Maybe the term ‘junket’ is something of a mysterious concept outside of Asia, so let’s explain what a junket is and shed some light on how they work.
First, a junket is the equivalent of a high stake or VIP room in the west; the only difference is that when they say it’s a room for High Rollers in Asia – they mean really high! Some Singapore casinos take bets on a single hand up to a breathtaking $550,000 versus a $150,000 ‘paltry’ that was accepted on the Las Vegas Strip, according to Forbes.
Sheldon Adelson, CEO of Las Vegas Sands, promised some time ago to invest the then seemingly outrageously large sum of $10 billion in Macau casinos and hotels, famously saying it would become “Asia’s Las Vegas.” He was corrected by an executive of the Macau industry who said: “Las Vegas will become America’s little Macau.”
While the media continues to shine their spotlight on the Las Vegas market, the Asian casino market is above anything in the US, in fact, head and shoulders. The Las Vegas casinos generated the not inconsiderable amount of $11.9 billion in 2018, but if you take a moment to contrast this with Macau’s $37.6 billion, you can clearly see that there are real VIP / High Rollers.
How is Junket in Macau?
Junket operators from Macau are working with casinos to introduce critical VIP gamers. Junket operators directly reach out to wealthy gamblers by offering luxury travel and accommodation promotions and other personalised services to lure them to Macau. Junkets are in essence responsible for a large portion of the VIP revenue from the casinos.
Junkets also bankroll their VIP customers through serving as bank-like entities, lending money to players and debt collection. They don’t own the casinos but are paid a commission for their services.
Junkets have a crucial role to play in the gambling market in Macau. At one time, 80 per cent of Macau ‘s revenue from gaming came from just 5 per cent of its VIP players.
The junkets were at the core of China’s crackdown on money laundering that started back in early 2014.
Over the years Junkets have acquired a bad reputation among the gaming community for their questionable methods.
“Some junkets also provide a means to outsource debt collection, relying on extra-legal mechanisms ranging in the worst case from suasion to violence,” Steve Vickers & Associates CEO Steve Vickers said recently.
For Americans, these kinds of “extra-legal” tactics are eliciting memories of an era in Las Vegas when casinos were run by nefarious characters tied to organised crime. But that chapter in the storey of Las Vegas ended decades ago.
New reports that flagging and freezing suspicious bank accounts by the Chinese government have junket investors pulling their backing. With junkets facing what might be a liquidity crisis, it is understandable that if the junket system collapses, casino investors are worried about the potential VIP income impact.