Macau’s VIP Junket Landscape: A Shift in Strategy Until 2026
The Macau authorities have decided to uphold the existing limit on VIP junket operators for at least the next 18 months, maintaining a cap of 50 licensed promoters, as outlined by the Gaming Inspection and Coordination Bureau. Currently, only 29 junkets are active in the gaming capital, revealing that less than 58% of the allowed slots are currently filled.
While this cap suggests potential for expansion, the landscape is unlikely to see a significant influx of new operators. The junket sector has been experiencing a steady decline since its heyday in 2014 when 235 operators contributed approximately 60% to overall casino revenues. Fast forward to today, and the number of operational junkets has dwindled dramatically, leading to only 18 remaining active.
A Changing Ecosystem
Historically, junkets thrived by attracting affluent high rollers to casinos, offering services like travel arrangements, accommodations, and substantial lines of credit for substantial wagers. However, this model has faced challenges, particularly following Beijing’s clampdown on corruption, which targeted both the movement of capital and attempts to circumvent foreign-exchange regulations.
The situation deteriorated further in 2023, marked by scandals involving prominent junket operators. Alvin Chau of Suncity Group received an 18-year prison sentence for over 100 counts of illegal gambling and fraud, while Levo Chan of the Tak Chun Group was sentenced to 14 years under similar charges. Additionally, Ji Xiaobo, once associated with the Hengsheng Group, was labeled a "criminal syndicate leader" by a Beijing court. The repercussions were profound, leading to the dismantling of major junket operations, with many shifting focus to jurisdictions with lax regulations, like Vietnam.
Adapting to New Realities
As the regulatory landscape evolves, the remaining junkets in Macau now operate under a revamped framework. Under the gaming law enacted in 2022, these operators can no longer share revenue with casinos, relying instead on a fixed commission of 1.25% from rolling-chip turnover. Their operations are also restricted to partnerships with a single casino concessionaire, although the latter can collaborate with multiple junket operators. The era of dedicated VIP rooms is fading, and new regulations effective in 2024 will ensure that only casino concessionaires can issue credit.
Per recent analysis by The Economist, Chinese President Xi Jinping is advocating for a transformation in Macau’s gambling-centered economic model, aiming to refine the region’s financial practices and reduce its dependence on the gaming sector.
Conclusion
Macau’s VIP junket scene is at a crossroads, operating under tighter constraints and evolving regulations. While there remains a framework for growth, the challenges posed by legal scrutiny and shifting societal values suggest that the golden era of junkets may be transitioning into a more restrained and regulated phase. As the city moves forward, it will need to adapt to these changes while exploring new avenues for economic development beyond its traditional reliance on gaming.