Gaming | Analysts warn stricter junket regulations could put recovery at risk

Financial services firm The Motley Fool is predicting that stricter regulations, poised to take effect in Macau’s junket sector, may put the gaming recovery at risk.

The restrictions will target junket operators that bring high- roller VIP gamblers to Macau, but these are the very same people thought to be responsible for the territory’s economic recovery, which began late last year.

Analysts therefore highlight the risks the new restrictions pose to Macau’s recovery and, according to The Motley Fool, threaten to “send the territory’s casinos reeling once more.”

“Any new regulatory crackdown could spook VIP gamblers once again,” the firm wrote. “It was, in part, the original crackdown on junket operators [in 2014] that caused Macau to go into a tailspin,” and any “tightening standards on the junkets […] could cause smaller operations to fold.”

Fears that Macau junkets could relocate or fail have been compounded in recent years with the addition of new policies such as smoking bans and ATM withdrawal limits. Competing gaming jurisdictions, which are popping up across Asia, could also incentivize operators to close shop in Macau.

The regulatory moves come as Beijing is pressuring the city to diversify its economy away from gambling.

According to the official figures, the city’s six operators have already beaten the Central Government’s target to have as much as 9 percent of casino revenue coming from non-gaming sources by 2020. The Secretary for Economy and Finance, Lionel Leong, said earlier this week that the figure already stands at 10.7 percent.

However, the proportion does not indicate that the days of VIP reliance are over. Compared with Las Vegas, where around two-thirds of operators’ revenue comes from non-gaming activities, Macau is still mostly about baccarat tables.

Operators have so far wanted to be seen diversifying their revenue, especially ahead of the casino license renewal period between 2020 and 2022. SJM and MGM are due to be reviewed first in 2020, followed by the others two years later, and there are no guarantees that the post-2022 casino landscape will look the same as it does today.

VIP baccarat, the game considered to represent the strength of Macau’s gaming economy, accounted for 58 percent of total gambling revenue in the third quarter of 2017, according to the Gaming Inspection and Coordination Bureau, up from 52 percent in 2016. DB