Gross, Damned Gross and Statistics

Figures for aggregated gaming revenue are fun but can be misleading

Everyone loves statistics and league tables. So the latest unofficial figures on gross gaming revenue (GGR) for Macau in September have got the industry abuzz.

According to Lusa, the Portuguese-language news agency, Macau’s GGR for September 2009 grew 53% year on year (i.e., compared to the equivalent month in 2008). By that reckoning, the autumn holiday season really was one of mellow fruitfulness.

The figures reported by Lusa suggest the territory’s casinos and their games of fortune brought in 10.8 billion patacas (US$1.35 billion) during that month. This echoes the runaway revenue growth seen in the first half of 2008 before China’s visa restrictions and the international financial crisis spoiled the party.

September does include the run up to the National Day holiday on 1st October which this year was a truly bumper event marking the 60th anniversary of the founding of the People’s Republic of China. Nonetheless, if this September’s revenue growth pattern were to be the harbinger of a trend for the rest of the calendar year, it would in likelihood more than make up for the sluggish performance seen between January and the end of August. In that period, Macau’s GGR was down around 2% compared with the same period in 2008.

Market share

In terms of operator market share for September, Dr Stanley Ho’s casino company SJM stayed in top spot with its share up 4% to 30%—a three month high. Las Vegas Sands Corp was in second spot with 20%—down 4% on August. Melco Crown Entertainment continued its strong performance, seen since the opening of its Cotai resort City of Dreams, with a 16% share, the same as in August. Wynn took fourth place with 14%, up 1% on the previous month. Galaxy held at 10% for the third straight month in fifth spot, while MGM GRAND Macau slipped back from its strong summer performance seen in July, when it peaked for the year at a 12% share of the gross. It scored 8% in September, according to the unofficial Lusa figures.

No serious student of the Macau casino industry expects market share on gross gaming revenue to tell the whole story or even part of the whole story. The figures are, however, seen as a reasonable snapshot guide on how the local sector is doing as a whole and how the individual concessionaires are performing relative to each other.
The perfectly understandable buzz created around the release of GGR figures shouldn’t distract observers from some other important structural issues. Those issues relate to the business model of VIP gaming.

Weighty VIPs

Because VIP rolling chip volume has such an important role in calculating GGR in Macau, the loss of one or two big players by a particular casino can have a significant impact on its market share. Of course, the loss of any one player by one casino constitutes a competitive advantage gained by another casino (assuming the player hasn’t left the market entirely through lack of liquidity, insolvency or an appointment with a branch of the People’s Court on the Mainland). If, however, an operator’s share of the gross yo-yos back and forth from month to month, that doesn’t necessarily indicate a trend in terms of the quality of that particular casino’s facilities. It may be more about VIP agents flip-flopping between casinos to look for the best commission deal—which those agents may then pass on in part to their clients in the form of incentives such as discounts on losses.