By Farah Master
MACAU, Nov 27 (Reuters) - On the second floor of Solaire'splush ocean-front casino in Manila, the dealers speak Mandarin,the players are Chinese and revenue from high-roller gamblers isrising rapidly.
"It's almost not in the Philippines. It's more like you'rein Macau," says Francis Hernando, the Philippine gaming body'svice president for licensed casino development.
Wealthy Chinese gamblers are a growing presence in Asia'semerging casino hubs as Macau's junket operators use their homebase as a springboard to grow their high-roller business acrossthe region.
"The junkets are very aware and are looking all over Asia toexpand. It's the biggest expansion phase ever right now," saidBen Lee, Asian gaming consultant at Macau-based consultancyIGamiX.
Offshore expansion is just one way the junket operators -which earn commissions from casinos to attract "big whale"gamblers - are responding to pressures at home as Beijingstrives to turn Macau into a mass-market tourist destination.
Caps on the supply of gaming tables that Macau's casinos caninstall and new rules that make it harder for wealthy punters toremain anonymous are two of the regulatory changes prompting thejunkets to alter their business model.
As a result, the proportion of Macau's gaming revenue fromVIPs has fallen to its lowest share since 2006, while spendingby middle-class, mass-market gamblers - who do not rely onMacau's idiosyncratic junket system - is surging.
Armed with extensive customer networks and deep pocketsthanks to monthly turnover of up to $9 billion, the junkets arenow trying to repeat the Macau formula in countries such asCambodia, the Philippines and Vietnam.
Suncity, Heng Sheng Group, David Group, Tak Chun, JimeiGroup, Golden Group, Mega Stars and Golden Dragon are some ofthe Macau junket operators scouting opportunities overseas.
Emerging casino hubs in Southeast Asia have lower overheadsthan Macau and can promise higher incentives to wealthygamblers. They also offer greater privacy, a key advantage forwealthy players who drop 1 million yuan ($164,000) a bet and arewary of China's anti-corruption drive.
Heng Sheng, one of Macau's youngest junket outfits which isaiming to go public in the near future, has cooperationagreements with Danang's Crown Casino in Vietnam and inWalkerhill casino in South Korea.
"Heng Sheng this year started its international expansion,"the company's assistant director, Luke Lu, said.
"Right now we have agreements in place overseas, graduallywe'll move to open VIP rooms and then take stakes in thecasinos."
Suncity operates VIP rooms around Asia, including inAustralian billionaire James Packer's Crown casino in Melbourneand in Philippine tycoon Ricky Razon's Solaire casino in Manila.
The group, which is headed by 39-year-old Macau businessmenAlvin Chau, also has a joint venture operation at the CagayanHoliday and Leisure resort in the north of the Philippines.
Jimei, run by Guangzhou-born junket tycoon Jack Lam,operates two resorts in the Philippines as well as a gamblingship that does daily cruises out of Hong Kong.
"The terms the junkets get overseas are typically muchbetter than in Macau. For instance, in the Philippines, due tothe lower tax rate, junkets can receive a bigger commission,"said Peter Lok, a former executive of Macau casino operator SJMHoldings Ltd and Jimei Group.
Casinos in Macau - the only place in China where gambling islegal - pay close to 40 percent of gaming revenues in taxes,compared with just 15 percent for VIP gambling revenue in thePhilippines.
Another way Macau junkets are adapting their business is toappeal more to middle-class gamblers and leisure travellers, whoMacau authorities are targeting in a bid to turn the formerPortuguese colony into an international tourist destination.
While these punters place smaller bets than the super-rich,they generate significantly higher profit margins because thecasino operators do not need to pay commissions to the junketsto bring them into their resorts.
So the junkets are using sophisticated promotions andsponsorship of major events to broaden their appeal beyond theVIP market and overcome their image as shady businesses withalleged criminal connections.
"More junkets are looking at the cash and premium massplayer for business opportunities," said Chien Lee, formerchairman and chief executive of Iao Kun Group which isplanning a Hong Kong listing.
Heng Sheng is sponsoring the Macau International MovieFestival in December while Suncity is launching its ownquarterly magazine about lifestyle and business at the end ofthis year.
Yu Yio Hung, a Macau junket operator of 27 years, said rapidgrowth has raised new challenges for the industry.
"The gaming concessionaires (casinos) want to promote themass market business which is increasing very fast. Theconcessionaires are raising the bar for VIP club operators andthey need to meet higher and higher targets," he told a MacauGaming conference in November.
($1 = 7.7518 Hong Kong dollars)($1 = 6.0929 Chinese yuan) (Reporting by Farah Master; Editing by Stephen Coates)
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