by Nigel Huxtable

Recent growth in the VIP gaming segment has been spurred by an unhealthy increase in credit extended to players by new junket operators, the managing director of the Emperor Entertainment Hotel Ltd said at a recent Las Vegas Conference.
The Macau gaming market has reportedly grown by almost 62 percent in the first quarter of the year to 29.8 billion patacas. Last year the VIP market, for which registered junkets provide the players, contributed more than 67 percent of the total games of fortune revenue according to figures from the Gaming Inspection and Coordination Bureau.
Melco Entertainment (Macau) Limited's (MPEL) Crown Macau has shaken up the market this year since the signing of an agreement with Ama International Limited, which provides liquidity to nine junkets operating at the casino.
“Ama provides substantial liquidity to its VIP gaming collaborators which may not be otherwise available to them under their existing arrangements” MPEL stated in a press release last year.
If a set target of gaming chip turnover is reached, Ama International will receive a maximum commission on sales of 1.35 percent, reportedly one of the highest rates in the market.
The deal took the casino from a total market share of 4.9 percent in July last year to company executives declaring it Macau's biggest VIP house in February with a 21 percent share of the high-rollers market.
January saw the highest monthly gaming revenue ever recorded at 10.43 billion patacas.
However members of the Macau Gaming Panel of the JP Morgan Gaming, Loging and Restaurants Conference held last month, attributed the recent growth to looser credit lending to new junket operators keen to reach commission targets.
“There are also some junkets that are new to the industry, they get crazy and because the casino operators are blindly increasing the rolling commission to anybody,” said Vanessa Fan, managing director of the Emperor Entertainment Hotel Ltd which previously operated VIP rooms in Stanley Ho Hung-sun's Hotel Lisboa and now contracts high-rollers directly to play at its Peninsula casino.
“They are smart, they let the junket absorb the credit risk and the junket ... (has) to meet a quota before they can get a higher range of rolling commission, so inevitably they will try to increase turnover to reach the target”.
Richard Lum, chairman of Dore Holdings Limited, which last year bought into the VIP business and controls junkets that deliver customers to Sands Macao, Venetian Macao and Wynn Macau, agreed an increase in credit had led to recent growth.
“Another reason for the expansion of the business is due to the expansion of the credit by some of the junkets in order to boost their business for one reason or another,” he said.
Representing Galaxy Entertainment Group Limited on the panel, investor relations principal Peter Caveny said the recent market jump should be ignored with last year's growth providing a better indication of the market's health.
“If you walk into a casino and you pass cash to Chinese players, they will play it and turnover will go up,” he said.
“Let's just discount the immediate past where you have had an exogenous shock of excessive credit.”

Commission
During the panel discussion Mr Lum confirmed that commission available to junkets has been rising in recent months, due to the “power” the operators currently have over casinos.
“In the past they started with 1.1 percent as the commission but now they give across the board 40 percent of the net win that translates to roughly 1.3 percent,” he said, adding that the upward trend is likely to continue for at least two years.
However none of the three casino executives on the panel admitted to raising commissions.
“We did not increase our junket commission recently and we can still keep very good business,” said Marco Lee,  deputy chairman of Macau Success Limited which co-owns the Ponte 16 casino-resort with Sociedade de Jogos de Macau (SJM).

Crown copy-cats
The Ama International deal with MPEL has caused a number of junkets to also seek better commission deals from casinos, with his own company also considering moving to one concession holder, said Mr Lum.
“To the best of my knowledge there should be another two copying (Ama International), one is with SJM and they are asking for 55 percent of the net win (the industry standard is 40 percent), but they have to be responsible for the expenses of the VIP rooms, if we deduct that it should be about 50 percent of the net win,” he said.
“We do not preclude the possibility that we are going to bundle with one major concession holder so that we can have what we call the win-win situation”.
Ms Fan blamed the rising rates on the new entrants to the market.
“All of the Western operators are keen to get into this high-rollers market ... but if they are not long established they need to go through agents, so what they do is raise and raise and raise the rolling commission,” she said.