A new generation Macau VIP operator is recruiting high rollers online—on a cash, not credit basis
The history of commerce has many examples of young people rising to success by challenging the old guard and revolutionising the business model in an industry.
A new-generation Macau junket operator is attempting to do that in the Macau casino industry. The operator—Goldenway—has a two-pronged approach. First, it wants to move Macau VIP business to a cash rather than credit model. Second, it wants to shift the method by which VIPs are recruited to online marketing via a dedicated website.
Use of a website for junket marketing is not new. Most of the Macau junkets have an online presence. What does seem to be new is that Goldenway is seeking to recruit its players primarily via a web portal, without the supporting use of agents, though it has customer service agents online and a customer relationship team to work with the players when they arrive at the casino. Goldenway recently opened a new VIP room at SJM’s Grand Lisboa flagship in downtown Macau, where members of the management team explained their approach to Inside Asian Gaming.
“Our management structure is modern and a long way from the traditional image of Macau junket management and gangsters, etc. It’s about creating new channels and a new environment for the guests,” says Jerry Tse, one of the Goldenway executive team.
“We strongly believe this model—the cash model for VIP play—will help to improve the image of Macau and help a lot in developing it as a tourism destination.”
Those are lofty ambitions. The people who run Goldenway are certainly young, ambitious—and iconoclastic. If their business model works it will also give more value back to the players in terms of rebates on rolling chip volume—notwithstanding the fact the players will have to pay up front to gamble in the first place. Goldenway says it will be able to offer better rebates to its customers than traditional junkets by sharing the commission it receives from the casinos solely with the players rather than with agents.
“We are bringing the guest to the casino, the casinos pay us commission, and we then pay commission directly to the players. I can’t say this is a revolution for the industry, but we are certainly bringing something new to Macau and that’s why the Grand Lisboa is backing us,” says Jerry Tse.
“Other junkets use the traditional agent model with agents and sub-agents to bring the players in. We don’t. We use the latest media—such as the Internet—to recruit players. People can visit us online and sign up. Then, once they come to us, our customer service team will meet them and look after them. I think we’re the first junket operator to do online recruitment.”
Goldenway launched its operations in Macau a year ago. Initially, it operated a VIP room at Sands Macao. It is now consolidating its operations at the Grand Lisboa with two rooms and a total inventory of 20-plus tables. It is targeting in particular the younger demographic of Greater China’s newly-rich. It includes those that have made money via Internet-related services such as e-commerce and software design and development. As an indication of the rapid growth of e-commerce in China, a survey from Analysys International, a consultancy, estimated that in the second quarter of this year the Chinese Internet advertising market generated revenues of RMB11.4 billion (US$1.8 billion).
For the Internet generation, it’s possible that arriving at Macau VIP gaming via a random Internet search or via recommendation from a peer through social networking, will seem perfectly natural and not at all irregular or odd.
“We’re certainly targeting not just the older players who in the past made up a large part of Macau’s VIP market. We’re also trying to attract some of the younger business people,” says Kenneth Cheng, Marketing Manager for Goldenway’s website, www.00853.com—a reference to Macau’s international telephone dialling code.
“Some of them have made a lot of money in a short amount of time. For example, there are people with Internet-based businesses in Hong Kong and Shanghai. We are not catering to the usual Macau standard—we are catering to Las Vegas standards,” he adds.
Visitors logging on to the website are immediately greeted with a pop up window inviting them to chat with a customer service representative in an instant messaging format—an approach that may appeal to under 40s brought up on social media.
There’s further evidence on the website that Goldenway may be aiming its services at a younger demographic—and one possibly less experienced at casino gambling than the entrepreneurs aged in their 40s and 50s who have typically accounted for most of the VIP players in Macau. The website devotes a whole page to explaining the rules and protocols of baccarat—the game of choice for Macau high rollers because of its low house edge and near evens chance of a win.
Goldenway is also offering high stakes poker in its VIP rooms. Poker has not been popular with all Macau VIP operators. It’s seen often as a niche product that doesn’t provide the same yield from precious table capacity as baccarat, because its business model is based on rake rather than the number of hands per hour.
“We have a poker table because we want to be a one-stop solution—offering entertainment and a gambling experience for our customers. Poker is a value-added service,” explains Jerry Tse.
The term ‘gambling experience’ is an interesting choice of words. It chimes much more with Las Vegas-style marketing methods than traditional Macau ones. It implies that gambling is just one of a range of experiences that Goldenway’s target market VIPs are likely to enjoy on their visit. Goldenway’s website reflects that approach. It mentions non-gambling activities such as shows—The House of Dancing Water at City of Dreams and Zaia at The Venetian Macao; nightclubs such as the Playboy Club Macau; and even bungy jumping at Macau Tower.
China has about 1,900 yuan billionaires, according to the 2010 Hurun report—twice as many as in 2009. Goldenway thinks that given the number and variety of China’s rich, there are enough players out there who are willing to view gambling not as an exercise in grappling with fate and fortune, but as a commoditised high-adrenaline pastime like skiing or scuba diving (or bungy jumping). And it thinks they are willing to pay for it up front in cash, just as they would for those other activities.
The more traditional voices in the Macau industry regard the notion of a website to recruit Macau high rollers as both amusing and scary. Amusing because they believe it shows a degree of youthful naiveté about how money to fund gambling moves around in the Greater China economy—i.e. circuitously and not always totally ethically. Scary because they think that even if the customer is a cash customer, the use of online marketing is too anonymous and too risk-laden in due diligence terms. Think family home trashed by gate crashers after little Johnny advertises his birthday party on Facebook.
RelatedPosts
The sceptics fret online recruitment of cash buy-in VIPs in Macau could cause due diligence problems regarding the source of the money. US-traded and -regulated operators in particular have to be mindful of US laws on money laundering, racketeering and terrorism funding. Macau’s traditional agent system may not be perfect, but at least the VIP recruitment sub-agents have a personal relationship with their customers. They know where they really live and what they do for a living. Set against that is the argument that a cash VIP model could—as Jerry Tse says—help to ‘clean up’ Macau’s image.
“We’re not connected with gangsters. We will guide our players on their gambling. We don’t encourage players to over-extend themselves on their gambling, as I think some junkets in Macau did in the past,” states Mr Tse.
If Goldenway proves that a cash buy-in model is sustainable—even if only as a niche VIP product rather than something for the bulk of the high roller market—it will cut out not so much the middleman, but the fourth, fifth and sixth men who work as agents and sub agents in the recruitment of VIPs from mainland China and elsewhere.
“With traditional junkets the VIP room shares the commission provided by the casinos with the player agents. With our model the customer directly benefits. In our marketing materials we stress the direct benefit to customers. That we share commission with the players rather than giving it to agents,” states Jerry Tse.
“The agency model is about giving a credit line with all the credit management issues that go with that. We don’t have those credit management issues. That’s the beauty of our business,” he adds.
But if the online recruitment of cash VIP players is successful, why would the casinos need a middleman like Goldenway to help them? Why wouldn’t they market to cash VIPs directly? The answer probably lies in the due diligence issue. It’s the other side of the same Macau VIP coin as the credit-driven market. The contractual relationship will remain between the cash VIP and the junket, rather than between the casino operator and the player.
The argument that credit-based VIP play is essential for the Macau casinos because of the non-convertibility of the renminbi is less compelling than it used to be. There are many legitimate ways that large amounts of money can be moved cross-border from China to Macau. Those currency movements can be done in the name of trade and personal investment. Macau and Hong Kong are currently the only places outside the PRC where personal bank accounts can be denominated in RMB. Since cross-border trade accounts in RMB were launched on a trial basis in July 2009, Bank of China—the official clearing bank for external Chinese RMB trade— had handled globally more than RMB740 billion-worth of business as of 31st March 2011. It’s likely that at least a small portion of that cross-border money found its way to Macau gaming tables. As time goes on the persistence of credit-fuelled play in Macau will be more to do with tradition, habit and player preference than with foreign exchange barriers. Who wouldn’t use someone else’s money to gamble and keep the winnings themselves—if they had a choice?
“We understand that tradition is a powerful thing—especially in China,” says Jerry Tse.
“But we hope that in time the other junkets will try and follow our steps and work towards a cash model. Then the whole of Macau will become a better place and a more entertainment-based market.”
