Inside Asian Gaming

INSIDE ASIAN GAMING | August 2008 30 “We got shellacked. It is what it is,” LVS President and Chief Operating Officer Bill Weidner said at the time. In Las Vegas, Harrah’s got out of the high roller baccarat market after losing money in that segment. CEO Gary Loveman was quoted as saying it “didn’t make sense” to have 10,000 or 12,000 people enjoying themselves in your property, but be nervous because one ‘whale’ in the high-limit room could undo it all. King baccarat Casino operators are unable to change the laws of probability, but they can smooth out the effects of this intrinsic baccarat volatility by going for volume of play. Indeed, the effects of baccarat volatility are probably masked in Macau compared to Las Vegas because of the sheer ubiquity of the game in the former Portuguese territory. By maximising the number of baccarat hands playedper tableperminute,Macauoperators are maintaining their house liquidity by narrowing the interval between paying out money and taking it in. Viewed in this way, casino baccarat has the characteristics of a gigantic game of musical chairs. If the music (i.e. play) suddenly stopped, some operator somewhere would be left without a chair. It would probably be fanciful to suggest that poker is somehow going to supplant baccarat as the game of choice for Macau’s passionate Chinese gamblers. Poker is more likely to be a complementary product rather than an antidote to baccarat, but if it takes root in Macau it will arguably offer operators a more predictable and stable margin because the house revenue comes via a consistent rake on the money staked, rather than the laws of probability that govern each hand of baccarat. Whether poker will offer sufficiently attractive margins in its own right to move it out of the niche product area and into the mainstream is a moot point, given that the format adopted so far by Macau’s gaming regulator, the DICJ, and the casinos is to hire in specialist sub-contractors to run poker rooms. This requires a four-way split on the revenue (between the taxman, the players in the form of a prize pool, the casino and the roomoperator) without the intrinsic benefits to the casino of volume of play or mitigation of commercial risk on credit provisionoffered by the operators of VIP baccarat rooms. Poker tables, like baccarat tables, must also by law be staffed by dealers who are Macau residents, a scarce commodity and a group notoriously difficult to recruit and then retain at a reasonable price. Salaries for casino card dealers can be as high as 15,000 patacas (US$1,870) per month and are likely to head significantly north of that if inflation in the territory continues to hover around the 9%mark.This is why some casino operators are openly talking about building a poker table market and then leveraging its popularity to turn mass-market customers on to low-overhead poker machines. Revenue streams In the shorter term, if table poker brings in new customers—perhaps well educated professionalswithhighlevelsofdiscretionary spending—then the revenue potential of poker can be seen not just in isolation at table level, but as a way of moving operators up the value chain. This is seen most clearly with the poker tournaments, which attract a small but significant number of women players as well as spectators of both sexes. By contrast, there are very few women players in Macau’s VIP baccarat rooms. The male clientele there are famous for their ability to sit at the gaming tables for hours on end, eschewing alcohol, sipping tea and pausing only for calls of nature and simple snacks of soup noodles or rice. In VIP baccarat, there’s often little in the way of complementary revenue streams for the casinos, and plenty of expense in the form of comps. Increasing numbers of Asian women are becoming wealthy in their own right. Any business model for Asian gaming that effectively excludes—whether by tradition or ambience—half of Asia’s population cannot be efficient in the long term. This is where casino poker may have an edge. APPT President Jeffrey Haas says: “Although men still make up the majority of our players, their wives and girlfriends split their time between watching games and other activities such as playing at the baccarat tables or the slots. I can tell you that as a result of our tour event in the Philippines, the gaming drop at the venue increased 62% over four days.” Chicken versus egg The challenge in Macau is that poker In Focus