Revenue figures from the first 18 days of this month show that the Macau gaming market is on track to do its highest on record, well more than the MOP10.4 billion(US$1.3 billion) it did back in January 2008 (soon after Amax started the junket commission war at Altira Macau).

It might even break the MOP11 billion(US$1.375billion) mark. Is this a case of “Be careful of what you wish for”? Many casino managers are starting to ask that question, with good reason: the Liaison Office of the Central Government’s Zhuhai branch has reportedly set up a special division to carefully monitor and research the link between the mainland’s fiscal stimulus programme and gaming revenues in Macau.

Indeed, past (recent) experience would suggest that the last thing Macau needs right now is a surge in gaming revenues, which will inevitably result in a (re-)tightening of visa controls on mainland visitors. However, all this academic speculation doesn’t hold much attention among the junket operators who are responsible — and we do not use that word lightly — for bringing in all these revenues.

As much as we are both delighted and frustrated to see the hordes back at the old ferry terminal, their presence has a small impact on the overall gaming revenue numbers. They help the bottom lines of the casinos, but they don’t worry Beijing, because they are not squandering — dare we say washing — any state-owned assets in the VIP rooms. No, it is the junket operators who bring in players who spend hundreds of millions a night on baccarat that are the greatest cause for concern.

And currently, they are making hay as fast as they can while the sun shines. The junket market in Macau is deserving of a PhD thesis. The problem is, however, that it changes and evolves so fast no researcher would be able to keep up with it. We have no idea yet how the health of Stanley Ho is playing out in this industry, but we have been witnessing fascinating duels and intrigue among the junkets ever since Amax took over Crown Macau (now Altira) in December 2007.

Recent developments continue to astonish, such as how Jimei took over the old Mandarin Oriental from SJM-STDM and then continued to drive players into Jimei VIP rooms at non-SJM properties. Now that Dore, which accounts for a lion’s share of Wynn’s VIP revenues, has its own property at the Lan Kwai Fong Hotel, many are wondering how that too will play out. The bottom line is that these operators are every bit as shrewd and ruthl ess as the big men who own concessions in Macau.

If you think Sheldon Adelson is a guy to reckon with, you obviously haven’t yet met Jack Lam or Ng Wai. What makes them truly remarkable is not just their ability to negotiate deals with the concessionaires. It is their pyramid structures of influence on the mainland. And those pyramids, unlike the ones in Egypt, are constantly being eroded and rebuilt under ever-changing circumstances. We can only wonder, for instance, what the impact is in Macau of the current crackdown in Chongqing, where a situation like Chicago in the 1930s seems to have developed and is now being cleaned up the Chinese equivalent of Elliott Ness.

Billionaires have been arrested together with thousands of so-called gangsters and police officers. It is understood that many of them have ties to Macau. For the most part, the Macau end of these pryramids is run with military-like precision. But at the end of the day, they are all only as good as the credit they can provide and the returns they can give to those with the assets to put into play from the mainland. How they are allowed to do this — dare we say get away with this — also depends entirely on how they manage their, ahem, government relations on the mainland.

It is a complicated and complex task. Sometimes, they get plain lucky. We don’t mean on the tables. Of far more importance to them is the shifting of a political wind that can result in, say, a well-connected banker friend suddenly being able to splurge on loans intended to boost the mainland’s GDP growth figures. When those winds shift, you gotta sail. And that is clearly what’s happening now. But for every action in the mainland, there is always an equal and opposite reaction, to paraphrase Newton. How strongly that opposite force is able to push back will determine how quicklly the current credit splurge comes to an end.

There is a strong school of thought in Macau that suggests nothing will be done to spoil the two big parties coming up this year: the 60th anniversary of modern China on October 1, and the 10th anniversary of Macau’s return to the motherland on December 23; that is also the day when the new chief takes office, and it would not be naive to think that Beijing will want him to have some time to settle in and show what he can do before the visa chain starts to be yanked. However, if revenues do indeed break MOP11 billion, all bets could be off. Stay tuned.

Courtesy | Destination-Macau.com