Junket VIP business could shift to premium segment, analysts say

The junket industry is in crisis after the arrest of Alvin Chau Cheok Wa.
The junket industry is in crisis after the arrest of Alvin Chau Cheok Wa.

Analysts at Sanford C. Bernstein predict that 15 to 30 per cent of the current junket VIP business could shift to the premium direct and premium mass business.

Macau.- The junket industry in Macau has been going through a lot of upheaval time since Alvin Chau Cheok Wa, CEO of Suncity Group Holdings, was arrested in Macau on cross-border gambling and money laundering accusations. Sanford C. Bernstein Ltd has now predicted that between 15 per cent to 30 per cent of the VIP business managed by junkets could transfer to premium direct and premium mass segments.

However, analysts stated the disappearance of junkets may have negative effects on premium mass.

Analysts wrote: “Based on our analysis we estimate overall pro forma gross gaming revenue (GGR) in Macau could be between US$25.1bn to US$28.8bn annually,” which is a decrease of 31 per cent to 21 per cent when compared to 2019.

They added: “While the VIP exposure looks negative for these operators, it is important to remember that profit contribution from VIP was much lower at only approximately 15 per cent for the entire group of companies.”

Gaming operators will terminate agreements with junkets, analysts say

Analysts at Morgan Stanley believe 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.

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.

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