If junkets shift, LV companies may hurt

A decision to change where some of Macau's top junket operators bring their big-spending customers could be troublesome for Las Vegas Sands Corp. and Wynn Resorts Ltd.

Ten Macau gambling representatives signed a new agreement this month to take their high rollers to the Crown Macau, which opened in May. The casino is operated by Melco PBL, a joint venture between Australian tycoon James Packer and Hong Kong businessman Lawrence Ho, son of Macau casino pioneer Stanley Ho.

The $565 million Crown Macau is on Taipa Island, between the main casino cluster on the Macau Peninsula and the growing gaming operations on the Cotai Strip.

The new arrangement could funnel a higher volume of the VIP business to Crown Macau's ultraluxurious private gambling rooms and away from the just-as-luxurious gambling suites at the Sands-owned Venetian Macau and Sands Macau and the Wynn-owned Wynn Macau.

"It is still too early to know the impact of this deal," Goldman Sachs gaming analyst Steven Kent said in a note to investors. "Wynn and Las Vegas Sands properties have amenities beyond just gambling and we suspect many gamblers would rather go to these facilities.

"However, if the customer is beholden to the junket operators, either due to history or other services, then the customer may be forced to go with the junket choice."

Roughly 70 percent of Macau's annual gaming revenue comes from the high-end VIP business, analysts said. The recent opening of the $1.2 billion MGM Grand Macau added a player seeking action from the VIP customer.

The Crown Macau's private gaming salons are on the 37th floor of the 38-story resort and have spacious gambling quarters, private dining and living rooms and expansive views of the Macau Peninsula.

In an interview in September, Crown Macau CEO Greg Hawkins told the Review-Journal that a high-end customer is required to put up $30 million in Hong Kong dollars for gambling purposes, roughly $3.9 million in U.S. currency, to gain access to the private salons.

Kent said the junket representatives, who will receive a higher commission rate from the deal, will guarantee a certain amount of high-end play to the Crown Macau.

"In the near term, this play could come out of existing Macau casinos and could create short-term volatility in this driver of individual property results," Kent said. "However, it remains to be determined how successful the deal will be and which casinos the play will flow out of and we still believe there is significant growth potential in the Macau VIP market."

The Inside Gaming column is compiled by Review-Journal gaming and tourism writers Howard Stutz, Benjamin Spillman and Arnold M. Knightly. Send your tips about the gaming and tourism industry to insidegaming@reviewjournal.com.