Hard Lessons

Macau knows from the VIP baccarat sector the perils of lopsided markets

Macau casino operators already know from bitter experience what table oversupply can do even in a table games market showing aggressive growth. It tends to lead to cut throat competition. This is particularly the case in the VIP baccarat sector where commissions paid by casinos on the volume of money ‘rolled’ by the VIPs can vary junket by junket and sub-junket by sub-junket. In the first half of 2008, when the number of baccarat tables peaked at 4,400, and revenue was growing by 50% year on year, the market witnessed what some analysts described as “irrational” competition on commissions as casino operators (in particular Crown Macau) scrambled to trade margin on high stakes baccarat in exchange for volume and market share.

Macau poker room operators may have considerably less wiggle room available in their business model to try to boost their player appeal, given that Inside Asian Gaming understands the size of the rake has been negotiated in advance with Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau (known by its Portuguese initials, DICJ). Guaranteed income agreements with host casinos also put a crimp on poker operators’ scope for aggressive marketing. One option might be for a poker room operator with deep pockets effectively to run its Macau room as a loss leader, offering prize pools sufficiently large sufficiently often simply to kill off rival rooms.
Competition

The APT and APPT have certainly been proactive in their marketing of headline poker tournaments in Macau. Last August, the Macau leg of the APT featured world famous players including Doyle Brunson and a guaranteed prize pool of US$1.5 million—a record for a Macau poker tournament.

PokerStars, the APPT’s online partner, recently closed down its room at the Grand Waldo and opened a new 22-table poker room on the second floor of the Grand Lisboa. It launched the new venue with a HK$10,000 buy-in tournament and a guaranteed HK$500,000 prize pool.

The data on poker table openings and closures in 2008-09 in Macau show a trend toward consolidation, with the number of venues offering the game being reduced from four to three within the space of a year.

Contrast that scenario with typical situations in many US casinos, where players have to put their names on a waiting list in order to get a game of poker. Some venues have a white board with the games and limits available along with the waiting players’ initials. Others will just have someone who writes initials or names on a sheet of paper. The card room calls the next person on the list when a seat becomes available.
Town versus country

There is similar strong demand for poker in Greater China, but it’s concentrated in small urban pockets. In Hong Kong, hundreds—possibly thousands—of players meet in restaurants on Friday nights to play in cashless games. To describe these games as ‘play for fun’ may be to miss the point. The players are just as competitive and devoted to their sport as any professional player chasing a million dollar jackpot in Las Vegas.

Online suppliers of mahjong games are already tapping in to China’s mahjong club and association scene to find new players. Why shouldn’t online poker rooms seek to tap in to the poker social scene in cities such as Hong Kong, Shanghai and Beijing by offering games on a play-for-fun basis and using this informal and specifically Asian business model to parlay those online players into players in bricks and mortar casinos? The chances are that the average poker player in Greater China is from a more desirable demographic group in terms of age, education and income than the average mahjong player. It would be worth the effort in terms of building a critical mass of players.

A further point regarding the urban elites playing poker in Hong Kong and Shanghai etc is that you don’t need to use a big net in the hope of catching a few tadpoles. The urban elite players are a self-selecting sample that want to be ‘caught’. Why not market casino poker to them in a subtle way via online subscription-based play for fun rooms with prizes such as free weekends in Macau casino hotels? The poker rooms within those properties need not be mentioned at any stage of the marketing process, but any player worth his or her salt will already be aware of their existence. It may be that this is sailing close to the wind in terms of local laws or regulations in Hong Kong or Mainland China. But given that Dr Stanley Ho is allowed to advertise his casinos on terrestrial television in Hong Kong using misty waterfalls and choreographed dancers performing tai chi movements, then surely the poker lobby can come up with some equally creatively obtuse campaign.

The Macau poker market is undoubtedly too small currently to warrant the kind of left field, high cost, high profile advertising and marketing campaign mounted by SJM for Grand Lisboa and its other properties. But Macau poker room operators could certainly benefit from connecting directly with the social poker movement. Then the rooms could develop as truly local 24-hour seven days per week attractions rather than as loss leaders and temporary homes for the visiting international circus of the various poker tours. By carefully targeting desirable demographic groups, online poker rooms might also be able to create new revenue streams by doing deals with marketing companies that want to sell other goods and services to this affluent urban clientele.