An insider’s take on how casino junket agents recruit VIP players in China
In September’s edition of Inside Asian Gaming, we offered a look inside the world of Asia’s gambling credit agents. This month a leading figure in the Macau gaming industry explains how the agents identify and then ‘recruit’ high roller players in the first place.
Extending gambling credit to VIP players via sub-contracted third-party agents or sub agents, rather than direct from the casino to the player, is a central pillar of the Macau gaming industry. To a lesser extent it is also a feature of some other Asian landbased gambling jurisdictions including the Philippines and Cambodia. The online gambling industry in Asia also uses thirdparty agents for the provision of credit and collection of debts.
The stakes are very high when it comes to recruiting high net worth casino players, because agents and sub agents—depending on their place in the junket system pecking order—may be paid either a recruitment fee or take as commission a percentage of the revenue ‘rolled’ by the VIP player over the course of a month, six months or a year.
High stakes
There are potentially a lot of VIP players to be recruited in China and a lot of commission to be won. As we reported in IAG last month, a recent study published by investment bank Merrill Lynch in October in association with Capgemini, a business consultancy, estimated there were around 345,000 US dollar millionaires on the Mainland.
Among that group of Chinese millionaires are a group Merrill labelled as ‘Ultra-High Net Worth Individuals’. These are nearly 5,000 people with net worth of at least US$30 million. Of that cohort, 106 were classed as US dollar billionaires.
An obvious question is how do these third party betting agents make contact with such potentially lucrative players in the first place, given that in China, a key market for Macau and casinos overseas, the advertising and marketing of gambling and gambling products is illegal?
Networking
The answer is many different ways—some of them through introduction or social networking and some of them through a growing system of VIP clubs.
“You can think of the junket network as the foot soldiers of a multi-level marketing strategy, rather like that you might find for a company selling consumer products such as Amway,” the industry insider tells IAG.
“They have thousands and thousands of people in China. In each province and each city, they know all the important people. They know who’s who. They know who are the big factory owners, they know the business people, they know what business they’re in, and by knowing them they have a way to help these ‘customers’ to come to Macau and gamble.
“Because advertising of gambling is clearly prohibited in China, the junkets provide an important network,” he adds.
The source says the network of VIP clubs is growing within Mainland China. They have many of the luxury facilities found on the VIP floors of Macau casinos—with the crucial difference that there are no gaming tables or machines, and no gambling is permitted.
Quality service
“Some of the junkets have VIP clubs in China and these are very often multipurpose entertainment centres,” explains the insider.
“Typically they have Internet facilities, they have massage facilities, and they have theatres. In China nowadays, these VIP clubs or entertainment centres are increasingly becoming a form of competition to the hotels.
“The hotels are in many cases getting less and less business because at the VIP clubs you can stay overnight—it’s much cheaper than a hotel. You can have a massage, you can get food, you can watch movies, you can get online—you can get everything you need. In every town in China, the VIP entertainment industry is booming.
“Many of the junkets actually have their service centre at these clubs, as a way to acquire VIP customers. They issue them with membership cards, and they also have affiliates—organisations in different casinos in Macau or the Philippines or other Asian gaming jurisdictions.
Comprehensive service
“Once these rich people in China become a member of one of these clubs, then transport can be organised so that they can easily come to Macau and gamble,” explains the insider.
Many junkets make a point of keeping detailed information on valued VIP customers—including their favourite food and what sort of music or films they like.
“It’s all about detail,” says the source.
“Attention to detail covers transport, accommodation, catering, entertainment. So from acquiring the customer in China to sending them on a plane, everything is taken care of,” he adds.
Recruitment of the Chinese high roller is a wasted effort though without the ability to organise credit for their gambling trip.
“If you look at the Macau gaming revenue [last year] of US$10 billion, clearly that’s a very big amount. But does it mean people are bringing US$10 million in cash at a time into Macau? No. Most of that money does not come through the border,” says the source.
Oiling the wheels
“The junket operators provide this key service of facilitating the flow of funds. A lot of times these big customers don’t have to bring in money at all. If they are on the ‘who’s who’ list in their locality they can get the credit. Sometimes they have to sign something, sometimes they may have to provide a symbolic deposit in the form of a cheque or provide some kind of asset collateral in China. Then they can come over to Macau without bringing any cash. In fact I believe you can only take a maximum of US$5,000, or about 40,000 renminbi out of China at a time. That’s not very much money. For VIP players that’s not enough for even one game. I’ve seen these VIP guys gambling HK$10 million per night. They don’t have that in cash. They just use their credit line from China to get the money to play,” says the insider.
As everyone in Macau knows, for historical reasons the casinos themselves don’t act as credit providers.
“There can be problems with lack of information on players. In China, information on an individual’s credit worthiness isn’t available. So how can the casinos, or even the agents, know who they can provide credit to? Clearly they don’t—especially the Western casinos.
Knowledge is power
“The Western operators are very good at building a fancy casino, but they don’t know the customer. So they have to rely on the junkets. Some of the casinos have tried to go direct by having their own high roller programme to some of their mass hall customers. But even when the casinos have their ‘own’ in-house VIP room as it were, they need those VIPs that can bring in money as a deposit,” explains the source.
This effectively rules out most potential VIP customers from Mainland China.
“If the person says ‘I’m rich but I can’t bring in any money to deposit’, the casino will say ‘That’s too bad. We want to serve you, but we can’t serve you if you can’t make a deposit.’ The casino may have to refer them to the junket anyway. The junket is able to take care of all these problems,” states the insider.
Paying up
Just as VIP recruitment is pointless without credit collection, so the profitability of the whole system hinges on the ability of the agents to collect debts. As gambling debts are not recognised as a legally binding contract in China, such debts cannot be enforced via the courts there. It’s up to the agents to ensure players honour their credit.
“The casinos in Macau essentially extend the credit to the junket operators. The casinos don’t want to touch the credit or the debt collection issue directly,” says the source.
“It would be difficult for them to go through their local gambling compliance procedures in the US or to follow the relevant anti money-laundering policies, so they want to outsource it to the junket operators.”
“The junket operators really know their customers and have this very good network of local people in China. If you as a player lose money, you’ll be given a certain amount of time to pay up, and if you don’t, the local representatives are going to follow you wherever you go until you do. That’s much more effective than the casino operator trying to chase the debt itself, long distance,” says the insider.
“I’m not going to go into details of how exactly they collect, but they’re definitely more effective.”
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