Macau Business: High-rollers: Adapt or perish

Macau Business

Special Report – High-rollers: Adapt or perish

By João Paulo Meneses

Will VIP gaming survive the overhaul of the city’s legal framework on gaming?

Macau Business | July 2022 | Special Report | Gaming in Macau: The new era

While some experts forecast a bleak future for high-rollers, others anticipate the segment will adapt to new times

One of the most profound changes to come in Macau’s new gaming concession term will be what many are already anticipating as the end of the VIP segment as we knew it.

It is true that in recent years (pre-pandemic), VIP gaming was losing steam, but it remains a hallmark of Macau’s casinos, as evidenced by the fact that 70 per cent of the market a few years ago was VIP-fuelled – this until China began tightening surveillance and hindering junket activity.

“It will be just as difficult (and perhaps more so) for high-rollers to take large amounts of money into other jurisdictions. They have to adapt to the new Macau, which means less bankroll and fewer trips a year (as many provinces are spacing out visa issuances per player),” Alidad Tash, Managing Director, 2NT8 Limited, tells Macau Business.

Given that “the junkets were the key channel for high-rollers (i.e., premium mass and premium direct players) to get money into Macau,” Mr Tash also predicts, “it will not be business as usual for the other channels (jewellery shops and UnionPay), as I foresee higher government scrutiny.”

Changbin Wang, Director of the Centre for Gaming and Tourism Studies at the Macao Polytechnic University agrees: “The high-roller market has been shrinking due to restrictions from mainland China, and it will continue to decline after the new gaming law comes into effect, because it will be very difficult for promoters to do business in mainland China, where most of their customers reside.”

The perspective of Macau-based lawyer Pedro Cortés, who has been writing and doing research on gaming issues, is more categorical. While on the one hand he believes that “high rollers from parts of the world other than China will be the target for Macau operators / promoters in the future,” as to high-rollers from mainland China, he doubts “that they will be able to continue to come to Macau or go elsewhere, given the restrictions imposed by the mainland authorities after the amendment to the criminal law that states that the organization or solicitation of cross-border gambling (land-based or online) is a crime punishable by up to 10 years’ imprisonment.”

Mr Cortés stresses to Macau Business that this amendment to the criminal law was followed by three announcements of blacklisted jurisdictions, plus the recent crackdown on Macau’s junket operators. “Hence, maybe we will have high rollers but of different nature to those that gambled in Macau in past decades.”

This Managing Partner at Lektou law office thinks there will be no need to reinforce existing controls: “I believe the controls already in place are crystal clear: mass market, yes, with parsimony, but high-rollers will not be allowed to take out their money in the same way they’ve done in the past. Simply because the junket channels are closed and the law in force criminalizes such activities.”

However, Carlos Siu Lam, Program Coordinator of the Macao Polytechnic University’s Bachelor of Business Management in Gaming and Recreation Management, believes they will continue to come to Macau.

“I think high-rollers are always welcome in Macau, and they may go to the VIP-rooms operated by the concessionaires. Compared with other jurisdictions in Asia, Macau is strong in its modernization, convenience and safety in its tourism products and services, ” Professor Siu tells Macau Business. “Unless these patrons want to get something different – in which case they may go to other jurisdictions with less control but with higher risk.”

Is it nothing but bad news then for gambling in Macau, with what appears to be the gradual extinction of the high-roller segment?

Ryan Ho, another lecturer at MPU – in the Centre for Gaming and Tourism Studies – sees a silver lining: “What is certain is that the mass market-oriented business model will definitely be more sustainable for Macau casinos in the long run. As opposed to the very slender profit margin of VIP gaming, the mass table hold is around 20 per cent, and some casinos even record a much better win percentage. This could be good news for operators.”

Virtually no casinos beyond 2035?

“I am quite pessimistic about the future of the industry, and in one scenario – which takes into consideration the current policy – I even believe we might not have casinos in Macau beyond 2035 – or perhaps we’ll have some small gaming halls exclusively for foreigners. This is nothing that hasn’t already happened in the past. For instance, when the first Macau Gaming Law (Legislative Diploma 1496, of 4 July 1961) came into effect there were several restrictions preventing some Macau residents (the law mentioned those aged 25 or below, of any nationality, domiciled in Macau) from gambling in the then-territory’s casinos,” Pedro Cortés told Macau Business.

“Concentrate on the old industries and make them grow”

“In a fiery outpouring, gaming businessman and former legislator David Chow Kam Fai urged local authorities to listen to societal opinion and focus on local core industries as the only way to recover an economy badly hit by the COVID-19 pandemic,” our sister publication, Macau News Agency, reported last April on the public intervention from the founder of Macau Legend.

“I don’t know what the government is doing. Do they even know, themselves? The gaming industry is very important for Macau, it has continued for 20 years, but now they have cut a lot of things,” the businessman said after taking part in an event organised by the Federal General Commercial Association of Macau Small and Medium Enterprises.

“It is the government’s responsibility; we tried to tell them. They have to listen and try to solve it reasonably. Talk to the Chinese government. The gaming industry in Macau is important. Don’t worry about following a new programme; concentrate on the old industries and make them grow. That is the only way to survive the next five years,” Chow added.