If every cloud has a silver lining, then the South China Morning Post thinks it may have spotted the sterling benefits of a credit crunch for Macau’s casinos.
The SCMP points out that with VIP players from China finding access to credit or even to Macau itself harder to come by these days, it means some junket operators may under perform on the turnover targets they agreed with casino owners.
This in turn may lead the junkets to miss out on lucrative bonuses, which in some cases can amount to up to 48% of all VIP room income. Thus although VIP revenue may be down across Macau, the margin on what remains may be more favourable for operators than would be the case in a red hot market.
The Las Vegas companies aren’t simply relying on a financial crisis to build their Macau margins however. Las Vegas Sands Corp reported in its fourth quarter earnings call for 2008 that The Venetian Macao had increased the so-called ‘direct play’ part of its VIP business as a proportion of total rolling. This is business based on credit issued direct to players by the casino rather than via third party agents.
Brad Stone, LVS’s President of Global Operations and Construction said direct play in Q4 ’08 amounted to 16.7 percent of total rolling volume compared to just 6.9 percent in the fourth quarter of 2007. It was also up quarter-on-quarter from the 14.9 percent of rolling volume achieved in Q3 ’08.
“We have achieved this increase in direct play while maintaining our prudent approach of bringing credit to our VIP customer market,” added Mr Stone.
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