Macau Junkets Could Be In Trouble

Published: 9th November 2020
Author: Joe Kizlauskas
Last Updated: 9th November 2020

The junket market feeding the casinos of Macau could be in trouble. The city’s gaming regulators have already come under fire, and a new law that is expected to be accepted in China could make things worse.

That’s not the end of it, however, as junkets had already taken a huge hit, both directly and indirectly, due to COVID-19. As far as Wynn Resorts is concerned, regardless of how healthy the gaming industry is after the coronavirus pandemic, the business segment will never be the same.

When the topic of junkets came up, Wynn Resorts held an earnings conference call last week. For its “top line market share,” the company’s CEO, Matt Maddox, painted a bleak picture of what’s in store.

“As far as the junkets, again, lots of conversation about junkets. That business is not dead as some people like to say,” he claimed. “We saw it getting back to 25 percent to 30 percent of its previous levels. I believe it will continue to consolidate with some of the largest operators, and we will continue to participate in it. So I don’t anticipate that junket business will be back to 2019 levels, because it is consolidating and it is shrinking.”

There were 100 licenced junctions in Macau in January of last year, and that number fell to 95 at the beginning of this year. Since then, it has started to fall, and the city has already been forced to change its segment earnings capacity. Macau only took in about 75 percent of what it got from junkets last year, and as the coronavirus problems continue, this is projected to be smaller.

Just because the junket section is smaller doesn’t mean that Wynn is absolutely prepared to write it off. “Clearly [the junket industry] is changing and it will be smaller than it was before, but it’s still very real. That business is not dead as some people like to say. The industry will continue to consolidate into the larger operators, and we will continue to participate in it,” Maddox added during his call.

This past March, Wynn began paying junkets a commission of 42.5 percent, an improvement of 2.5 percent over the previous amount, and in 14 years the operations had seen a boost for the first time. Of course, at the time, with no traffic going to Macau, a 42.5 percent commission could have been 100 percent just as easily and would not have made a difference in pay-outs.

Following the COVID-19 fiasco, Wynn is now on the road to recovery and said it had $6 million in EBITDA (earnings before interest , taxes, depreciation and amortisation), which blew away the $40 million EBITDA loss it announced for August. The Macau activities of the company are picking up, too, and Maddox is cautiously optimistic that this will continue. In the call, he said, “I don’t know at what pace, but the overall mood and trajectory is quite good.”


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About Joe Kizlauskas

Joe is a seasoned iGaming copywriter and speaker who has been in the business since 2015. He's written more words on all elements of iGaming than he likes to remember, and he's contributed material to a number of well-known brands. Joe may be seen playing 5 a side, at the gym or playing games on his Playstation when he is not writing.