WHIRL POOL: episode 8 “It’s The Junkets World”

Posted: May 19, 2011 in Uncategorized

Story by:  Alan Kaplan

19th May 2011

Whirl Pool episode 8

Story by:  Alan Kaplan

After one year of trying to fend off junket operators from its casino, SilverStone management finally conceded defeat in their effort.

Silverstone set up its premium players club called The Rooftop.  For the first year of its operation, the result was real bad. In this part of the world, there isn’t a sizeable market for direct premium players. Most high-rollers are looking for three things: concealment of real identity, transfer of funds and, credit facility.
Only the Junkets could meet and sustain such demands from high-rollers. Casinos in Macau already operate under low margin in general due to high gaming tax regime imposed by the authority (40%!). It is therefore highly unlikely that casinos would handle credit risk themselves.

The Rooftop was renovated with posh design and great service in mind. Hoping that it would bring in bundles of high rollers for the casino. But that equation was completely out of whack. Chinese high rollers continued to stay close with junkets. The high rollers felt safer with junkets.  After one year from opening, The Rooftop was then divided into two portions. One area of VIP salons remained to be  managed by casino VIP staff and a couple of rooms were ‘leased’ to some junket operators. The Nevada jurisdiction does not allowed American casinos under which to operate junket rooms. However, SilverStone ‘by-passed’ such a restriction through a creative arrangement. The casino told Nevada that the high roller salons (rooms) were ‘fully managed’ by casino instead of junkets. Though players were brought in by junkets. That seemed to work well, stopping Nevada from further questioning.

Very soon those high roller rooms operated by junkets were producing the necessary results. In reality, the concept of direct marketing to high rollers had failed big time. That’s regardless of how grand a premium club like The Rooftop was to be. Macau casinos still needed junkets for  their VIP gaming revenue. Till to date, this scenario hasn’t changed. Macau VIP gaming holds 75% of total gross gaming revenue generated.

James was very amazed about how those junkets behaved in SilverStone Casino. They hired their own staff who wore different uniform from the casino staff, cooked their meals in The Rooftop Club, junkets & their promoters wore jeans & T-shirt, scolding casino duty staff, shouted at senior vice president of VIP gaming, etc. etc.

Soon after the launch of The Rooftop Club, Beijing government started sending officials to Macau and tried to understand this animal within the casino. When on occasions James brought those Beijing officials into the VIP area, he could sense that they were highly impressed. Beijing now understood that why there were huge amount of hot cash flowing into Macau, at the rate of RMB600b annually! Of course, cash flowing through illegal “underground banking channel”… A free flow pipeline of funding for Macau casinos.

It’s The Junkets World.


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