The Macau Gaming Information Association is invigorating junket efforts for a deadbeat borrower blacklist.
By Muhammad Cohen
Bad times are bringing Macau’s junket promoters closer together and closer to realizing their longstanding goal of a blacklist for debtors, based on a shared credit database, to prevent junkets from granting credit to players that are already failing to pay up. Along with falling VIP revenue – down 19% in the first quarter after declines of 40% last year and 11% in 2014 – debt collection is a major challenge facing the junket sector, with outstanding credit to players estimated to be around HK$60 billion (US$7.7 billion), roughly equivalent to Macau junket promoters’ revenue from gaming last year.
The Macau Gaming Information Association (MGIA), which launched on 1 February and held an introductory event at last month’s G2E Asia in Macau, is spearheading efforts to create the database, alongside Macau’s Gaming Information and Coordination Bureau (DICJ), junket trade group Macau Gaming and Entertainment Promoters Association (AMJEM) and individual junket operators.
Focused on Macau junkets but open to all gaming stakeholders, the MGIA is chaired by Charlie Choi and aims to help connect junkets with destinations beyond Macau. It has also launched a phone app that allows members to share industry news.
“We provide a platform for healthy and transparent exchange of information within the industry,” MGIA Vice Chairman Tony Tong says. “Our mission is the promotion of healthy, sustainable development of the gaming industry.”
Macau’s junket sector has appeared neither healthy nor sustainable of late. Hong Kong-listed top five junket promoter Neptune Group expressed doubt about the industry’s survival in its 2015 annual report. The number of registered Macau junkets has dropped from 235 in 2014 to 142 at the latest count – a 40% fall and the lowest number since 2006 – as VIP play continues to decline in the face of China President Xi Jinping’s anti-corruption campaign and slowing mainland economic growth. Many surviving junkets have curtailed operations, with Golden Moon reportedly closing its room at Wynn Macau last month. All junket promoters are facing additional pressure from the DICJ’s new financial reporting regulations and last month’s ban on phone use at tables, effectively barring proxy betting. Estimates had proxy betting pegged at up to 10% of junket revenue.
LENDING RACE
Exchanging player credit information won’t cure all of the junket sector’s ills, but it will allow better informed decisions on credit.
“Previously, many industry players were competing against each other, leading to bad debt problems,” Mr Tong, founder of junket advisor and investor Pacific Financial Group, says. He believes a blacklist, “hopefully an official one,” can help reduce bad debts.
At G2E Asia, AMJEM President Kwok Chi Chung told reporters that junkets have overdue debt of more than HK$30 billion. A Daiwa Securities report in April gave a “conservative” estimate of VIPs’ current debt (not overdue) to junkets as also being around HK$30 billion. Last year, Macau’s VIP revenue totaled HK$124 billion. Through commissions on betting and revenue share deals, junkets receive roughly half of that revenue in exchange for supplying players – predominantly from mainland China where currency transfers outside the country are restricted – and giving credit to them. Gambling debts remain uncollectable through China’s legal system and sources estimate collections currently run as low as 20%.
The MGIA and AMJEM are in talks with the DICJ and individual junkets to create a debtor database that would be accessible to industry members. The Macau government has agreed that a debtor database can be created within current statutes, says the AMJEM’s Mr Kwok, who is a lawyer.
“They have considered this issue thoroughly to make sure it’s done legally and respects privacy,” he explains, noting that the gaming industry, rather than the government, would operate the database to increase its flexibility and timeliness.
BROADER HORIZONS
The MGIA is also working with its “stakeholders across the spectrum,” to uncover new opportunities for junkets.
“MGIA is a means for the industry to find good venues far outside Macau,” Mr Tong says.
These efforts come as Macau’s junket sector continues to contract and consolidate.
In a report last month, investment bank Sanford Bernstein estimates the top five junkets control 70% of the market, with SunCity Group alone holding a nearly 40% share and the top 10 combining for 85%. While the top players offer extensive international travel and financial services to customers, many of the other 130 junket promoters scrambling to find opportunities in a contracting market are small operations with limited experience doing business outside greater China.
“With decline in Macau, junkets are looking for more places to capitalize their database and networks,” Mr Tong explains. “There’s a genuine need for junkets to explore opportunities in the region.”
With members from across the region on both the operator and promoter sides, MGIA can facilitate matchmaking between junkets and casinos beyond Macau. Silver Heritage Ltd (SHL) signed a cooperation agreement with MGIA at G2E Asia last month. SHL are “managing and developing casinos in frontier and emerging Asian markets” including Vietnam and Nepal, Executive Director and President for Business Development Tim Shepherd says. “We are being told by promoters that players want to travel more and escape the bright lights of Macau and Singapore. We therefore see cooperation between SHL and MGIA members as a natural step to take and are very happy to be working with MGIA on this initiative.”
Mr Tong notes that, “Nepal has visa-free entry for Chinese. Eventually, a lot of Chinese will come. There’s a lot of interest among travelers in mountain climbing, Buddhism.”
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He also believes SHL’s boutique resort outside Hanoi can attract VIPs.
“The average white collar professional or business owner likes to travel,” he continues. “Saipan and the Philippines have huge potential along with Laos, Vietnam and Cambodia. You don’t have to be a super VIP to travel overseas.”
Mr Tong says Macau junket promoters want places that are “stable politically” – which helps guarantee patrons’ safety – have no political disputes with China and offer low tax structures to enable higher rebates from casinos.
Despite the continuing downturn in Macau’s VIP play, he insists junkets remain vital in pursuit of the mainland customer.
“As long are there are currency restrictions, no promotion of gambling through media and no gambling in China, junkets will not be replaced,” he says, noting the importance of peer-to-peer promotion in the mainland after Korean casino promoters were arrested there.
“Even if they want to gamble, VIPs face restrictions on the transport of currency. That’s not going to end until the SAR border is eliminated.” That gives the junket sector a lease on life until at least 20 December 2049.
