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Hold or Fold?

Newsdesk by Newsdesk
Tue 14 Apr 2009 at 16:00
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Balancing Act

Avoiding oversupply is tricky when testing new gaming products in brand new markets

If there was a poker room or casino on every street corner of every town, the chances are that gaming products would quickly lose their allure. A trip to a casino is a thrill and a special occasion, not a mundane activity like going to the supermarket. Balancing supply and demand in such a way that the industry and governments avoid killing the goose laying all the golden eggs is the key to success.

That leads to the question of how casino operators in emerging casino markets such as Asia go about marketing new products such as poker. Macau is an overwhelmingly baccarat-centric place. The game in all its table forms pulled in gross revenues of 95.2 billion patacas (US$11.9 billion) in 2008—equivalent to 87.5% of all Macau’s takings that year from games of fortune.

While such baccarat mania poses significant challenges for casino licensees wishing to introduce new gaming products to the Macau market, it also offers unprecedented opportunities for them to start with a blank sheet of paper. Taking Texas Hold’em poker as an example, there are tens of millions of Chinese people out there with no preconceptions about the game, other than a desire that it be fun and fair. Hollywood chic means little or nothing to them. If they like the game they will play it regardless of whether Brad Pitt or George Clooney thinks it is cool (assuming they’ve even heard of those two gentlemen).

Poker chic

The advance guard of poker in Greater China (and by that we mean Hong Kong, Macau, and Taiwan as well as the People’s Republic) appears to be an unashamedly urban elite of sophisticated well-educated people with exposure to Western and other outside influences. Peer influence is a major factor in building product markets. Why, for example, is a Porsche sports car considered cooler than a Subaru Impreza? The Impreza has been known to beat the 911 Turbo and run the 996 close in straight line racing from a standing start. Yet the Porsche is considered highly desirable while the Subaru is considered merely an attractive urban toy. Dollar for dollar, component for component, the Porsche may not cost significantly more to make. The difference one could argue is the time and effort that’s gone into not only the design of the Porsche but crucially also the way the Porsche is marketed. It’s sold as a niche product and its image is carefully guarded.

So what relevance does all this have for the Macau gaming market? Arguably the relevance is that live poker should be a premium niche product marketed like a Porsche, but that it’s currently being marketed as if it were a mass market Impreza.

Consider the following statistics. Between February 2008 when SJM Holdings’ Grand Lisboa opened four poker tables, and the end of March this year, poker table supply increased in Macau by 850%. This is the net figure when openings and closings are taken into account. Four tables opened at Grand Lisboa; 16 at Grand Waldo; eight at Galaxy StarWorld, and eight at Wynn Macau. Afterwards, the 16 tables at Grand Waldo and the original four at Grand Lisboa closed, but the latter witnessed an ulterior launch of 22 new tables.

During calendar year 2008, Macau’s gross revenues from Texas Hold’em poker grew dramatically—by 400% in fact—rising from four million patacas in the first quarter, when SJM Holdings opened a four table room at the Grand Lisboa, to 20 million patacas after a flurry of room openings in the middle and second half of the year, arriving at a total annual revenue of 54 million patacas. This is miniscule (rather than simply small) potatoes compared to the 73.7 billion patacas brought in by VIP baccarat in the same period, but it’s not bad from a standing start. Nevertheless, Poker’s Macau gross is growing at only around half the rate seen in poker table supply.

It doesn’t take a maths prodigy therefore to work out that unless poker revenues put on a massive spurt in 2009, then the existing market risks being cannibalised by the new table supply.

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The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

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