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
