Junkets crack down, Macau hotel prices tumble

Macau has been overloaded with hotel rooms due to a Chinese government crackdown on junkets. About 80-90 percent of reserved rooms are made through junkets. VIPs and their deals on high prices helped keep hotel room prices high, but now hotel prices are falling. Many junkets had to shut down and hotels and casinos are shrinking. According to Nomura, a Japanese broker, despite excessive hotel room problems and falling prices, one hotel remains strong with luxury room rates. The company says Louis XIII will charge 1 million Hong Kong dollars or about 128,997 dollars per night at a boutique hotel casino on Thursday, June 25, 2015.

Louis XIII Holdings plans to open in an executive meeting in July 2016. It's targeting high-end gamblers or whales with 16 VIP tables and 50 mass tables. But is the price too high given the top analysts' information? No way, it's because it's the luxury center of real estate that treats all guests as VIPs.

According to a recent report from Morgan Stanley officials to Macau, the quality of hotels is generally deteriorating on the customer side, and there is a price war between hotels to attract more customers. The US Bank said some five-star hotels charge $160 a night, sometimes half or a third of what they used to charge.

Last year, Win Macao paid an average of $333 per night. Four Seasons Macao charged $400. Major 2015 hotel chains such as Crown Tower charge $200 and East Asian hotels charge only $75.

There are fears that hotel availability will increase with the opening of a new Kotai hotel in 2017. Supply will increase by 50%, according to Morgan Stanley. The hotel market is firmly believed to remain stagnant for years to come.

Morgan Stanley returned from a trip to Macau and found hope that the market would soon recover, but found nothing. Other restrictions, including low margins, high salaries, and smoking cessation, are negatively affecting Macau. China's islands still focus on VIPs' revenue, which accounts for 50 percent of their revenue. Morgan Stanley believes that no matter what, there will be a "profit erosion."

As for the government's crackdown, Louis XIII appears to be the only positive casino hotel operation. They believe that they can lure Macau VIPs to their hotels with the right targets. Nomura says that "the upper and middle classes of people who are not subject to China's anti-graft campaign" are the customers they are looking for. Another difference is that Louis XIII will rely on just one junket, or Neptune Group, which will reduce the problem. 동행복권파워볼