By Farah Master
MACAU, Nov 27 (Reuters) - On the second floor of Solaire's plush ocean-front casino in Manila, the dealers speak Mandarin, the players are Chinese and revenue from high-roller gamblers is rising rapidly.
"It's almost not in the Philippines. It's more like you're in Macau," says Francis Hernando, the Philippine gaming body's vice president for licensed casino development.
Wealthy Chinese gamblers are a growing presence in Asia's emerging casino hubs as Macau's junket operators use their home base as a springboard to grow their high-roller business across the region.
"The junkets are very aware and are looking all over Asia to expand. It's the biggest expansion phase ever right now," said Ben Lee, Asian gaming consultant at Macau-based consultancy IGamiX.
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 Beijing strives to turn Macau into a mass-market tourist destination.
Caps on the supply of gaming tables that Macau's casinos can install and new rules that make it harder for wealthy punters to remain anonymous are two of the regulatory changes prompting the junkets to alter their business model.
As a result, the proportion of Macau's gaming revenue from VIPs has fallen to its lowest share since 2006, while spending by middle-class, mass-market gamblers - who do not rely on Macau's idiosyncratic junket system - is surging.
Armed with extensive customer networks and deep pockets thanks to monthly turnover of up to $9 billion, the junkets are now trying to repeat the Macau formula in countries such as Cambodia, the Philippines and Vietnam.
Suncity, Heng Sheng Group, David Group, Tak Chun, Jimei Group, Golden Group, Mega Stars and Golden Dragon are some of the Macau junket operators scouting opportunities overseas.
Emerging casino hubs in Southeast Asia have lower overheads than Macau and can promise higher incentives to wealthy gamblers. They also offer greater privacy, a key advantage for wealthy players who drop 1 million yuan ($164,000) a bet and are wary of China's anti-corruption drive.
Heng Sheng, one of Macau's youngest junket outfits which is aiming to go public in the near future, has cooperation agreements with Danang's Crown Casino in Vietnam and in Walkerhill 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, gradually we'll move to open VIP rooms and then take stakes in the casinos."
Suncity operates VIP rooms around Asia, including in Australian billionaire James Packer's Crown casino in Melbourne and in Philippine tycoon Ricky Razon's Solaire casino in Manila.
The group, which is headed by 39-year-old Macau businessmen Alvin Chau, also has a joint venture operation at the Cagayan Holiday 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 gambling ship that does daily cruises out of Hong Kong.
"The terms the junkets get overseas are typically much better than in Macau. For instance, in the Philippines, due to the lower tax rate, junkets can receive a bigger commission," said Peter Lok, a former executive of Macau casino operator SJM Holdings Ltd and Jimei Group.
Casinos in Macau - the only place in China where gambling is legal - pay close to 40 percent of gaming revenues in taxes, compared with just 15 percent for VIP gambling revenue in the Philippines.
Another way Macau junkets are adapting their business is to appeal more to middle-class gamblers and leisure travellers, who Macau authorities are targeting in a bid to turn the former Portuguese colony into an international tourist destination.
While these punters place smaller bets than the super-rich, they generate significantly higher profit margins because the casino operators do not need to pay commissions to the junkets to bring them into their resorts.
So the junkets are using sophisticated promotions and sponsorship of major events to broaden their appeal beyond the VIP market and overcome their image as shady businesses with alleged criminal connections.
"More junkets are looking at the cash and premium mass player for business opportunities," said Chien Lee, former chairman and chief executive of Iao Kun Group which is planning a Hong Kong listing.
Heng Sheng is sponsoring the Macau International Movie Festival in December while Suncity is launching its own quarterly magazine about lifestyle and business at the end of this year.
Yu Yio Hung, a Macau junket operator of 27 years, said rapid growth has raised new challenges for the industry.
"The gaming concessionaires (casinos) want to promote the mass market business which is increasing very fast. The concessionaires are raising the bar for VIP club operators and they need to meet higher and higher targets," he told a Macau Gaming conference in November.
($1 = 7.7518 Hong Kong dollars) ($1 = 6.0929 Chinese yuan) (Reporting by Farah Master; Editing by Stephen Coates)