Inside Asian Gaming

MArch 2016 inside asian gaming 7 Cover Story jurisdiction, generally three miles offshore, it’s free of restrictions on gaming and any sovereign regulation of it. International cruise lines include casinos among their entertainment options, while smaller operators offer cruises to the high seas specifically for gaming. Cruise ship gaming remains lucrative in East Asia, with shipboard gross gaming revenue estimated at more than US$500 million last year, roughly double the likely size of the Vietnam gaming market. Gaming cruises stay afloat despite the expansion of the region’s land-based casinos in terms of location, size and attractions. Many in the industry deride shipboard gaming as the redoubt of penny ante players, and contend that it poses no significant competition to land based casinos. But as VIPs shy away from major gaming hubs, and Macau attempts to diversify as a tourism and entertainment destination, cruise ship casinos may prove a bigger factor in regional gaming than the presumed smart money believes. Walk down Hong Kong’s Canton Road and you may be approached with the offer of a free ocean cruise. That’s the blunt end of a surprisingly robust and sophisticated gaming segment. Genting Hong Kong’s Star Cruises runs overnight outings from Hong Kong on Star Pisces with a capacity of 1,000, and two-night high seas cruises from Singapore in addition to longer itineraries. Lower in the market, most cruises-to-nowhere operators sail a single vessel for up to 500 customers, dubbed “pirate ships” in the industry. While grabbing customers off the street is a crapshoot, gaming cruise operators generally run their businesses much like other casinos in the region. They rate players by average daily theoretical and run loyalty programs. They have VIP rooms and work with junket agents, most doubling as subagents in Macau. Ships include pawn shops, “a mini-Macau,” one cruise executive says. LOW COST CONVENIENCE So why don’t cruise players go to the real Macau or another casino in the region’s burgeoning land-based gaming industry? For customers, the main factor is convenience. Passengers board, perhaps have a quick meal or nap in their cabin and within minutes of casting off, they can start playing. No hassles with ferries, Macau immigration or shuttle buses. Singapore residents avoid the SG$100 (US$70) entry tax at the city’s integrated resort casinos. For rated players, cruises are generally free. Minimum bets are lower than those at Macau or Singapore tables. On the VIP side, commissions can reach 1.60% of rolling, compared with 1.25% in Macau. Credit to junket promoters can run up to HK$50 million per cruise. On the business side, all cruise ships have significant cost advantages over land-based casinos. Because they operate on the high seas, they pay neither gaming taxes nor compliance costs connected with regulation. Workers recruited from low wage countries such as the Philippines and Indonesia get low salaries, though they don’t pay taxes and have room and board provided. A gaming cruise’s breakeven point for a customer can be as low as HK$100 (US$13), an industry insider says. International operators, with dozens of ships, buy in huge bulk, feeding and otherwise accommodating thousands of people a day, and can negotiate big discounts from suppliers. The falling price of oil has cut one major operating cost; Star Cruises reported fuel costs decreased 41% though it also recorded a loss on fuel hedges for the On the business side, all cruise ships have significant cost advantages over land-based casinos. Because they operate on the high seas, they pay neither gaming taxes nor compliance costs connected with regulation … A gaming cruise’s breakeven point for a customer can be as low are HK$100 (US$13), an industry insider says.