Watershed for Macau Casino Landscape

Posted: December 13, 2010 in Uncategorized

MACAU MASS GAMING BUSINESS IS FADING AWAY

13th Dec 2010       

Contributed by: Alan Kaplan (An industry observer based in Hong Kong)

By October 2010, VIP gaming business continued to be the leading pack of Macau’s gaming revenue, scored a huge 84% of market share for total casino revenue. Among the big casinos, VIP bacarrat win percentage varies from 2.48% to 3.23%. An unlucky month of operation could wipe out the already thin margins in this volatile field.

Slots remain weak in the territory since 2004, staying at a low share of <5% of total casino revenue.

Chinese govt. would be happy to see that mass gaming influence is capped at this level and hence, social issues would also be minimized. However, going forward Beijing would not like Macau to run its world largest gambling den all the way over the edge (of the cliff). New plans (and boundaries) are being toyed by the central govt. at this point in time.

Main gaming floor revenue achieved only a mere 10 – 12% or so in the share of total gaming revenue. Among all casinos, Sands has the larger pie of mass gaming revenue and therefore has a greater margin from casino taking. In contrast, Galaxy continues to sink under the wave of syndicated Junket Room operation and hence, allows its profit margin to be heavily eroded. If such situation were to persist, it is unlikely that Galaxy Resort in cotai can be successfully run even if it opens in 2011 or later. Large casino resorts typically need to achieve high Ebitda margins in order to survive. This is especially so in Macau gaming landscape.

aN INDUSTRY EXPERT SAYS:

Galaxy is the most VIP-oriented operator, MAINTAINING 90% of its table gaming revenue from VIP baccarat. iT WAS RUMORED THAT ITS RESORT IN COTAI MAY NOT OPEN AT ALL AND WILL BE FURTHER DELAYED DUE TO LACK OF CONFIDENCE IN COMPETING FOR MAIN GAMING FLOOR BUSINESS WHICH IS CRITICALLY NEEDED FOR SUSTAINING MARGIN PLAY.

in macau only two casinos are holding on to the mass market business, they are, SJM (Lisboa) and Sands. Wynn Resort has gradually shifted over to vip share of revenue.

that said, it is still far from achieving the initial dream of making macau the asia’s las vegas that will carries more non-gaming entertainment funs. the pressure is building up for macau authority. another indicator is towards capping of american casino expansion. sands would not be allowed to expand “unlimitedly” in the territory. sjm linked operators may be given more leverage in cotai development going forward.

According to sources, Chinese central govt. may adopt greater intervention on macau development in 2013 to change the tide of overwhelming casino influence on the territory.

 

Published data:

Gaming Revenue in October 2010 (excluding slots revenue) for Macau casino industry

  Main Gaming Floor Revenue (HK$ bn)

VIP Baccarat Turnover (HK$ bn)

VIP Baccarat Win Rate (%)

VIP Baccarat Revenue (HK$bn)

Total Revenue (HK$ bn)

Share of Revenue From VIP Baccarat (%)

SJM

1.62 153.94 2.72 4.19 5.81 72
Sands China

1.08 53.05 4.08 2.16 3.24 67
Melco Crown

0.38 68.93 2.96 2.04 2.42 84
Wynn Macau

0.47 72.56 2.61 1.89 2.36 80
MGM Macau

0.36 45.98 3.23 1.48 1.84 81
Galaxy

0.17 64.12 2.48 1.59 1.77 90
Industry Total/Avg

4.07

458.57

2.91

13.36

17.44

84

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Comments
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  4. Good article, thanks! Could you tell me about the second paragraph in more detail?

    • Admin says:

      The 2nd paragraph refers to the Slot gaming devices in Macau. Slots (& electronic gaming) are not as popular as in the USA and Europe. From Day One of liberalization of Macau casino industry for foreign casino operators, the Americans tried very hard to popularize slots in the territory but to no avail. The main growth in casino revenue in Macau has been the table games (largely VIP Baccarat).

      — By Alan Kaplan

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