Inside Asian Gaming

Editorial What Lies Beyond the Tables? When Cirque du Soleil performed in Hong Kong at the end of last year, there weren’t too many doddery old Chinese ladies in fading blouses and US$1 slippers in the audience. Such ladies are regular fixtures at Macau’s casinos, and you’ll often spot them hobbling up to the cashier to buy US$25,000 worth of chips. Somehow, the gambling grannies never seem to get mugged on their way home. When you’ve got a proven market, providing the best offering can prove profitable. It’s no surprise that the Las Vegas-style Sands Macau has proved a hit since opening in May 2004. Its 50-foot ceilings and plush interiors offered a more comfortable gambling environment than those of the erstwhile monopoly casino operator, Stanley Ho’s STDM. In this issue of Inside Asian Gaming, Stanley Ho’s right-hand man, Ambrose So, admits that his company’s flagship Casino Lisboa, which was built in the 60s, obviously falls behind in terms of“hardware.”STDM’s gaming subsidiary, SJM, is busy carrying out renovations and building new facilities to keep up with Macau’s new foreign casino operators.The Lisboa remains the top-grossing casino in the world by a fair margin, but that will change, if only because VIP gamblers brought in by its established networks will soon migrate to the Grand Lisboa being built across the street. Sands Macau has done well in attracting the mass-market crowd, yet Casino Lisboa continues to earn at least twice as much revenue with a smaller property thanks to the company’s grip on the lucrative VIP market. According to a Bloomberg report, the VIP market consists of about 4,000 gamblers, primarily from Mainland China, who bet an average US$1 million per visit. VIP baccarat accounted for 77% of Macau’s casino revenue in 2003, but made up just 63% in 2005. Core Pacific-Yamaichi expects VIP baccarat’s share to fall below 60% this year.There are two explanations for this: firstly, the mass market is growing thanks to the lure of new casinos. It is also possible that some of the VIP market has been drawn to Sands Macau’s high quality mass-market facilities. Still, the issue of credit will keep most VIP gamblers with SJM.The bulk of VIP gambling is done on credit, and the new US-based operators face serious obstacles in extending credit to Mainland patrons, since collection of credit on the Mainland often necessitates resorting to questionable relationships which could jeopardise their gaming licenses in the US. Gaming revenue will continue rising across Asia, and in Macau in particular. Globalysis, a Las Vegas-based firm that tracks Asia’s casino gaming markets, predicts gross casino gambling revenue across Asia will grow 20% year-on-year to US$13 billion in 2006.The biggest revenue gain is expected to occur in the fourth quarter of 2006, following the opening of the Wynn Macau casino resort in September. The question now, as discussed by CLSA’s Aaron Fischer on page 30 of this issue, is whether non-gaming revenues will rise too. Macau’s gaming revenue could soon overtake that of the Las Vegas Strip, but Macau’s non-gaming revenue lags far behind. Wynn Macau will be the first full-fledged Vegas-style resort to open in Macau since the end of Stanley Ho’s 40-year casino monopoly in 2002. Granted, the 600-roomWynn Macau will be a much smaller version of the 2,716-roomWynn Las Vegas, and its entertainment offerings have yet to be revealed, but it will provide an initial indication of whether Chinese have an appetite for more than just Vegas-style gambling. Ambrose So argues that the US-based casino operators descending on Macau have thus far quietly scaled back their ambitious non-gaming plans, putting in more tables to tap proven demand.The gambling grannies will come if you give them more luxurious casinos, but they will not likely support the other offerings of the grand resorts set to open over the coming two years. Macau will need to attract a new, unproven demographic. Las Vegas Sands (LVS) Chairman Sheldon Adelson is confident that Vegas-style entertainment and dining will prove a hit in Macau, drawing Mainland China’s burgeoning middle class. His oft-quoted soundbyte:“If you build it will they come? In my mind, not only will they come, but they’ll come in droves.”LVS is betting hard cash on that vision, with the US$2.3 billion Venetian Macau scheduled to open in mid-2007 featuring a diversified offering of Vegas-style convention and entertainment facilities. Sands Macau merely proved that Chinese gamblers prefer gambling in more plush surroundings. Mainland Chinese will eventually demand Vegas-style entertainment and dining, but it could take some time.They will surely come. It just might take them a bit longer to get here than LVS hopes. Kareem Jalal We crave your feedback. Please send your comments to kareem@asgam.com 5 Editor and Publisher Kareem Jalal Director João Costeira Varela Contributors Edwin Karmiol,Vivek Ramani, Aaron Fischer, Kristian Nygaard Photography Carmo Correia Advertising Director Herb Moskowitz Email: ads@asgam.com Tel: (852) 2838 8702 Fax: (852) 2572 5468 Inside Asian Gaming is published by Must Read Publications Ltd 9B Edificio Regent, 22 Praça de Lobo de Avila Tel: (853) 646 0795 For subscription enquiries, please email subs@asgam.com