Macau junket VIP slot room may affect near-term slot GGR; Union Gaming

Macau’s very first junket driven VIP slot parlor opened at the Jimei Casino on the Macau Peninsula, and may result in near-term disruption to slot gaming revenue, Union Gaming says.

The 130-slot VIP room is believed to be funded primarily by traditional junket investors. Union Gaming says the move is indicative of an increasingly difficult environment for junkets. “We believe the opening of this slot parlor could be indicative of a segment of the industry (i.e. junkets) that is very much in need of revenue and willing to try an idea that in a different era would likely not have even been considered.”

However, Union Gaming recommends caution on the move. “Slot players are exceptionally fickle and VIP slot players probably even more so. They are very high maintenance from a customer service perspective and are very particular about what games they want to play, denominations, etc.” the report states. “Further, the location of this new VIP slot parlor is within an existing 3rd party casino that offers few other amenities, and we believe it is one of the lower-performing 3rd party properties in Macau. As such, it could be a tough sell to attract and retain players based solely on having VIP slots on offer.”

The VIP slot room may also face difficulties relating to regulation when compared to VIP rooms offering table games, Union Gaming says. “It is generally not easy to dynamically manage a slot floor as changes like swapping out machines, reconfiguring (physically moving) slot layouts, can take months to be approved. This is very much unlike the table games segment where changes can essentially be made in real-time.”

Union Gaming adds that given the VIP slot room will be run on a junket model, where players will have the ability to play on credit along with some sort of rebate, the dynamic would be appealing to existing slot players, and thus may pose a threat to near-term slot performance amongst the other casinos, as well as the potential for starting a price war on the Peninsula.

“We would not be surprised if high-limit slot revenues at properties like Wynn Macau, MGM Macau and Grand Lisboa were to experience some softness in 1Q16. To put this in perspective, we estimate that slots GGR will account for 6.7% of total Wynn Macau GGR in 2015; for 7.6% at MGM Macau, and for 2.4% at Grand Lisboa.”