Word is that LVS is getting more aggressive (finally?) with junket commissions in Macau.
We are of the understanding that LVS utilize a more competitive commission structure to amp its VIP business. As can be seen in the following chart, LVS has been consistently losing share over the past two years in this segment and is now at an all-time low of 9%. Of course, YoY VIP market growth has generally been +50%, so even LVS is showing strong growth.
LVS will be trying to grow the VIP business next year when their new rooms open. Their plan is to match anyone else on commissions/deals but only for the top 4 volume guys in the market. We are assuming they will also be more aggressive in advancing commissions to junkets. LVS will have new VIP rooms opening – 2 rooms at Four Seasons (by Chinese New Year) and also rooms in Q3 and Q4 at Four Seasons. At Venetian and Sands, existing rooms will be remodeled and refurbished. Management believes that the new hardware is key to getting the new junket deals in place.
The problem for LVS is that until they open the new rooms and offer more competitive commission structures, their VIP share is probably going to worsen, beginning in August through the rest of the year. How successful will they be next year? Hard to say. Regaining respect is not easy in the Chinese culture once lost – and LVS has burned a lot of Chinese bridges. Junkets have not shown an interest in coming back despite LVS reaching out this year. If they are successful, companies like MPEL and WYNN could be at risk for share loss. I’m not sure they are losing much sleep yet, however.
