New Junket Profit Sharing Plan A Game Changer

Posted: September 30, 2010 in Uncategorized

30th Sept 2010  Thur

Comment By:    Steven Micky  (Macau)

New development of VIP Gaming landscape in Macau

Game Changer In Macau Casino Hub
 
 
The latest development in the world’s largest casino hub (Macau) has shown that the VIP gaming landscape in the Special Administrative Region is still subject to on-going evolution  Here’s the extract from a gaming publication: 
 
“Remember the price war that started in the Macau VIP baccarat trade back in 2007 when Crown Macau offered a junket aggregator 1.35% rolling chip commission? It seems the price wars are back, but this time in the form of competition over profit sharing.
Industry rumours suggest one Macau operator is now dangling in front of junkets the carrot of a 57% share of the VIP profit, keeping only 3% for itself. To put that in perspective, that’s 15% more than Wynn Macau has reportedly being offering junkets under its profit share set up.”
 
  
 The above change means that margin war of casino operators (in Macau) would only become more “bloody” than before. This is a savage situation that for those who are not prepared for such drastic change of profit-sharing terms will eventually be sidelined.
 
The report further disclosed that “If the latest reports on a heating up of profit share competition are correct, it would mean the advent of a 40:57:3 model in the Macau VIP trade that could be as revolutionary (and potentially as provocative of a price war) as anything seen during the VIP commission battles between late 2007 and the autumn of 2009. The rumoured new VIP model would mean the government gets 40% in tax off the top, and the net (i.e., the gross, less player win) would be split 57% to the junket and 3% to the casino operator. “
 
In conclusion, I would think that another significant impact is that, for casino operators who are still in the process of gearing up another mega resort in Cotai Strip, their chances of survival will be rather remote. All new mega (casino) resorts require sizeable critical mass of “mass-market feed” for sustainable operations and profitable margins. Under the new development of profit-sharing for junkets at 47 – 57%, Macau Studio City (already with financing issue), Galaxy Cotai Resort and Lot 5 & 6 of Sands will be hit hard. As the growth trends for mass gaming market is not moving by leaps & bounds.
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Comments
  1. Jim says:

    This is pretty shocking. What’s the source of this 57% profit share proposal? Thanks.

    Jim

    • Admin says:

      According to the writer, the information was from Macau practitioners. We have made a check and found that propfit-sharing with junket room operators had generally gone up much, with variations from 47% to 57%. The strong junkets in Macau are calling the shot.

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