The overnight transformation of Macau from a sleepy Portuguese colony into the “Gambling Capital of the World” has been nothing short of spectacular. Multinational gaming corporations like MGM, Harrah’s, Genting and Sands have been quick to take advantage of China’s relaxed policy on direct investment. During the last decade, no fewer than 35 casinos have sprung up, including some of the biggest and most luxurious on Earth.
Unlike the casinos of Las Vegas or Atlantic City, which are supported by millions of middle-income tourists from neighboring California and New York, respectively, Macau has not promoted itself to China’s masses. Instead, it has focused like a laser on high-rollers—the wealthiest players of Asia—providing them with amenities and gambling opportunities suited to their special status as “whales.”
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VIP Play = Baccarat
In modern Macau, baccarat is far-and-away the most popular table game. In 2002, fully 85.9% of the year’s US$2.8 billion in total revenues came from baccarat. A decade later, that share had grown to 91.4% of nearly US$33.5 billion, indicating no slowdown whatsoever in the game’s appeal. But the truly telling statistic is the portion of this that comes from high-stakes play or so-called “VIP baccarat,” where a player wagering US$2.6 million per session is not uncommon. In fact, VIP rooms account for whopping 80.1% of all baccarat income.
Knowing this, virtually every casino on Macau vies for the lucrative VIP baccarat segment. The ones that have been most successful are those that go far beyond the gaming tables to offer a VIP experience unmatched anywhere in the world. Exclusivity and privacy are key selling points when catering to whales.
For example, when the Sands Macau first opened, it was impossible for anyone but VIP guests to book a room. Day-trippers were welcome to gamble at the 1,390 gaming machines and 440 table games on its 229,000-square-foot gaming floor, but overnight stays in the luxury suites were by invitation only, as was access to the baccarat tables in the Sands’ opulent high-stakes Pearl Room.
Another casino that has successfully positioned itself for whales is the Venetian Macao Resort-Hotel in Taipa with its 550,000-square-foot gaming space, 20 restaurants and 3,000 rooms on the premises. The venerable Golden Dragon has 15 different secluded VIP rooms spread throughout its casino, the Grand Lisboa has eight VIP rooms and the Grand Emperor offers high rollers two entire floors separate from the main casino.
The Role of Junkets
Macau has evolved a unique method of bringing whales to its tables. Specialized tour operators, such as Asia Entertainment & Resources, create “junkets” exclusively for high-rollers. These junkets include not only transportation, accommodations and entertainment but also a line of credit for gambling during their stay. In conjunction with the casinos, the junket organizers are allowed to issue “non-negotiable chips” against pre-established credit lines. These chips can be used only in the high-stakes baccarat rooms, where winning bets are paid out using the casino’s “cash chips.”
Apart from ensuring that high rollers actually put their credit in play, the two-chip system helps keep track of commissions owed to the tour companies by the casinos as “finder’s fees.” It also takes the burden of collecting debts off the shoulders of the casinos. The Macau-based junket planners maintain their own collection operations within mainland China to ensure that any losses are paid for in full.
The symbiotic relationship between tour operators and casinos works well for the high rollers, too. They receive VIP hospitality, along with no need to deal with the financial aspects of their Macau stay. At one point, more than 200 junket operators were allegedly vying to serve China’s wealthy players with a mix of concierge services and money lending. Since 2008, however, many have merged and the smaller ones that were unable to compete have disappeared, so now a few dozen such companies dominate the market.