Are Junkets in Macau in Danger of Failing?
For many years, Macau has relied heavily on its junkets to bring in high-rollers to play in casinos. VIP high-rollers once accounted for more than 70% of the revenue earned at casinos in this territory. Recently, junkets in Macau have struggled to bring in the players that once flocked this area. Is this business dead?
Let’s look at the recent updates to Macau’s gambling industry. Junkets are struggling for business, and if the current trend continues, Asia’s gambling hub may be in trouble.
What Exactly Are Junkets in Macau?
Thousands of gamblers from China head to Macau every single day to make bets inside the territory’s many casinos. These gamblers have certainly helped to bring in revenue, yet the big money here has always been in high-rollers and VIP’s. Junkets are groups responsible for bringing in these big-time players.
Junket operators act as facilitators for some of Macau’s biggest casinos. They offer high-rollers free accommodation, entertainment packages, and more. In exchange for these free perks, the VIP’s agree to a minimum guaranteed rolling chip turnover. In other words, they’re promising to bet and bet big.
These junket businesses earn commission off the players they bring into casinos. Without an influx of high-rollers, these businesses can fail. Unfortunately, that’s been the case in Macau over the past couple of years.
China’s economy has slowed down dramatically due to trade disputes with the US. As this economy slows, fewer people here choose to partake in gambling. Earlier this month, we reported on the news that Macau’s revenue earnings had dropped for the first time since 2016.
It’s beginning to look like junkets in Macau are in trouble. Recent reports are now claiming that these businesses are earning a significant portion of their revenue from overseas.
Macau Junkets Expanding More Overseas
The junket business in Macau was a good one for many years. That may not be the case anymore. The number of junkets in Macau were said to have shrunk by more than 8% over the course of 2018. Only about 100 of these operators are now available in Macau.
We’ve covered the increase in casino gambling around Asia. Countries such as the Philippines and Vietnam are now investing heavily in this industry. It seems Macau junkets have taken notice and are offering their services abroad more than ever before.
Many junkets that previously worked exclusively in Macau are now said to offer services for casinos in smaller markets. Gambling analyst Jeremy An gave his take on this by stating,
“Overseas business is growing faster than Macau, but not at the expense of Macau. Growth is mainly coming from the Philippines, Vietnam and Cambodia, while [South] Korea and Australia are not doing so well.”
What to Expect for Macau’s Casino Industry in the Future
Some people were quick to claim Macau was in danger after the reports that revenue was dropping. It’s certainly not ideal for businesses here, yet revenue earnings actually dropped less than what analysts were predicting. Macau is and has been the biggest gambling destination in the world.
The fact that junkets are beginning to take their businesses overseas may be more of an indication that Asia’s casino industry is booming. Even countries like Japan are finally changing their stance on casino gambling.
Many analysts predict that revenue in Macau will continue to fall for the majority of 2019. There was a slight boost in earnings here due to the Chinese New Year, yet things quickly began to wind down within a few weeks. We can estimate how the casino industry here will perform based on how well China’s economy is doing.
It remains to be seen how long the dip in revenue here will last. For now, junkets in Macau are supporting themselves with business’ based in other countries. Casinos based in these countries are probably enjoying that fact.
Do you think the gambling industry in Macau will begin flourishing again? Make sure to let us know what you think in the comment section below!
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