Operators must be transparent to survive
Senior executives from the Las Vegas Sands Corp. discussed the future of Macau junket operations at the JP Morgan Gaming, Lodging, Restaurant and Leisure Management Access Forum in the United States this month.
Sands President and COO Rob Goldstein told attendees that Macau is still “the greatest gaming market in the world—and will be forever, in my mind,” despite political pressure to end corruption by high-rolling gamblers. That crackdown, which began last summer, has resulted in nine straight months of decline in what once seemed an inviolable gaming enclave.
Goldstein said the Sands Corp. wants to continue working with the junkets, but only if they conform to what Chinese Premier Li Keqiang calls the “new normal,” with stricter observance of existing regulations, and enhanced oversight of large cash transactions. Junket operators arrange lines of credit for high rollers, coordinate their travel plans and see to their accommodations.
“We believe there is a place for junkets… I don’t believe it will be as nearly as important as it’s been…but they remain a part of the overall composition of Macau revenue and EBITDA,” said Goldstein. “We have built capacity for them, the magnificent suites and the amenities this VIP customer wants. Our biggest concern is regulatory.”
In October, an industry source close to Sands China told GGRAsia that the Macau operator was barring a local industry practice of allowing junket operators to take proxy telephone bets in some Macau casinos on behalf of VIP customers. The source said it was “a continuation of Las Vegas Sands and Sands China expanding their leadership role on compliance-related matters.”
Goldstein said if junket operators are transparent, “we will embrace them and work with them.” There may be fewer to work with. In January, two leading junket operators, David Group and Gold Moon Group, closed rooms in Macau.
“The rules have changed, and the junkets have to adhere to this new philosophy,” he said. “We have heard nothing from the Macau government or Beijing that junkets are persona non grata. We have heard that practices that are not transparent are off the table.
“You can play this [industry] game two ways,” he added, “but the only smart way to play it is completely to embrace the compliance issue and run with it.”
Goldstein added that the company will run leaner to compensate for recent losses; overall, Macau’s gaming industry lost $75 billion, or 2.6 percent in value during 2014, and fell 49 percent to 19.5 billion patacas (US$2.4 billion) in February, despite the Chinese New Year holidays, which drew record visitors.
Citing an unnamed source, Bloomberg News reported that the Sands Corp. is “reconsidering big-ticket entertainment events (in Macau), such as a Rolling Stones concert last year that failed to attract big-stakes bettors.” Instead the company may focus on Chinese entertainers.
