VIP promoters. Galaxy, Melco, MGM, Sands, SJM and Wynn have all seen a future that doesn’t rely so much on junkets.
In spite of the shift in attention, Macau’s gaming industry isn’t expected to be turned upside down. Casino operators were already prepared to deal with a reduction in junket-driven VIP activity in favor of mass market gaming. It’s also possible that the junkets will continue to feed gamblers to Macau, but under a different business model.
A Rebirth of Junkets Could Emerge
Edmund Loi Hoi Ngan, associate professor of the Social, Economic and Public Policy Research Centre of Macao Polytechnic Institute, sees junkets sticking around. He believes that the pressure being placed on junkets will allow them to reemerge as “travel agencies,” according to Inside Asian Gaming. This is also more beneficial to the Macau economy.
The IRs are here already and as long as the clients are not organized to come (by operators or promoters), it is a normal operation. This way, the line is drawn so that everyone is clearer,” said Edmund Loi.
By changing how the junkets operate, Macau’s gaming operators can show the city (and, in turn, China) that it is addressing concerns about capital movement. Loi expects that the industry will reduce its reliance on VIPs and increase non-gaming components. This will also appease government officials.
He adds, “Countries like Singapore, Thailand, Malaysia, South Korea, and Japan are not opposed to cross-border gambling. The ways for junkets are not completely blocked, as long as they stay away from mainland China. I think the bottom line is very clear.”
Loi is also optimistic that Macau will rebound in 2022. The city added 44% to its 2020 revenue figures in 2021, and this year could bring more. He calls the Macau gaming market the “most promising.” He explains, “The reason I’m optimistic about Macau is because I cannot find any better place.”온라인카지노
Macau Tells Junkets to Cease Loaning Gaming Funds to VIP Clients
Macau’s casino junket industry — the world’s largest — could soon be a thing of the past. That’s after reports surfaced this week that the enclave has ordered gaming promoters to stop loaning money to their VIP clientele.
Macau’s Gaming Inspection and Coordination Bureau (DICJ) has reportedly told junket groups that they cannot continue to loan their customers money to gamble with while they are in the casino town. Brokerage Bernstein broke the news that the gaming regulatory agency is greatly cracking down on junket operations throughout the Chinese Special Administrative Region (SAR).
The six commercial casino operators — Sands, MGM, Wynn, Melco, Galaxy, and SJM — began shutting down their private VIP gaming rooms that were used by such junkets following the arrest late last month of Suncity Group founder, chairman and CEO Alvin Chau. Suncity has long been one of the largest junket groups in Macau and throughout Asia.
Macau’s six casino licensees are set to see their gaming privileges expire next June. The Chinese SAR is currently amid a comprehensive review of all regulatory aspects of its global-leading gaming industry.
Junkets have become enemy No. 1 of the industry reassessment. Prompted by China President Xi Jinping, there are great concerns regarding how junkets assist mainlanders in moving vast amounts of their money from the People’s Republic to the tax haven that is Macau. Xi says the capital outflows to the casino hub are a risk to national security.
Junket customers typically purchase an exorbitant VIP trip to Macau from a junket on the mainland that includes first-class luxurious travel and accommodations. The mainland travel package says nothing about gambling. But when the client arrives in Macau, they are typically offered a line of credit that mirrors the trip purchase price.
The DICJ, according to Bernstein, has directed such junkets to suspend the credit component. That is the main function of the junket enterprises, meaning the days of VIP groups ushering in China’s wealthiest gamblers to Macau could be numbered.
“If this is true, the junkets will have to operate as a travel agency, through activities such as receiving fees for bringing rich clients to casino operators, rather than receiving commissions from VIP gaming rooms, which has been the main business model for years,” explained Carlos Lobo, a Macau gaming consultant.
Gaming Bounce
Macau casinos haven’t expressed an abundance of concern over the strong possibility of junkets no longer being part of the industry in 2022 and beyond. MGM’s chief financial officer says junkets actually did little for the company’s bottom line in the region, and the premium mass-market customer is today the most coveted consumer.
Despite the regulatory chaos surrounding junkets, Bernstein says there’s been a noticeable improvement in gaming revenue in the first week of December. A note from the brokerage explains that gross gaming revenue (GGR) in December is up around 20 percent from the weekly average experienced in November.
The GGR bump comes as a result of less restrictive border crossings for mainlanders in and out of Macau.
