MGM China wants to develop its own customers to help manage risks, said Bowie, the company’s CEO.
“The junket model is a very successful model in terms of efficiency but we need to diversify,” he said. “No organization should limit themselves to one geographic market or one business strength. It’s too high risk.”
A junket operator -- also known as a VIP or gaming promoter -- typically draws a commission for each high-stakes bettor it delivers that’s equivalent to 1.25 percent of the gambler’s rolling chip turnover, or the amount of bets made, said Kenny Lau, a Credit Suisse Group AG analyst in Hong Kong.
Commissions total about 44 percent of the gross revenue from high rollers, according to the brokerage. That means junkets earned about $13 billion in commissions last year, or 29 percent of the casinos’ total revenue, according to data compiled by Bloomberg.
After government taxes of 39 percent, casinos can be left with “rather thin” profits, said D.S. Kim, a Hong Kong-based analyst at BNP Paribas Securities Asia Ltd.
That’s a relative assessment: Sands China, for instance, posted an 80 percent gain in net income to $2.2 billion on revenue of $8.9 billion last year.
Glitzy Shows
To reduce their dependence on the wealthy, casinos have also been adding glitzy shows and shopping malls to draw middle- class families.
“The influence of junkets is decreasing as the mass and the premium mass segments become more substantial,” said Lawrence Ho, co-chairman of Melco Crown and Stanley’s son.
There’s more money to be made. While the junkets are still important partners of casino operators, companies including Sands are working to bypass the middlemen.