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AGB Part 2: Alidad Tash on Junkets, RFID and gov’t partnership

Macau: Junkets, RFID and gov’t partnership – Alidad Tash

By Kelsey Wilhelm - January 15, 2024

In the second part of the Face to Face sit down with 2NT8 Limited’s Managing Director Alidad Tash, we delve into the shifting role of Macau’s junkets, the frontloading of non-gaming spend – now upped to nearly $16 billion over 10 years, and how to align government and private-sector initiatives to benefit both. In addition, RFID tech is placing MGM China far ahead of the competition.

Kelsey Wilhelm: Given what a major role the junkets provided before in bringing money into and out of Macau, what is changing? How are these figures still able to reach those levels, even though we don’t have that avenue for the movement of funds?

Alidad Tash: There are no more junkets like they used to be. The only reason gaming companies would be willing to pay 42.5 percent of their money coming into a junket was they were able to do something they could not. They could go into China, utilize thousands of their own sales agents, lure gamblers, give money to them, bring them over here with illegal funds far exceeding what they’re supposed to take on an annual basis.

They were able to basically break the law or effectively do the kinds of things that a casino would never be able to do. So they were doing some of the dirty deeds that the government of mainland China and the government of Macau both saw as a threat, and as a result, cracked down on junkets. And what you have now is a far more family friendly casino operating environment, whereby the junkets are basically glorified travel agents. All they do is: “Would you like to come on such and such a date? Let me go make the travel arrangements.” And that’s not worth much to the casinos.

That’s why the casinos are just saying “Yeah, no problem”. They lost the power to negotiate in the past as Suncity, a big company who said “I’m gonna bring this player, I want this much of commission, I want the best room”. And if you said “No”, then “Okay, then I’m going to take my 10 players from this property to your other property”.

No more, they have no more power of negotiation. They can’t lend anything else anymore. They can’t even go ahead and lure people from China into Macau.

And their illegal methods of bringing money over have been shut down. So they’re not junkets anymore.

Kelsey Wilhelm: And we saw that with the jailing of Alvin Chau, who got 18 years. Then also the head of Tak Chun, which was the second largest junket in Macau, Levo Chan, he and a bunch of other people have also been jailed for their junket activities. That happened within the past couple of years.

But then we got a strict reminder again, this year with CCTV putting out that report, specifying how much money they believe Alvin Chau and Suncity had been able to make through online gambling activities with the Philippines. So it seems possibly like they’re sending a message, again, to Macau, reminding them 2024 is going to be a great year but let’s keep this mass ball rolling.

Alidad Tash: Mass and non-gaming. Family-oriented gambling. The government would much rather have that. The government has nothing wrong, no issues with these gaming operators generating lots of money. They would much rather have them gain it and gain all these billions of profits. I mean, remember, they made something like $9.5 billion in 2019. This year, I think the number is going to be something close to $6.5 – $7 billion. They’re gonna say “Great, make even more money, but please make it more on the non-gaming side.”

And as you know, after years of pleading, begging, demanding, the Macau government finally got its wish and it was able to utilize this license – this 20 year license, which is now a 10 year license – to its benefit by making all these non-gaming commitments. And suddenly, it finds itself on the receiving end of about MOP130 billion, something like $16 billion, of non-gaming investments from these six gaming operators.

To begin, like I said, they’re going to become non-gaming operators and they’re going to go ahead and hopefully add a lot more infrastructure, more non-gaming to Macau – the kind of division that the government really wanted to do but they’ve never had the opportunity – never had a carrot and a stick large enough – to lure these companies to do that.

Kelsey Wilhelm: As a part of that, also, you know, they pushed within the gaming contracts that if they did exceed that figure, that would trigger that 20 percent additional non-gaming investment clause.

Alidad Tash: And we held our breath and we found out on the first day of January this year, a couple of weeks ago, that that magical number was reached. And as a result, they did receive another 20 percent in non-gaming investment. So basically, instead of $13 billion that had to come in is now $16 billion that’s going to be spent by the six gaming operators over the next 10 years.

You say over the next 10 years, in reality who’s crazy enough to spend money on year 10, or on year eight, or year nine? They’d much rather make it front loaded. So actually, that means that the operator is going to spend even more money in the first three, four or five years than they’re going to spend on the second, so at least they can actually have a return on investment.

Kelsey Wilhelm: There has to be a roadmap, they have to go through an annual evaluation process, have to submit new plans every single year to make sure that they’re in line with what the government wants. We obviously saw some pushback on the plans that they had submitted before, and what they’re thinking about them.

How is that dialogue happening between the gaming operators and the government? Is it clear and out in the open? Or do you think that there’s some people we’re still kind of trying to figure out what’s gonna happen?

Alidad Tash: You know what, that is probably one of the biggest sources of frustration is that the government does not stop calling and basically, quote, unquote, harassing these gaming operators to go out and spend, spend, spend. But it doesn’t give nearly as much guidance as to where to spend. Not everything that’s done has to be equal.

Let me give an example. They took Macau, chopped it into six equal pieces, and gave it to different operators. They said “hey, Melco, hey, Galaxy, hey, Sands, hey, all six operators, here’s your neighborhood, here’s your neighborhood: revitalize it, great.”

But you can’t do that, just say: “we’re gonna have six movie festivals. And here’s six pieces. And here’s six pieces for the next Art Museum. And here’s six for hospitals”. It needs to figure out a way to come up with some overarching (plan). On the one hand, it’s whipping these individual gaming companies to go spend, spend, spend, but it doesn’t give any guidance. And as a result, these people may be overdoing some things and under doing some of the other ones. And I think that’s something that needs to be addressed, I think they need to generate that overarching goal.

The second criticism I’ve heard from multiple operators as well as citizens, the government has certain powers that the gaming operators do not. For example: you can’t expect these guys to go ahead and build, build, build, and hire these various people and bring them on board without giving them the visas required to do that. And we’ve seen some of the challenges we’ve had with immigration, whether it’s IPIM (Macao Trade and Investment Promotion Institute), or the immigration department (which) does a better job.

But overall, the government has to recognize that in terms of transportation and infrastructure, a bigger airport, better English signage. In many buildings, signage is still in Portuguese and Chinese.

All of that stuff needs to be fixed, because if the government has the goal of bringing non-Chinese people, which is what it’s whipping these operators to concentrate on, without doing its own part of hiring and making it more English-friendly, making taxis more reasonable, the government’s gotta go play its role.

And I think, again, it’s not as disastrous as the first quarter, second quarter, because even the government was caught off guard by this volume of visas that suddenly, after three years of shedding jobs, had to go and load those guys back.

It’s becoming better, the government’s relations with the various gaming operators has become better in the fourth quarter than it did in the first and second quarter. I think eventually, they’re going to have to coexist and really realize they’re in it for the same reason. The gaming operators making more money, at the end of the day, means more bonuses to the 60,000 employees of these various gaming operators, the biggest employer in Macau.

Kelsey Wilhelm: Well and what got us through the pandemic? It’s the fact that we had 85 percent of the government revenue coming from the casinos for so long. And those were the funds that we were able to then spend on everything from personal protective equipment to vaccines. So, you can’t discount what has been contributed by these operators.

And it was really interesting to see the dynamic between the government and the operators during the lead up to the attribution of the licenses. And it does feel, at least on the ground here, like that dynamic has changed slightly, it seems like they are valuing the operators a little bit more than the operators – seeing this massive uptick.

And then looking forward to what this can be, especially because the onus has been placed pretty much on the six operators to do what Macau’s non-gaming development plan was supposed to do, and which had not been implemented by the government so far.

Alidad Tash: Well, remember the gaming operators – I’m not a big defender of gaming operators – but I’m telling you they have said every time the government said “Jump” they’ve said “How high?”

Since the beginning of the pandemic in 2020 and 2021, the most disastrous years in terms of revenue and profit generation, where you had losses, they gave out bonuses to locals, to the only people left, because most of the expats were pushed out, a very few percentage of a roadmap were left. They gave out bonuses.

Every time they’ve asked something – no more dividends. That’s very bizarre. And it’s the only jurisdiction where gaming companies which are independent, have to get permission from the Chief Executive to give dividends to their shareholders.

Kelsey Wilhelm: Which is very interesting, considering they’re publicly listed.

Alidad Tash: Exactly. They’re independent. This is not a government-run organization. And yet, they did that, fantastic. So the gaming operators have done everything that’s been asked so they cannot be punished. This is one of the reasons I’m such an optimist for 2024. Because unless they start acting the bad ways, and again it was never the gaming operators, it was the junkets that the gaming operators were so fixated on and addicted to.

Now that they’re gone, or they’re on the verge of extinction, I think the government doesn’t want to go ahead and punish the gaming operators. Gaming operators thriving means the Macau government coffers are going to get larger and bigger, which means also indirectly, all the workers are going to get bigger wages, are going to get jobs. The government did realize how painful it was when these six gaming operators are losing money: it’s losing money.

Forty percent of all the dollars that come in, you know, believe it or not, out of the $100 that comes in, gaming operators keep $25, $26, maybe $27, collectively of th at $100 coming in. The government makes 40 percent without even lifting a finger. And the rest of it goes in expenses and salaries and all the other goodies, helping out small businesses. So recognize the value of these guys. It no longer holds its nose when it thinks about those six gaming operators.

I think what the government needs to do is maybe take away some of its silly promises of “Oh, we’re not gonna have any more properties being built in Cotai”. Why not? Build a couple of hotels, keep Cotai as the only gaming area and maybe the Avenida de Amizade on the peninsula. Close all the satellites and keep very few casinos on the Macau side and keep everything else in Cotai. And that’s it. Keep those two areas.

Give the operators the tools, the tables, the slots, the hotel rooms, the land they need to thrive. Because the government makes more money in profit than the operators themselves, in terms of the bottom line. Help them out and the gaming operators will become non-gaming operators for you.

Kelsey Wilhelm: Looking to 2024 we saw that MGM had a stellar 2023. Are there any of the operators that are best positioned to then take advantage of 2024 and, coming to the end of the year, what would you predict would be the one who has gained the most market share?

Alidad Tash: Everybody said “MGM it’s only the first quarter. Oh, it’s only the second quarter. Oh, it’s you know…” They’re going to continue doing so well.

They have RFID technology. Next month will be the six year anniversary of MGM Cotai. That means they’re six years ahead of everybody else, when it comes to Walker Digital, these RFID tables, which are smart tables. And it’s going to take years, literally years, for the other operators to maximize or to optimize their tables, even though some want their actual RFID tables today, they’re not even going to get them until the second half of the year because there’s such a demand.

The government has unofficially pushed these operators to go ahead and generate RFID.


They will be fairly compensated for the amount that they’re gambling.

And it helps identify who plays where, so instead of putting Japanese and Koreans and non-Chinese players in their own little area, which is usually dead, versus a very busy area, the government can now go ahead and – using the system by the operators – to be able to track “This is how much money was allocated to the number of Japanese players. And look, it’s far higher than it used to be at the beginning of the year.” Therefore you’re going to go get some kind of an incentive to proceed. So they get the discount on their taxes.

So besides MGM, I think Galaxy is going to get its full use of the two new hotels, whereas last year, collectively, three or four months worth of the year, it was officially open. Andaz wasn’t fully open until the last month of the year. Now you’re gonna have 12 months of a brand new hotel, 12 months of the other brand new hotel, 12 months of this arena, that’s all positive.

Studio City, as I mentioned earlier, opened in June and the other hotel in September. Instead of half a year and a quarter of the year, now you’re going to have them for an entire year. That’s also: anytime you add more capacity – being it tables, which is no longer moving, or slots which no longer is fixed – adding hotel, which is the next level, I think they are going to benefit.

Now it’s very difficult for Sands to do so. I think Londoner – had there not been phase two of its renovation – I think Londoner did fantastic – but it’s going to be slowed down. I think Londoner is going to do fantastic in 2025 once its renovation is finished.

In terms of SJM, I see challenges for the next year, they’re still mired way down in fifth and sixth place.

And it’s basically up to the management of Wynn, management of COD, these individual properties, to see whether or not they can catch on to whatever else happens.

So I think again, the winners for me is going to be: MGM – especially MGM Cotai, Studio City and Galaxy. These three properties will benefit, all things being equal.

Kelsey Wilhelm: Well, we do have a lot of things that have come online and are now reaching the ramp-up point. It’s going to be very interesting to see how Macau can grow. 2023 was great. Let’s hope 2024 can progress even more. Alidad Tash, thank you again for your time. Alidad Tash, Managing Director of 2NT8 Limited. I look forward to seeing you again very soon.

Alidad Tash: Thank you.


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