If poker table supply consistently outstrips demand in Macau it could kill off the game’s brand equity
There’s a saying among stage performers—frequently attributed to the 19th century American showman P.T. Barnum—that you should always leave the audience wanting more. The same could apply to the gaming industry, which is after all a form of entertainment that has its own stage, set of directions and audience.
Brand building for poker in Macau is arguably like working an audience. It’s a delicate process and the market players have to ‘feel’ the mood of the crowd. If table supply gets too far ahead of demand it risks turning poker from a hot game to just another casino sideshow. Not only would persistent table oversupply be bad for the existing poker room contractors, it’s also likely to be bad for the image of the game. A bank of empty poker tables in a Macau casino would send out entirely the wrong message to uninitiated Asian players, i.e., ‘This game is no good’. Baccarat can get away with empty tables during a period of economic recession because the game is already ingrained in the local culture and the consciousness of local players. Poker has no such deep-rooted brand equity in Asia at this stage.
For over zealous competition to kill off poker’s green shoots now would be a great shame. With some gaming analysts predicting as much as a 15% fall in baccarat revenues during 2009 there has probably never been a better time for poker to stake its claim in the Macau market.
Boom in a bust
In the baccarat boom times of the first half of 2008, when baccarat tables in the high roller and mass market sectors were packed with players, casino managers saw poker as interesting, but essentially a niche product. It’s unlikely to move beyond niche status for the foreseeable future. If carefully managed, however, it could punch well above its gross gaming revenue weight because of its business model.
In Macau the rake on player buy-in fees for poker games is typically set at 5% up to a US$200 cap. This compares with the theoretical house edge on baccarat in Macau of 1.52% and the 1% or more commission paid by operators to junkets on the betting chips ‘rolled’ by VIP baccarat players. Despite the house-friendly business model of poker, Macau casino operators also have the comfort zone of opting for a guarantee on minimum monthly income as the price of the cooperation with a third party poker room operator.
Although poker revenue as a proportion gross gaming win in Macau is miniscule, the poker model does seem to have the additional virtue of attracting people from well educated, high earning A and B social groups willing to engage in complementary spending on high value services such as luxury hotel rooms and fancy restaurant meals.
“We think what’s happened in the United States and Europe over the past years has been extraordinary and we do expect that to continue in Asia. The question is when is it going to take off?” said Jeffrey Haas, President of the Asia Pacific Poker Tour, speaking at the recent Asian i-Gaming Congress & Expo (AiG) in Macau.
“I think in Macau it’s about the diversification of gaming products. Poker is significantly less than 1% as far as revenues are concerned. It is marginal at best today, but with a lot of potential. Poker, as far as casinos are concerned, brings players in, and those players and the people they bring along can then be cross-sold other products,” added Mr Haas.
However, in order to nurture these green and promising shoots, some careful gardening may be required. Balancing supply and demand can be difficult in any industry. To get consumers to pay a premium for a product or service they must believe that it contains inherent value and they must believe their purchase makes a positive statement about them to the wider world.
