City of Dreams (CoD) looks to be aptly named after the new Cotai resort’s management decided it didn’t much like the hold percentages it recorded on its 127 VIP tables in the first month of operation.
Melco Crown Entertainment Ltd said the 0.8 percent hold on high roller revenue of USD1.94 billion at CoD was ‘well below’ its target of 2.85 percent. The hold on rolling chip volume of USD2.76 billion at its other Macau property, VIP-focused Altira Macau, was also below the company’s expectations, at just under 2 percent.
But it didn’t worry the public relations team at MPEL. They cheerfully announced that by ‘normalizing’ (their word not ours) the VIP gaming revenue figures at both properties it would have given MPEL an overall 15 percent share of the Macau market during June.
“Normalizing our gaming revenue to reflect the target rolling chip hold percentage at both properties, we estimate that our company-wide market share of gross gaming revenues for June would have been approximately 15%,” stated the company in a press release.
What this actually means is beyond Asian Gaming Intelligence’s wit to understand. There appear to be so many holes in the statement it makes a paper doily look like a robust piece of civil engineering.
First off, linking table hold to market share isn’t relating apples to apples. An operator could have 100 percent of the table games gross gaming revenue in any given market, but unless you know what discounts and commissions he’s paying to bring in that GGR, then table hold percentages won’t help you very much in understanding the health of the business.
Even if you know what he’s paying out in discounts and commissions, there’s still the small matter of the volatility of baccarat returns. All the market share in the world won’t help you if the house has a very bad run. You would need to smooth out that volatility over the course of a year or more to get any kind of understanding of what competitive edge if any, one operator had over another.
Last but not the least, what does the 15 percent share relate to? Is it the VIP table market or the VIP and mass market combined? And without explaining the methodology used by the company in the process of ‘normalization’ how can anyone take such a statement seriously?
The upshot of this seems to be to prove a point made on a number of occasions in our sister publication Inside Asian Gaming. This is that when table hold percentages are deemed favourable by operators they are milked for positive publicity. When they’re unfavourable they are simply disregarded as ‘abnormal’. This sidesteps the tricky question of what counts as ‘normal’ in casino baccarat.
MPEL said just under USD100 million was taken by CoD’s average 376 operational mass market tables in June, providing a table hold within the targeted range of 16 percent to 18 percent.
In the first quarter of 2009 CoD’s next door competitor The Venetian Macao claimed VIP table hold of 3.16 percent against a forecast hold (before discounts and agent commissions) of 3 percent and mass market table hold of 21.9 percent against a forecast hold (before discounts) of 18 percent to 20 percent.
Table hold percentages are in any case largely an exercise in corporate window dressing. As we mentioned earlier, they don’t mean a lot unless you know what an operator is paying out to agents and players for that business in the first place. That information isn’t generally shared even with investors.
Under those circumstances a cynic might be left wondering whether CoD’s unfavourable performance on VIP table hold in its first month of operation was really to do with the well-documented volatility of baccarat returns, or rather more to do with an operator of a new property being anxious to build its table games volume by throwing money at agents to bring in business. Under those circumstances an operator reporting a lower than expected table hold could simply be burying exceptionally high agent costs in the figures.
MPEL’s approach to the table hold issue gives hope to all fans of under performing sporting teams around the world. Did your team suffer a heavy defeat to a rival outfit at the weekend? No problem, simply ‘normalize’ your own team’s score, to reflect what the result should have been under optimal conditions.
It works every time.
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