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Junket commissions remain consistent but all-in commissions tick up

The data is in.  Once again, we have seen a sequential uptick in all-in commissions, from 2H11 to 1H12.  Whether we look at commissions as a % of win or as a % of RC, the conclusion is the same.  However, we would argue that % of win is a more relevant metric since the majority of junkets and almost all the large ones are paid on a revenue share basis.

The charts below show the composition, by company, of all-in commissions among the straight junket commission, the rebate that goes back to the player, and non-gaming giveaways.  The first analyzes the dynamics on a revenue share basis, the second as a percentage of rolling chip.  

Main takeaways:  

  • The gap between the lowest and the highest all-in commission rate widened to 4.95% in 1H12 from 3.97% in 1H11 on a % of win basis and to 34bps from 22bps on a % of RC basis.  We believe this is directly a result of increased competition.
  • WYNN remains the least aggressive in its commission policy.  From 2008 to 1H11, the spread between the average all-in commission rate paid by WYNN vs. average of LVS, MPEL & MGM narrowed from 7.81% to 2.67%.  It gapped out again to 3.79% in 1H12.   
  • MPEL still offers the largest junket commission but until 1H12, they consistently had the lowest comps on non-gaming amenities.  That changed this interim period with non-gaming comps increasing to 3.68% of win up from 2.56% in 1H11 and 2.62% for all of 2011.  MPEL maintained one of the lower rebate rates which is surprising given the relatively large direct premium play business at City of Dreams.

Other observations:

  • Rebate rates
    • The average rebate rate for 1H12 was 32.8% (as a % of win) or 97bps (as a % of RC) vs. 32.3%/94bps in 1H11
    • WYNN had the lowest rebate rate in 1H12 at 30.2%/81bps
    • MGM had the highest rebate rate in 1H12 at 34.6%/121bps
  • Junket commission  
    • The average junket commission increased 2% in 1H12 vs 1H11 on a % win, and 4% on a RC basis to 8.2%/24bps
    • WYNN continued to offer the lowest commission rate  of 7.1%/19bps
    • MPEL continued to offer the highest commission rate of 9.2%/27bps
  • Comped non-gaming amenities
    • The average non-gaming comps increased 14% in 1H12 vs 1H11 to 4.5% as a % of win and to 13bps as a % of RC.
    • For a change, MGM offered the lowest comps at a rate of 3.25%/10bps
    • LVS continued to offer the highest comps at a rate of 5.85%/17bps, which is not surprising given that they have the largest % of their revenue base coming from non-gaming amenities.
  • The all-in commission rate
    • The average all-in commission rate increased to 45.53% in 1H12 from 44.35% in 1H11 on a % of win basis and from 1.29% to 1.35% on a RC basis
    • On a % of win basis, LVS paid the highest all-in rate at 49.2% in 1H12
    • On a % of RC basis, MGM was the biggest spender at an all-in rate of 1.48% in 1H12
    • WYNN held the line at 42.69%/1.14% in 1H12