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VIP trade feels the chill

Newsdesk by Newsdesk
Mon 22 Dec 2008 at 16:00

Grand Emperor Hotel

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Despite the upbeat view on 2009 from SJM’s management, the company admitted, in common with other operators, that conditions were getting tougher in the VIP market.

SJM said its share of Macau’s VIP gambling market (a market that currently accounts for more than 65 percent of Macau’s annual gross gaming revenues) was holding up at 26 percent to 30 percent in the face of strong competition and a bearish outlook for the regional economy.

Emperor Entertainment Hotel, a Hong Kong-listed company that operates the Grand Emperor Hotel in Macau under an SJM casino licence, blamed a mini credit crunch in the VIP gaming segment for a 58 percent decrease in its chip sales to high rollers during the six months to September.

VIP chip sales from the company’s two self-run VIP junket tables at the Grand Emperor Hotel fell to HKD11.3 billion in the half-year period, from HKD26.9 billion a year earlier.

The company said though that part of the fall in VIP sales was due to its deliberately conservative approach on issuing credit to gamblers in the first place, and that the general economic outlook had influenced this policy.

“We have taken a cautious approach in lending to our customers in order to protect our credit book. We anticipate this situation to be temporary,” said Vanessa Fan, Emperor Entertainment’s executive director in comments reported in the Hong Kong press.

Credit control certainly seems to be one reason why the volume of VIP bets ‘rolled’ in the Macau gaming market has been falling. Junket liquidity is also reportedly being affected by a slowing in the rate that VIP players pay off their debts—possibly as a result of toughening macroeconomic conditions in China and the impact of visa restrictions, which are limiting Mainland residents to four visits per year.

So-called ‘VIP rolling chip turnover’ is used by Macau casinos to measure the volume of VIP business transacted and represents the aggregate amount of bets players make.

Bets are wagered with ‘non-negotiable’ chips (also known as ‘junket chips’ or ‘dead chips’). Under Macau’s junket system a certain percentage of the payout on a winning bet must be ‘rolled’ for further play. This is done by paying some of the win in these non-negotiable chips. It allows VIP agents to take their commission, and avoids volatility in the day to day capitalisation of VIP rooms by preventing players from having one big win and cashing out.

Some of the slow down in the VIP sector could be mitigated by lower end VIP players migrating to the higher margin mass-market tables. Emperor Entertainment says cash play in the 52-table mass-market hall at the Grand Emperor rose 27 percent in the reporting period to HKD351.4 million.

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The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

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