SJM has already dented LVS’s VIP share with its junket push and now, LVS may be feeling the Mass pinch as its market share has plummeted in May.
We’ve written quite a bit about SJM’s big push for junket share, and it has indeed paid off – if market share and no margins was their goal. Higher commission rates paid to junkets and the company’s unique “franchise” structure that offloads more of the risk and reward to the operators have contributed to expanding share. As can be seen in the chart below, SJM’s Mass share has also increased but not nearly at the rate of VIP's.
It’s hard to be too pessimistic on any Macau operator when the market is growing at a potential 85% clip (in May). However, for a variety of reasons, LVS is losing share, which could be an issue once the market inevitably slows.
We do know that the Venetian junkets were directly in the sight line of SJM which partially explains the sharp degradation in LVS’s VIP share. We also believe Encore took a big chunk out of LVS in May, contributing to a 5% sequential drop in share in May month-to-date relative to April. If SJM is serious and successful in its Mass Market aggression, LVS’s properties could be most at risk given their higher Mass mix.
SJM maintains third party operating arrangements at many of its properties. On its quarterly conference call this morning, SJM discussed the opportunity for the satellite properties to cultivate a Mass business. They believe they’ve only scratched the surface. We’ll see over the coming months but the opportunity certainly seems to be there.