By TAMARA AUDI AND BRUCE STANLEY
The opening of dazzling casinos in Macau, China's gambling enclave, was supposed to be a jackpot for U.S. operators. Instead, Macau has presented fresh problems for companies whose Las Vegas operations are already taking a beating from the sluggish U.S. economy.
Starting in 2004, after Macau's government ended a decades-old monopoly in its gambling business, b馆casino companies, including Las Vegas Sands Corp., MGM Mirage and Wynn Resorts Ltd., descended on the territory, enticed by the lure of wealthy Asian gamblers.
Yet even as the U.S. operators pour billions into the market, they are struggling to overcome an unforeseen obstacle: the growing power of local middlemen in determining where big-spending, socalled VIP players spend their money. The middlemen, known as "junket operators," are a hybrid of travel agent, banker and debt collector. Lending money to mainland visitors on behalf of casinos and acting as collection agents, the middlemen have a strong say in where the visitors play.
The stakes are enormous. Casinos in Macau generated more gambling revenue during the first three months of this year than their counterparts in the Las Vegas Strip and Atlantic City, New Jersey, combined.
Las Vegas Sands, which operates Macau's largest casino and is building six megaresorts that will include a million square feet of casino space, blamed "intense competition" in Macau for much of its $11 million loss in its first-quarter results. MGM Mirage, which jointly owns a Macau casino with Chinese business partner Pansy Ho Chiuking, concedes it mistakenly expected name-recognition to draw customers to its MGM Grand Macau, which opened in late 2007.
As more casinos open in Macau, junket operators are demanding and receiving higher fees from the casino companies for their services. They already command a huge piece of the action, typically grabbing 40% of a casino's gambling take from customers they recruit. The Macau government takes another 40%, and the casino gets the remaining 20%. (Some operators, like MGM Mirage, also use a different formula that gives junket operators about 1% of the amount the customer wagered.)
The importance of the high rollers, and the impact of the junket operators, are reflected in Wynn's firstquarter Macau results. The amount wagered by high-rolling customers that Wynn defines as its VIPs increased 105%, to $14.8 billion compared with the same period last year. On that, Wynn made $444 million. But it kept only about $88 million after paying around $177 million in commissions and a similar amount in taxes.
After Las Vegas Sands lost about a third of its VIP market since December to competing casinos, the company raised its commission for junket operators to 45% from 40%, a spokesman for the company confirmed. Earlier this month, MGM Mirage offered its junket operators the option to take a cut of the total amount wagered, or a portion of casino winnings. The change was made to remain competitive in the market, company officials said.
MGM Mirage Chief Executive Officer Terrence Lanni said his company will focus on increasing its mass-market business in Macau, which has better profit margins.
No comments:
Post a Comment