LAST WORD 66
Time for legal clarity It’s been a bombshell end of year for Macau and not in a good way.
Sharon Singleton
Managing Editor, AGB
T
This is a risky and grey area for the operators he arrest of Suncity CEO Alvin Chau at the end of November saw the city’s VIP when it comes to their marketing activities in China. And then there are the amendments to the gaming and junket industry unravel at breakneck speed. Suncity is winding up its operations, law, which had spooked the market a couple of months at least three operators have terminated their accords prior to the latest developments. Proposals included with all junkets, and VIP rooms are being shuttered potential restrictions on the distribution of capital, which could be particularly problematic for the U.S. across the gambling hub. Although the loss of VIP comes at a terrible time operators. There is concern about greater operational for Macau’s casinos, given another year of Covid-hit supervision at the board level as well as the need for revenues, analysts ultimately aren’t too concerned about greater local representation. All of this has created a sea of uncertainty in the the loss of the top end of the market. It accounted for about a third of total revenue in recent figures, but made world’s largest gambling hub, which legal experts and up a much smaller proportion of profit, as the perks and industry insiders say needs to be cleared up as soon giveaways to high rollers made it a low-margin business. as possible. It is now clear that Beijing has lost patience with Operators had been weaning themselves off this Macau’s foot dragging on its sector for sometime, with most economic diversification and turning their sights to the muchover-reliance on the gambling coveted premium mass sector, industry for 80 percent of its which can have margins of about Beijing has tax revenue. It’s quite willing to 37 percent compared with 10 to also signalled wield its sledge hammer to force 20 percent for VIP. an economic restructuring along It’s here that things get sticky that Macau is not lines that are more in tune with for Macau. exempt from its its vision of what a world centre Although not junket play, these for tourism and leisure should be. visitors shelled out a lot more in a crackdown, as Part of this will undoubtedly single day than the $50,000 total had widely been involve the need for operators permitted to be brought out of to invest in more non-gaming Mainland China in an entire year. believed. amenities and to participate in So how will these players gain the Mainland’s plan for greater access to funds? integration amongst the Greater It’s hard to see that China will turn a blind eye to any potential loopholes, such Bay Area cities and the development of Hengqin Island. While this may be beneficial for Macau in the as the use of multiple China UnionPay cards, or the cashing in luxury items such as jewelry and watches long term, it may mean a world of short-term pain for the city as it goes through a period of economic in Macau’s pawn shops. Local regulator, the Gaming Inspection and adjustment. The government may lose about a third of Coordination Bureau, has also told the local junkets its tax revenue from the loss of VIP and it has already that they can no longer extend credit to players. That’s conceded that unemployment will rise as a result of despite it being a legal practice in Macau and no formal the junket closures. The city is brimming with VIP-focused services, amendments having been made to any law. All of this raises significant questions for the future Michelin-starred restaurants, high-end designer retail not just of VIP, but for a large and profitable segment and luxury hotels. Presumably this offering will need of the market. In singling out Chau and his junket to be adjusted. As it goes through the process, the operators activities, which included enticing Mainland Chinese across the border to gamble, Beijing has also signalled deserve a lot more clarity from the government about that Macau is not exempt from its crackdown, as had the future direction and how the rule of law will be applied. So far it’s sadly lacking. widely been believed.
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Asia Gaming Briefings | December 2021
