Peace Breaks Out
It's a doctrine of free market capitalism that appealing to self-interest is often the best regulator of market behaviourWednesday, 16 September 2009
That appears to be the case on Cotai in Macau. Las Vegas Sands Corp and Melco Crown Entertainment Ltd were ahead of the pack in announcing a bilateral agreement on VIP commission caps of 1.25% several weeks before the cap was agreed on a market-wide basis with the Macau government.
This was to avoid a costly and (from their perspective) unnecessary trade war between The Venetian and its newly opened neighbour, City of Dreams.
As Stephen Weaver, Asian regional president of LVS told Inside Asian Gaming after the inauguration of the casino operators' trade chamber at the Grand Lisboa Casino recently:
"We're neighbours, we're on friendly terms, so it didn't make sense to enter into [commission] agreements that might have to be amended later at the behest of the government."
In case anyone is worried that a new Woodstock-style era of peace and love is in danger of breaking out between the operators in Macau, don't worry. It isn't all sweetness and light.
There's still the small matter of whether to build an air-conditioned bridge linking The Venetian and City of Dreams. The current line of thinking in both camps seems to be to push for first mover advantage and damn the bridge. In other words, grab as many customers at the ferry terminals and border land crossings as you can, then hang on to them for dear life until they've spent up and so have nothing left for your rival across the road. Some market research published recently in Australia seems to support this theory.