Inside Asian Gaming

INSIDE ASIAN GAMING | October 2009 32 T he number of slot machines installed across Macau jumped from 11,971 at the end of the first quarter of 2009 to 13,509 at the end of the second quarter, following the opening of the sprawling US$2.1 billion City of Dreams resort on June 1st. The number of slot machines had actually peaked at 13,552 back in the first quarter of 2008, but then declined over the next three quarters of that year as casino operators took underperforming machines off their floors. Revenue from slot machines accounted for 6.0% of all casino revenue in the first half of 2009, equivalent to 3.1 billion patacas (US$383 million), and compared to 5.2% of casino revenue for the whole of 2008. Following the City of Dreams opening and addition of extra capacity, the share of total casino revenue generated by slot machines is set to increase further in the second half of this year. Macau’s slot revenues have experienced explosive growth in percentage terms since 2003, when they accounted for a mere 0.8% of total casino revenue. Still, slots in Macau have a long way to grow—both in terms of installed base and the revenue they generate—before they can catch up with their Vegas counterparts. Slots generate over half the casino revenue on the Las Vegas Strip and over 70% in downtown Las Vegas. There are several explanations for the erstwhile aversion to slots in Macau, ranging from Stanley Ho’s neglect of the slots at his properties and the perception that gaming machines under the monopoly regime were bound to be rigged to offer meagre payouts, toculturalexplanationssuchasthesupposed preference of Chinese to engage in intense face-to-face battles against the house, and their belief that they can influence outcomes at the tables by spottingpatterns andpicking lucky cards or numbers, whereas they leave their destinies to unfeeling computers when playing slots. The perception of slot machines before the end of the monopoly was summed up by their moniker in the local Cantonese dialect: “hungry tigers.” In 2003, Macau only had 814 slot machines, but even so, demand outstripped supply, as demonstrated by the banks of idle machines at Casino Lisboa. Following the opening of a string of glitzy post-monopoly gaming venues, slots are the focus of increasingly aggressive marketing programmes by the city’s six casino operators, and are now seen by players as offering a good deal. Macau remains very much a table- dominated market, with the ratio of slot machines to gaming tables standing at 3:1 at the end of the second quarter of this year, compared to around 30:1 in Nevada. Macau’s slots to tables ratio also lags those of other major Asian casino jurisdictions, including South Korea (where the ratio is around 7:1) and Genting in Malaysia (6:1). It will take several more years for the explosive percentage growth of slots revenue in Macau to translate to a significant contribution in absolute terms to the overall gaming pie. One major factor holding back the growth is the credit-crisis induced slowdown or suspension of construction on various new mega resorts, with City of Dreams marking the last major property opening of this year, and perhaps also next year. LasVegas Sands Corp (LVS) alone placed an indefinite moratorium on the majority of its planned US$12 billion investment in Macau in the last quarter of 2008, though there are suggestions that development could resume early next year. With the opening of a critical mass of mega resorts along the Cotai Strip, adding to the offerings at the sprawling US$2.4 billion Venetian Macao and City of Dreams, the city could well witness a spurt in its evolution from hardcore gaming getaway to a more diversified tourism hub in the Vegas mould. This will draw a new demographic of visitor to Macau, with demand for ‘lighter’ forms of gaming, such as slot machine play, increasing relative to more ‘hardcore’games, such as VIP baccarat. Nevertheless, much of the current growth in slot revenue is driven by the hardcore players, and Inside Asian Gaming hears of various plans to enticemore high-rollers to switch from their traditional game of VIP baccarat to slots, which offer casino operators much higher margins. Another demographic change that will drive slot revenue growth is that Mainland Chinese are becoming increasingly tech- savvy. This translates to greater trust in and familiarity with gaming machines. Perhaps soon, slots in Macau could earn a more benign nickname that doesn’t evoke images of being mangled by a sharp- toothed carnivore. Where the Slots Stand As Macau’s slot machine capacity returns to near-record levels, the explosive growth of the city’s slot revenue will continue into the second half of this year