Through a Glass Darkly

Accurate analysis of Macau’s VIP business is hard to achieve

The opacity at the centre of Macau VIP gambling has all sorts of knock on effects that could ultimately make it harder for the sector to compete in an open and increasingly globalised market. How many multi-billion-dollar industries can you think of in the rest of the world that have virtually no formal market research publicly available?

The US$9.23 billion spent in 2008 on VIP gambling in Macau is in all likelihood coming from a tiny number of players—probably numbered in the low thousands—compared to the 22.9 million people recorded as tourist arrivals in Macau in 2008. The reality is we can’t be sure.

The people who could potentially provide the information—the agents, sub agents and casinos and, of course, the players themselves—generally have a vested interest not to shine too bright a light into the corners of the business. For one thing, the agents don’t want to give important information about their players away to competitors. Octo Chang adds that those with a cynical turn of mind believe that the greater the distance between the casino, the agents and the hard men who may ultimately have to enforce any debts owed by players, the better for the image of the industry as a whole.

Publicity shy

The chances of the players themselves volunteering information about their consumer habits as VIP gamblers aren’t high either. An academic at Macao Polytechnic Institute recently made a brave attempt to add some kind of metrics to the high volume end of the Macau table gaming trade. He did it via the painstaking but relatively low-tech method of monitoring Chinese media sources for information on criminal and other judicial hearings where high volume gambling in Macau was mentioned as a contributory factor in proceedings.

Care is needed for anyone tempted to extrapolate wider messages from the findings of Professor Zeng Zhonglu’s research. In all likelihood only a small proportion of Macau’s high volume table game gamblers end up the subject of criminal proceedings. It’s also important to bear in mind that not all high volume gamblers use VIP rooms. Some are known to play on the public tables. Their motivation for this is not clear, though it’s been suggested in sections of the local the media that it’s in order not to draw too much attention to their presence in Macau. Most high volume gamblers (whether labelled VIPs or not) appear to take their wins and losses with equanimity and without it having a catastrophic effect on their lives and businesses.

Even with those caveats, it’s fair to say Prof. Zeng’s findings make startling reading. Perhaps the most interesting statistic was that among the 99 high rollers from Mainland China he tracked via media reports, the average debt contracted over the period of their Macau trips was US$3.4 million.

Of the group Prof. Zeng followed, more than half worked for the Chinese government or state-owned enterprises. A total of 33 state officials each reported average US$2.7 million losses. Nineteen senior managers at state-owned enterprises each lost US$1.9 million, and seven cashiers at state-owned businesses US$500,000 respectively. Such behaviour is reportedly less of a problem since Mainland police started monitoring casino floors last year. Macau’s anti money-laundering laws also require suspicious transactions or those by “politically exposed persons” to be reported.

Losing streaks

His research found that in a single gambling session one gambler lost US$12 million, and one private company owner lost US$96 million over several years. During the period of his monitoring work, at least ten Chinese companies collapsed, reportedly casualties of massive gambling losses by big-spending players, said Prof. Zeng.

The academic’s analysis of media reports revealed that 44% of the 99 high rollers had either died or been given long jail sentences as a consequence of their gambling. Mainland courts sentenced fifteen to death, seven committed suicide or were ‘killed by others’, two were given a death sentence reprieve and 20 were serving long jail sentences.

Prof. Zeng said he wasn’t able to determine which casinos the gamblers in his survey had used. He added he was unable to use questionnaires or surveys to poll high rollers because they were ‘reluctant to reveal their gambling experiences’. Under the circumstances as revealed by his survey that’s probably not surprising.

The theft of state funds by government workers was certainly mentioned by analysts last year as one of the reasons for China’s clampdown on issuing visas for visits to Macau.