Macau is China’s gambling capital and the only place where gambling in China is legal. In the recent past, Macau has overtaken Las Vegas as the gaming capital of the world. The reason for the rise of Macau is because of the Junkets offering VIP services to Chinese nationals. The Junkets can easily transport Chinese citizens to Macau as VIPs due to the illegal nature of gambling in China. The casinos are now generating about five times the revenue that is collected in Las Vegas. Macau was conceived to be a tourist attraction when Xi Jinping came into power. But there seemed to be consensus that Macau had become overly dependent on gambling and this had to change.
Crackdown on Corruption
The government sought to crackdown on corruption, as well as revive the Chinese economy that had seemingly taken a slump. Macau serves as a tourist attraction where people come for the fun and the spectacle of the city. Amenities such as water slides, a Batman ride and the half-size Eiffel tower were constructed to ensure that Macau appealed to tourists. The city endured a huge slump between 2014 and the end of 2016 when it tried to reach for mass markets rather than aim for the VIPs.
Investments in hotels, as well as hospitality hardware, have made considerable steps in the recovery of the town. But much of the capital has been trickling from a very unlikely source. Over the past few months, the return of VIP gamblers has coincided with a recovery of the economy of Macau. For the past 11 months, there has been a constant rise in the gross gaming revenue. In the previous two years, the industry had taken a blow and the revenues had plummeted to a record low. In June of this year, there was a recorded growth of 26% in the market and this for many was deemed to be a disappointment. It was considered to be a disappointment due to the tremendous levels of growth that have people have witnessed over the past few months. Since the beginning of the prior 11 months, there has been a growth of $18 billion dollars in the sector.
The government introduces mass markets
The government’s attempt to introduce mass markets in the casinos may appear as somewhat successful. But when compared to the VIP revenue from gambling, it pales in comparison . In the first quarter of this year, the revenue generated from high rollers that are funded by Junkets has grown by an average of 17%. In comparison, this revenue is more than double what the mass markets bring in. Most people think that the mass markets have a more significant influence, but it is hard to argue with the figures. The VIP market, which took a hit in 2014, is now seemingly stronger based on the speed of its growth.
VIP revenue outdoes mass markets
Analysts from JP Morgan believe that VIP revenue growth overtook the mass market revenue growth by a total of 9%. This is the first time that this has occurred since the beginning of 2011. Since the beginning of the year, there has been a total growth of 19% in the VIP revenue versus the 10% in the mass market. Experts estimate that in the next quarter, there will be a 17% increase in the VIP revenue as compared to 13% in the mass market revenue. However, the mass market does also play a role in generating revenue in the city of Macau. Studio City, which is a major attraction, has a multi-stage magic show and the world’s largest figure-of-eight wheel. This establishment is an example of general entertainment that caters to mass market consumers who are just looking for a good time, not VIP-style opulence.
Arrests in China
Just last year, the police in China arrested Crown Resorts employees. After the arrest of these employees, it became evident that mainland China was not the ideal place for Casinos to operate. Most casinos shut down their operations in China and now rely on Junkets for marketing and for delivering VIPs to their casinos.
Trump’s restrictions favor Macau’s gambling industry
Another factor that is enhancing the growth of the junket market in Macau is the travel ban and restrictions that have been implemented by President Trump. Las Vegas is the dream destination of most gamblers because they believe that they are playing against the best in the world. However, the restrictions that have been implemented by Trump are making it harder to visit Las Vegas. For this reason, most people are looking for another option to satisfy their need to gamble with the best. The other viable option is Macau and its top-notch Junkets which make it more desirable to the people unable to access Las Vegas.
The revenue from VIPs is more than that of the mass market, which means it is a significant player for the Chinese government. The trend is expected to continue and the VIP to grow exponentially in the coming years due to Trump’s influence on the travel restrictions. The continued construction of facilities such as hotels, casinos and entertainment spots will only work to China’s advantage, drawing in more viewers and increasing revenues.
Suncity’s rewards program
Suncity is one of Macau’s best Junket operators and has devised new ways to tap into a market that is growing daily. The operator has introduced a package where high rollers can attend a car race through their services, and it is working in their favor. The company has also introduced a rewards program where people can redeem points gained from bets on the table to win luxury items. The rewards program, according to the founder, has helped boost the betting volumes by around 30% in the past year. It’s projected that, there should be a 20% increase for the junket when the high rollers use the credit extended to them to gamble.
The program is marketed to people in mainland China to restore the popularity of Macau which had been hit by a slowdown after the anti-corruption drive that was headed by the President. The diversity of the junket, which incorporates travel and entertainment features, has helped it evade the hands of Macau regulators that are intent on restricting the gaming industry. The travel offerings bar it from regulation because they are not directly tied to gaming and can, therefore, be advertised in mainland China.
The company has also bolstered its brand by staging concerts and other events to pull people to the Macau Strip. In the course of a year, the company used private jets to transport clients to a party in Manila, treating them to lavish accommodations. The VIP rooms offered by the Junket have also been registering growth. In the previous month alone, there was a total of $19 million in bets placed at the table in the VIP rooms. Despite attempts to increase oversight in Macau’s gaming industry, $30 billion in winnings were posted by VIPs in the past year alone.
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