Inside Asian Gaming

INSIDE ASIAN GAMING | February 2011 6 Market Outlook T he maxim “There are three types of lies—lies, damned lies, and statistics,” has, probably appropriately, been attributed to at least three famous men of politics and letters: Benjamin Disraeli, Alfred Marshall and Mark Twain. The phrase never seemed more appropriate than when applied to Macau gaming numbers. An operator can move up a place or two in the revenue league table but it may not help very much if the price is deterioration in higher margin mass-market business, or if the improvement was a result of a short upward blip in his VIP hold percentage, which subsequently normalises. As Sheldon Adelson pointed out in his third quarter earnings call last year, SJM’s share of Macau revenue looks unassailable at first glance (32.2% in January this year)—but not so rosy when one digs into the statistics. Most ‘SJM’properties (16 out of the 20) are satellite casinos operating under the SJM licence but with varying degrees of autonomy in their management. That means SJM gets to keep a smaller proportion of the gross wagered in Macau than its market coverage and table numbers would suggest. Satellites are paying SJM anywhere from 20% of the gross (the traditional 40:40:20 model, whereby 40% goes to the government in tax, 40% to the satellite owner and the residue to SJM), to as little as 3-5% to SJM on a profit share basis. And market-wide, Inside Asian Gaming understands the trend is for a movement away from the 40:40:20 model. Even that bald statistic is somewhat misleading however, given that in return for giving up 15-17% of the gross, SJM is relieved of the headache of staffing those satellites. That’s no mean concession in a market short of reliable and cheap labour, and could have the effect actually of boosting SJM’s profit margin in some or all of those properties. Minefield The above illustration is a good indication of the minefield into which any commentator steps when trying to ‘analyse’ what the Macau revenue numbers mean in advance of company reporting. While all businesses in all markets are subject to variables (such as Lies, Bad Cheques and Statistics The ‘back story’ to Macau’s VIP gaming numbers Sheldon Adelson of LVS—a few home truths about market share