Inside Asian Gaming

INSIDE ASIAN GAMING | October 2010 24 local unit—MGM China Holdings Ltd—on the Hong Kong stock exchange. It submitted the first round of paperwork to the local regulator last month, and sources familiar with the deal say the joint venture between MGM Resorts International and Pansy Ho hopes to raise at least US$500 million via the offering. That task will be easier if investors are convinced that the US$1.25 billion property is moving forward in the Macau market, not merely treading water. War, what is it good for? If a VIP price war has commenced, does it even matter when the market is so buoyant? Some analysts estimate Macau gross revenues for 2010 could reach MOP180 billion (US$22.5 billion). That’s a 50% increase on 2009, which was already an all time record year. To place the debate in the context of the recent rolling chip commission war, Union Gaming estimates a 57% profit share arrangement is equivalent to 1.625% in rolling chip commission. “In this case, for every hundred dollars in roll, EBITDA contribution is just six cents assuming normal hold,” says Union Gaming. “Simply put, we don’t believe this activity is sustainable for any relevant period of time.” – Union Gaming Research If an operator snatches market share by fierce competition on VIP business, can the operator then make a decent profit out of that business, and sustain the commercial model? The evidence from the experience of Crown Macau (now Altira Macau), MPEL’s high roller-focused property on Taipa south of Macau peninsula, is ‘No’. South side bubble In the short term, the rolling commission hike certainly helped MPEL, Co-chaired by Lawrence Ho. Within months, Crown Macau had grabbed 18% of the Macau VIP gross. But the market as a whole paid a high price. It led casinos and junkets to act like factory ships in a bid to compete, trawling the sea of VIP players and sucking up any they could find—even those they might normally have If an operator snatches market share by fierce competition on VIP business, can the operator then make a decent profit out of that business, and sustain the commercial model? The evidence from the experience of Crown Macau (now Altira Macau), MPEL’s high roller-focused property on Taipa south of Macau peninsula, is ‘No’. VIP Market Outlook