Alvin Chau’s arrest continues to send shockwaves through the casino industry in Macau.
Now, IAG has reported that the concessionaires are considering terminating all contracts with junket operators in the wake of the arrest. The concessionaires are in charge of issuing Macau’s casino concessions, the authorizations that allow companies to operate casinos in the SAR.
If they go through with the terminations, it will kill the VIP industry as we know it from both ends.
Good luck finding a nosebleed poker game in Macau this week.
Chau’s arrest last week put the first serious hole in the ice, but cracks had been spider-webbing across the surface of Macau’s junket industry since June 2020.
Last summer the Chinese government put currency export on its list of national security concerns. The junket industry depends on a version of currency export and so found itself under a microscope. Crackdowns began almost immediately, but nothing so severe as to cause a panic. Just a few cracks showing in the ice and little cold water pushing up around the junket operator’s feet.
Folks are falling through that ice now.
End of an era
The Suncity group has gone ahead and killed its own junket business, with no clear path to paying back depositors as the relevant funds have been frozen.
Suncity Gaming Promotion Company Limited, the group’s junket arm sent a letter to its employees explaining that, “in view of the force majeure factors currently encountered, the company regretfully announces the termination of its business with immediate effect from December 10, .”
Suncity was responsible for roughly 40% of the VIP traffic into Macau.
Melco and Wynn Macau responded to the situation by closing their VIP sections. Tak Chun dropped its agreements with junket operators and laid off related staff. So the junket industry in Macau is all but finished.
Barring a sudden change in the direction of both the Chinese government and the Macanese commissionaires, the casinos of the Macau Special Administrative Region are going to have to find something else to do with their VIP rooms. That will probably mean an expansion of mid-stakes gaming and a big push to promote other forms of tourism. One might expect casinos to shift a greater emphasis onto the hotel, retail, and show business side of things.
In the meantime, Macau might be looking at lean times as stocks and revenue are both down.
Even without the commissionaires stepping in, it is clear that something has to give. Macau seems terrified of China stepping in if they don’t tidy things up themselves. Chau’s arrest is a message sent, delivered, and signed for.