Inside Asian Gaming

INSIDE ASIAN GAMING | October 2010 22 R emember the price war that started in the Macau VIP baccarat trade back in December 2007, when Crown Macau offered a junket aggregator 1.35% rolling chip commission? It seems the price wars are back, but this time in the form of competition over profit sharing. As our Asian Gaming Intelligence e-newsletter reported first last month, at least one concessionaire, in a drive to build its share of the vital VIP market, is said by reliable industry sources to be dangling in front of junkets the carrot of a 57% share of profit (profit in this context denotes the ‘win’ or gross revenue) generated by the junkets’ VIP players. With the government’s share accounting for around 40% of profit (35% as direct gaming tax, the rest as mandatory social and welfare payments), that only leaves a 3% share for the casino operator. Anecdotal News of a 57% deal offered by a particular operator first began circulating in the industry three weeks ago. It has not so far been confirmed on the record by that operator’s management. But the arrangement has been confirmed off the record within the industry. It has also been suggested to Inside Asian Gaming that three SJM satellite casinos—i.e. casinos licensed by SJM but owned by third parties—have been on a 57% deal for several months. A possible reason for the reluctance of operators to discuss the topic openly is its sensitivity in relation to two regulatory issues. The first is that the government has already acted once (if somewhat belatedly) to curb cutthroat price competition in the VIP trade. The second is that in order for an operator to go as low as 3% on its own share of profit, many industry observers assume it would need to pass on all or most of the running costs associated with VIP room operations to the junket operators. That is what SJM, Dr Stanley Ho’s casino operating company, did when it shifted some of its satellite casinos from a 40:40:20 model initially to a 40:55:5 model. Anecdotal reports suggest the three SJM satellite casinos alluded to were then moved to a 40:57:3 deal to allow them to pass more incentives to high roller agents and bring in more VIP customers. ButanyshiftingofVIPoperationalcoststo the junkets naturally raises questions about how much oversight the concessionaire Killer Whales Any new price war over VIP junket business could come back to bite the Macau operators VIP Market Outlook