Macau Junket Operator Cali Group Closes Two VIP Rooms
The decline in Macau’s gambling industry and the collapse of its junket operations has continued in 2016 as more VIP rooms have been shut down. According to news reports, Cali Group, a gambling junket operator in Macau has decided to close two of the four VIP gaming rooms it operates in Macau.
The Forefront of Macau Gaming (FMG), a gaming association has stated that the junket operator’s gaming rooms in the Grand Lisboa and City of Dreams which once catered to the VIP market segment was shutdown on the 31st of January 2016. However, Cali’s operations at the Galaxy Macau and MGM Macau will continue to operate as usual. Employees from the closed gaming rooms are said to have been deployed at Cali’s Philippines operations.
The news was confirmed by the President of the Association of Gaming and Entertainment Promoters of Macau, Kwok Chi Chung. He also said that the current trend of junket VIP rooms closing will continue in 2016.
In a statement, Kwok Chi Chung said,
The current situation is like the aftershocks following an earthquake. After some time, some VIP rooms may have seen the number of customers that they receive is not enough to support their operations. As such, they may prefer shifting some of their resources and focuses from Macau to other places in order to decrease their operational costs here.
Kwok also stated that it is not just the smaller VIP rooms that will suffer in the downturn but also the large ones. In his view, it did not really matter how big or small the junket operator turned out to be as the key criteria of surviving the market crash according to him was based on how these junkets manage their finances. If they have given out more loans, their capital flow would be impacted and significantly hamper their operational efficiencies.
Junket operators like the Cali Group work on the investment model where they raise capital by giving private investors interest returns for their deposits that are significantly above market rate.
The slowdown in Macau’s casino industry has hit junket operators hard as VIP gaming revenues have dwindled with no signs of recovery. Industry analysts such as Union Gaming analyst Grant Govertsen have predicted earlier that the junket industry will undergo closures and consolidation as a result of declining VIP revenues. According to latest reports, the number of VIP gaming rooms in Macau has shrunk to 100, a drop of 30 per cent in the last six months.
The junket industry has also been dealing with increased regulatory oversight. A number of operators have not had their licenses renewed due to regulatory breaches. Cases of employee embezzlement and fraud have also been the downfall of a few junkets as it has resulted in extensive losses.
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