GAMING | More VIP room closures ‘not surprising’

Ben Lee

The junket operators are among the most affected in the midst of Macau’s gaming revenue slump. Analysts and industry insiders predict that more junket operators and VIP rooms will not be able to survive, or will be merged into their bigger competitors.
Ben Lee, managing partner of IGamiX Management & Consulting, told the Times that it will not be surprising if more VIP room closures take place.
“There have been some suggestions that some of the smaller junket operators have not been able to maintain the required liquidity to finance their operations since the Huang Shan scam in April last year. We saw several of them shuttered their rooms in September and it would not be surprising if even more have done so in the past two months,” he said.
The Huang Shan scam took place in April last year when Huang Shan, the shareholder of Kimren (aka Jin Lin) was alleged to have absconded with HKD8–10 billion, which was reported to have been most likely sourced from investors actively involved in side-betting.
Moreover, Lee predicted two possible outcomes from the closure of the smaller junket operators and VIP rooms.
“One scenario is that the top four junkets who are already estimated to control about 55 to 60 percent of the VIP market will gain even greater dominance. The other possibility is that the top four may pursue quality over quantity in terms of the players they will facilitate, leading to a continuing deceleration in the VIP segment. Either way, the landscape will have changed and, paradoxically, the quality of the relationships between the casinos and their biggest clients will become an even more critical factor in a matured market,” he said.
The Times has spoken to a source working for a mid-scale junket operator in Macau. On condition of anonymity, our source said that the VIP rooms situation started to deteriorate half a year ago and it has remained “pretty quiet” since then. “It has been a while since I saw people carrying several bags of cash to the VIP rooms to gamble,” he said, before showing the Times several photos of bags full of HKD1,000 bills.
Furthermore, he has observed that some smaller junket operators have closed or have been merged into bigger operations, with this trend likely to continue.  However, he did not indicate clearly whether the junket operator he was working for is planning any merger.
The prediction of more VIP room closures was reported by Macau Daily on Monday. The paper has reported that the market adjustment could lead to the closure of up to 50 VIP rooms, citing an anonymous source in the gaming industry. The source said that the junket market has been developing too rapidly over the previous two to three years, and some of the operations may not fully comply with regulations. The source believes the adjustment and drop in VIP revenue gives the stronger operators a chance to grow further by merging with others.