Macau's casinos pin hopes on everyday gamblers after junket shutdowns

LET group

21/12/2021 05:36

By Eduardo Baptista
    HONG KONG, Dec 21 (Reuters) - Macau's casinos face a bleak
short-term outlook after shutting most of their lucrative gaming
rooms catering to wealthy gamblers and as COVID-19 travel
restrictions prevent the shift to mass-market customers that
they will depend on in the future.
    The former Portuguese colony that is the world's biggest
gambling hub in terms of money wagered has long relied on the
revenue from the VIP gaming rooms where high-rollers placed
massive bets. 
    But the Chinese government's recent crackdown on the junket
business, which arranged the transportation, accommodation and
the credit necessary to gamble for wealthy clients, is calling
into question the financial outlook for casino operators
including Wynn Macau  1128.HK , Sands China  1928.HK  and MGM
China  2282.HK .
    Junket-run gaming rooms inside casinos made up roughly a
third of Macau's overall gaming revenues in 2019, according to
Alidad Tash, managing director at 2NT8 Limited, a consultancy
specializing in international casinos and integrated resorts.
    However, that revenue has dried up after the arrest in
November of Alvin Chau, the head of Macau's biggest junket
operator Suncity, triggered the shutdown of gaming rooms
throughout the city's casinos. Chau is charged with setting up
an internet platform based in Macau that let bettors in mainland
China, where gambling is illegal, place overseas wagers.
    Replacing the VIP revenue will depend on the ability of
casinos to draw the mass-market gamers that analysts at
Bernstein have said are the "secular long-term growth story" for
the sector, but that hinges on controlling COVID-19. 
    "The pace of recovery in late 2021 and 2022 depends on COVID
outbreaks, travel restrictions coming down, and the key to
recovery is to have mass players coming back to Macau at more
normal levels," the analysts said in a note.
    "The future remains in mass and premium mass recovery."  
    Mass refers to mom-and-pop players who play table games,
such as baccarat or blackjack, or slot machines. Premium mass
includes players who bet large enough amounts that they earn
complimentary rooms, food and transportation but do not have
their losses discounted nor are they extended credit from the
casinos.
    Representatives from Wynn Macau, Sands China and MGM China
did not respond to requests for comment on their plans to
replace VIP revenues when contacted by Reuters. 
    Since Chau's arrest, shares of Wynn Macau have plunged about
23%, Sands China has fallen about 13% and MGM China have dropped
20%.
    Suncity could not be reached for comment.
    
    RESTRICTED ENTRY
    China's strict COVID-19 movement restrictions have limited
the pool of mainland gamblers that can enter Macau. In the
pre-COVID month of October 2019, there were 3.2 million visitors
that came into Macau, in October 2021 that plunged to 328,245
visitors.
    Visits remain depressed even though quarantine-free travel
is allowed for most arrivals from mainland China.
    Group visas for players have not been issued since the
COVID-19 pandemic and individual visas to Macau have come under
greater scrutiny, according to Ben Lee, founder of Macau gaming
consultancy IGamiX. 
    There are also concerns as to how gamblers in Macau will be
able to bring funds into the region.
    Junkets, besides extending credit to high-rollers, also
operated a shadow banking network that helped players skirt
China's capital outflow rules that limit taking only the
equivalent of $50,000 out of the country in one year.
    Premium mass and premium direct players, who wager enough to
gain rebates on their losses and received credit from the
casinos, also utilized the methods to move funds. 
    But with junkets closed down, players have lost the most
convenient channel to bring money into Macau, said 2NT8's Tash.
    

 (Reporting By Eduardo Baptista; Editing by Anne Marie Roantree
and Christian Schmollinger)
 ((annemarie.roantree@thomsonreuters.com; +852 97387151; Reuters
Messaging: annemarie.roantree.thomsonreuters.com@reuters.net))