Gaming operators will terminate agreements with junkets, analysts say

It seems the junket sector may be at its end.
It seems the junket sector may be at its end.

Analysts at Morgan Stanley have said that more gaming operators will end agreements with junkets, effectively closing the junket sector in Macau without the government having to intervene.

Macau.- Analysts at Morgan Stanley believes that more gaming concessionaires will terminate their agreements with junkets, effectively ending the industry in the city even if the authorities have not formally ordered a ban. All junkets licences in the city will expire on December 31. However, according to Morgan Stanley, if gaming operators cut contact with junkets, the industry may be brought to an end without official government orders.

The forecast comes after all VIP rooms operated by Suncity, one of the largest junket operators in Macau, were closed following the arrest of Alvin Chau and 11 others on December 1 on cross-border gambling and money laundering accusations. 

Credit Suisse has since revealed Wynn Macau plans to close all of its VIP rooms from December 20. Other operators are reviewing their positions but have not taken decisions. It appears that Wynn will retain only its direct VIP business, which currently accounts for about 20 per cent of its VIP revenue.

The number of junket licences issued by the Gaming Inspection and Coordination Bureau (DICJ) has been falling each year, from 235 in 2013 to 85 in 2021. In 2019, Suncity accounted for more than 45 per cent of the junket market, while Tak Chun accounted for about 19 per cent. VIP revenue that year was approximately US$14bn.

Analysts at Morgan Stanley stressed that the VIP industry is more important for local taxes than to casino operators’ EBITDA. The industry has generated US$228bn in revenue and US$89bn in taxes for the Macau government in the past 15 years, but casino operators only saw US$20bn in EBITDA.

Macau: DICJ tells junkets to stop offering credit

A report published by Sanford C. Bernstein says that Macau’s Gaming Inspection and Coordination Bureau (DICJ has issued instructions to junkets to stop providing credit to customers and to require prepaid cash to purchase chips. Junkets will no longer be allowed to provide VIP gamblers with loans, one of the pillars of their business model.

VIP junket operators usually work with a network of sub-junkets that know the credit history of their customers. The sub-junkets collect commissions from VIP junket operators, which provide credit to gamblers and are responsible for debt collection.

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