Operators state their expected VIP baccarat win percentage in their earnings announcements, and although the laws of probability do not vary across properties, there is significant variation among those assumptions. In case you are tempted to use the variations to gauge how realistic each operator’s overall expectations are, bear in mind that there appears to be a correlation between the actual win percentage achieved by an operator in a given quarter and the expected win percentage claimed in that quarter.

For example, when Wynn Macau reported a disappointing 2.4% win percentage over the four months it was open in 2006, it stated its expected win percentage ranged from 2.5% to 2.8%. A relatively lucky Q4 2007 led to a win percentage of 3.1%, and the company coolly raised its expected win percentage for the quarter to 2.7% to 3.0%.

Owing to the intensity of the players and sums involved, VIP baccarat in Macau probably ranks among the world's most volatile casino games for both house and player. Expectations can be influenced by new observations and experience, but unless the expected win percentage remains static, using it as a benchmark to comment on the actual win percentage—which varies with luck—is irrelevant. By arbitrarily raising the expected win percentage, an operator suggests a high win percentage can be sustained, and was not merely the result of luck, which cannot be relied upon to continue.

The bull stands out

While we have insinuated that an operator’s reported expected win percentage may not always reflect that operator’s actual expectation, it is notable that mild-mannered Galaxy Entertainment Group gave an expected range of 2.7% to 2.9% in Q4 2007, even though it was particularly lucky in the quarter, enjoying an actual win percentage of 3.3%. Ever-bullish Las Vegas Sands Corp (LVS), on the other hand, does not offer a range of values for expected win percentage, opting to provide a single value instead. In Q4 2007, that value was 3.0%, giving LVS the biggest expected win percentage in the market, although its properties presumably do not have any unique inherent edge over players. Perhaps LVS just felt it fitting to have the biggest expected win percentage in order to compliment the city’s biggest casino and construction pipeline.

The aggressive expected win percentage is a reflection of the lofty expectations LVS is trying to create for its projects, especially since its actual VIP win percentage for the quarter came in at a rather average 2.72%. LVS thereby wants us to believe that its Q4 2007 VIP revenue would have been better, had it not been for a run of bad luck (even though 2.72% is within most other operators’ expected range). Unless all the other operators have got it wrong, such an aggressive expected win percentage could come across as a transparent attempt to boost the company’s stock price.

Melco PBL stated a flat 2.7% expected VIP baccarat win percentage in its Q4 2007 results announcement. Although this makes Melco PBL the listed operator with the lowest expected win, that does not mean the company has proven itself to be prudent or modest, especially since its actual win for the quarter came in well below expectations at 2.4%. This is reminiscent of Wynn Macau's weak start, and it is likely that future lucky quarters will lead Melco PBL to also revise its expected win percentage upwards.