The decline of Macau’s casino industry over the last two years has made it difficult for junket operators to run a successful operation as these middle agents played a key role in bringing VIP gamblers to Macau’s casinos. Beijing’s anti-corruption crackdown resulted in the collapse of the VIP gambling segment and as a result left junket operators in a tight spot.
Junket operators lost their VIP clientele but were also left stranded as they found it difficult to recover their debts from these VIP clientele who decided to avoid Macau’s casinos. Macau’s Association of Gaming & Entertainment Promoters stated that junket operators were finding it a slow process to recover their dues and were only able to collect around twenty percent of what they had loaned.
Junket woes continue to grow in 2016 as the Macau government recently announced that it has come up with a new proposal that seeks to increase the capital requirements of junket operators by one hundred percent. The new proposal, if approved, will raise the capital requirement from around $1.3 million to $13 million and make it mandatory for one shareholder from the junket operation to be a resident of Macau. These new rules will not be enforced on existing junket operators and will only be applicable to new junkets.
It appears highly unlikely based on Macau’s current market scenario that new junkets will apply for licenses as the Macau government has encouraged casinos to stop focusing on the VIP segment and diversify their gaming and non-gaming portfolio. The new casinos that are opening on the Cotai strip have significantly reduced their VIP gaming room area which automatically reduces the business of these junket operators.
In a statement, Kwok Chi-chung, president of Macau’s Association of Gaming & Entertainment Promoters said “The current situation is like the aftershocks following an earthquake. After some time, some VIP rooms may have seen the number of customers that they receive is not enough to support their operations. As such, they may prefer shifting some of their resources and focuses from Macau to other places in order to decrease their operational costs here.”
Macau’s junket operators have complained about their low cash reserves due to the fact that they are unable to recover their debts from their declining VIP clientele. As a result, they are unable to lend like before and bring in new VIP gamblers, causing their business to shrink significantly.
The new proposal on raising capital requirements is yet another attempt by Macau’s government to tighten regulations on junket operators who have come under the scanner after a number of junket thefts.