MACAU BUSINESS
D
espite a mix of opinions whether Macau is covered by the recent criminalisation in Mainland China of any party assisting in cross-border gambling, the message is clear enough for the local gaming industry, in
particular the VIP segment: the shake-up continues. This new amendment to the criminal law in the mainland, coming into force on 1 March, bans anyone – namely, casino operators, holders, investors, as well as those hired or commissioned by them – organises or solicits mainland Chinese citizens to “gamble outside [the country’s] borders”. Weeks after the implementation of the new law, there is still no certainty about the status of Macau – which is a special administrative region of China but travelling to the city is regarded as cross- border tourism in the perspective of the central government – or what Sands China Ltd President Wilfred Wong has described as “ambiguity” in a conference call earlier this year with analysts. Nonetheless, local stakeholders have adopted a rather prudent approach when officials from the Central Government have pledged the strictest measures to eradicate activities of cross-border gambling. Gaming operators, such as Wynn Macau Ltd, MGM China Holdings Ltd and Melco Resorts and Entertainment Ltd, have reportedly suspended their customer services in the mainland or tried to avoid the collocation of their mainland operation with gaming and casinos. Junket operators, which help casinos entice big spenders and lend them credits that will be settled later, have also followed suit. “We still do not know the scope and extent of this new criminal code… a question that scholars probably don’t have an answer too,” says veteran junket investor Luiz Lam Kai Kuong. “Without any clear information [whether gambling in Macau is covered by law] we will just wait and see without making any move.”
Stagnation
In addition to this new code, other regulatory hurdles like the Central Government’s attempt to control the outflow of capital from the mainland have further dampened the performance of the VIP gaming sector amid the Covid-19 pandemic. “With the start of the return of travellers the performance of the mass market [in casinos] has started to improve but the performance of the VIP segment has remained stagnant,” he illustrates.
Albeit just about less than one-third of the pre-pandemic
volume, visitor arrivals to the city have reached the highest level in recent weeks since the onset of the coronavirus outbreak last year. In light of an improved tourism market, Macau gross gaming revenue, according to latest data from the Gaming Inspection and Coordination Bureau (DICJ), hit MOP8.31 billion (US$1.04 billion) in March, expanding 58 per cent year-on-year to the highest monthly tally since January 2020. A further breakdown of the DICJ data also show the mass market gaming revenue, including slot machines,
“We still do not know the scope and extent of this new criminal code… Without any clear information [whether gambling in Macau is covered by law] we will just wait
and see without making any move” says junket investor Luiz Lam
reached MOP14.51 billion in the first quarter of this year, up by 2.1 per cent from the previous quarter but down by 7.4 per cent from the previous year, while the VIP revenue only amounted to MOP9.13 billion in the January-March period of 2021, surging 19.7 per cent quarter-to-quarter but plunging 38.3 per cent year-on-year. “Accompanied by the start of the Covid-19 vaccination campaign here and the rebound of visitor arrivals, the revenue in the mass market has started to recover. The share of the mass market [in the gaming market] will further rise as more travellers return to Macau,” says Kwok Chi Chung, president of the Macau Association of Gaming and Entertainment Promoters. While the overall gaming revenue might resume the
pre-pandemic volume driven by the mass market, the executive of the junket trade body is more sceptical whether the VIP segment could resume the 2019 level, totalling MOP135.23 billion a year, over greater scrutiny. “The new criminal code rolled out by the mainland authorities has further dampened the business environment of junket operators,” Mr. Kwok says, sharing a similar perspective as other industry veterans.
Dwindling figures
In the first quarter of 2021 alone, the VIP sector made up 38.6 per cent of gross gaming revenue while 61.4 per cent for mass gaming, compared with a share of 46.2 per cent for the VIP segment versus 53.8 per cent for mass gaming in 2019. Brokerage Morgan Stanley has remarked in a recent research note about the regulatory headwinds against the VIP sector: “We expect VIP to contribute around 25 per cent of total GGR [gross gaming revenue] in 2021 and beyond. This compares with 70 per cent in 2012. With VIP being de-emphasized, we are looking at mass revenue, which has been on a structural growth path.” The segment has indeed been embroiled in turmoil for
years over the nation’s greater scrutiny on gambling and capital flows, as well as an anti-corruption campaign, since President Xi Jinping swept to power in late 2012. The operators with less financial power and a smaller scale have been gradually phased out. The number of licensed individual or corporate
junkets, or so-called ‘gaming promoters’ in the government terms, totalled 85 earlier this year, down by
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