Inside Asian Gaming

september 2016 inside asian gaming 25 Just what can we expect fromMGMChina over the next 12 months? Parent company MGM Resorts International is a global giant, boasting 16 casinos in the United States alone including iconic Las Vegas Strip properties Bellagio, MGM Grand and Mandalay Bay, but in Asia it’s a very different story. MGM China holds the smallest piece of the Macau pie among the city’s six concessionaires, with 9.1% of market share according to the latest numbers and less than 500 of its 5,998 gaming tables. It is also suffering from a shortage of hotel rooms with just 582 at MGM Macau – a situation not helped by the recent announcement that MGM Cotai would delay its opening until 2017. Nevertheless, MGM Macau has long been a major revenue source for MGM Resorts – contributing, at its 2014 peak, as much as 32% of the total revenue generated by properties under the MGM Resorts umbrella. Even now it comprises just over 22%. Much of the credit for the success MGM Resorts has enjoyed US$90 million. Union says the top three promoters are increasingly poaching agents from smaller junkets. In the long run, that may provide greater leverage with casino operators, though given Macau’s tax rate and 1.25% commission cap, any gains will be marginal. More broadly, Suncity has extended its reach as a full-service travel, wealth management services provider promoting an aspirational lifestyle, embodied by Mr Chau. On Suncity’s website, visitors can secure a VIP room seat in Macau, Melbourne, Manila or Seoul, book a trip to Wimbledon or the Suncity sponsored Macau Grand Prix and even rent a yacht. The Union Gaming report highlights junkets’ efforts to move into casino ownership. Suncity is a minority partner in the Hoi An South integrated resort project along Vietnam’s central coast. In an interview last year, Mr Chau told Inside Asian Gaming he’d like to have a chain of “boutique casino resorts” across Asia. A rival executive chuckled, “Who wouldn’t?” Alvin Chau CHAIRMAN Suncity Group Power 1,647 Last 7 Score Year Claims to Fame The face of Macau junkets Highest ranking Macau native in its gaming industry 13 from its Macau operations can be attributed to Chairman and CEO Jim Murren. In 2011 he engineered a deal with fellow stakeholder Pansy Ho to give MGM Resorts a controlling interest in the Macau operation, with the added revenue playing its role in the company’s overall recovery following some difficult years during the Global Financial Crisis. Last month, MGM Resorts raised its stake again by acquiring another 4.95% of MGM China Holdings from Ms Ho – taking its total stake to 56%. “We believe in the future of the Macau marketplace and are confident in the success of MGM China as we expand into Cotai next year,” Murren explained. In the meantime, however, MGM Cotai’s main role has been to provide a backdrop to the glitzy openings of its neighbors with both Wynn Palace and the Parisian welcoming their first customers in 3Q16. As Macau’s largest junket promoter, Suncity is an increasingly bigger fish in a shrinking pond. Suncity remains the industry pacesetter in terms of volume and innovation and its chairman Alvin Chau, a Macau native with matinee idol looks, is the face of the junket industry. The junket business in Macau has declined by more than 50% since its 2013 peak and shows no sign of a turnaround. In the second quarter, Macau’s Gaming Inspection and Coordination Bureau (DICJ) reported second quarter VIP revenue fell 16.7% from last year; that was the sector’s best performance in two years. Union Gaming analyst Grant Govertsen expects VIP revenue to decline for the rest of this year and by another 4% next year, “biased to the downside.” The Union report published last month estimates that the three largest Macau junkets, Suncity, Neptune/Guangdong and Tak Chun, control 80% of the market, up from 45% to 55% during the good times. Suncity alone may have a 50% market share, which would give it gross commission revenue in the neighborhood of Asian Gaming POWER 50 2 0 1 6