Scientific Game

Onward and Upward

Winning Asia Technology Ltd Product Marketing Director Alice Tang shares her insights on Macau’s rapidly developing slot market

Monday, 01 November 2010 16:14
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Although Macau was not entirely devoid of slot machines during Stanley Ho’s effective 42-year casino operating monopoly, they were viewed more as decorative elements than serious revenue drivers. In 2003—the year before the opening of the first post-monopoly casino, Sands Macao, in May 2004—slot revenue accounted for a mere 0.8% of Macau’s total casino revenue, compared to over half the casino revenue on the Las Vegas Strip and over 70% in downtown Las Vegas.

Macau only had 814 slot machines in 2003, but even so, supply outstripped demand, as demonstrated by the banks of idle machines at Dr Ho’s then flagship property, Casino Lisboa. Reasons for the erstwhile aversion to slots in Macau include non-existent marketing, meagre returns to player (reportedly 60% compared to over 90% now), and the supposed preference of Chinese to engage in face-to-face battles with the house, and their belief that they can influence outcomes at the tables by spotting patterns, whereas they leave their destinies to unfeeling computers when playing slots.

The post-monopoly casinos have succeeded in overcoming ingrained prejudices against slot machines, and have been aggressively promoting slots. They have a strong incentive to do so. Although VIP baccarat remains by far the biggest contributor to the city’s total casino revenue, margins on the business have been dwindling with the advent of competition— particularly with the offering of significantly higher commissions to the junkets bringing in the VIP players.

Macau’s slot market is reaching its seventh year of explosive growth. The installed base of slot machines reached 14,316 in the third quarter of 2010. That represents an over 17-fold increase from the figure in 2003. There has been an 11-fold rise in the number of gaming tables over the same period to 4,838 in the third quarter of 2010.

Despite the strong slot capacity expansion, average win per machine per day has more than doubled from 2003 to the third quarter of 2010, when it stood at over US$210, while average win per table has declined over the corresponding period.

Macau’s slot market has a long way to grow in relation to its table market. The ratio of slot machines to gaming tables in Macau is now about 3 times, compared to over 20 times on the Las Vegas Strip. The narrowing of the gap will be hastened by the Macau government’s recently announced cap on the number of gaming tables in the city. As posited in Inside Asian Gaming’s July 2010 cover story, “Electric Dreams”, the table cap could be a golden opportunity for suppliers of electronic gaming machines.

VIPs are migrating to machines

A major driver of the jump in machine win per unit is the growing trend for high rollers to stray from the VIP baccarat tables and devote some of their gaming spend to slots. According to Winning Asia Technology Ltd Product Marketing Director Alice Tang, “the majority of slot revenue comes from VIPs and VIP slot players are mainly mainland Chinese. One VIP player can cover 20 mass players. You hear many stories of mainlanders losing millions of dollars on slots in two or three months. So more and more casinos are opening up VIP slots areas. That’s the biggest and most lucrative part of slot revenue.

“Whenever I pass through a VIP area, I see players on HK$10 denom machines with 10,000 or 20,000 credits [equivalent to HK$200,000, or US$25,600]. I say, ‘wow, you’re putting the equivalent of a car into the slot machine. And sometimes a Ferrari.’ “This is the trend now. You might happen to see it in Vegas, but not often. In Macau, the VIP slot market keeps expanding, but the products are still the same kind of products.”

So what drives VIPs to slots? According to Ms Tang: “Some people might not be a table player, but they’re really rich and maybe bored, and want to spend a few hours in a casino. Slots give them an environment in which they can spend hours without losing so quickly.” In addition, it appears women VIPs have a greater tendency to favour slots.

Slot machines offer much better margins than VIP baccarat, so it’s no surprise that casinos are increasingly trying to entice more high rollers onto slots with a range of comps including free hotel rooms and F&B. But as Ms Tang observes, “I found that ‘real’ gamblers don’t really care much about what marketing, free food, free rooms you give them. Because they’re people who just want to gamble. They don’t want you to disturb them and they don’t care how much they lose. They just want to feel the volatility and excitement.”

Aside from VIPs and non-VIPs, slot players can also be categorised as regulars (including regular locals and tourists) and non-regulars. “Regular players provide a very stable income. Regular tourists provide a very good payout because they include VIPs from China with very high turnover on play,” points out Ms Tang.

The regular crowd also includes far less affluent local players. “Because they’re coming regularly, some local players can’t afford to spend much on slot machines, so what happens is that more lines and lower denoms have become a very popular setting nowadays, because they allow players to keep betting for the whole day.”

Although Asians are known to prefer highly volatile games, regular local players on a budget are clearly an exception. “Like grannies and women waiting to pick up their children from school. They just want to spend time somewhere. And old people wouldn’t spend much on high denom or high volatility games. They voice out, ‘we just want to spend time playing. We don’t mind losing a little bit of money every day.’ They come every day and just want to talk to the person next to them, and just spend some time because they are retired and they found the casino offers either cheap or free food and other things.

“Sometimes many of them are couples. They come every day at the same time, like 10am, after breakfast, then they stay until 3 in the afternoon. Maybe they have a grandson they have to pick up after school. These segments don’t really play high volatility games.”

Leaving the comfort zone

It can be a challenge to get slot players in Macau to try new games. Alice Tang explains: “Most players [in Macau] stick with the types of games they are used to playing, and they are reluctant to move on to new games. Word of mouth is very helpful, because players always talk to each other. If someone recommends a game to a player, they might try it. And if one player gets a big win on a new machine, the news spreads very quickly throughout the hall.

“When it’s a new game, they hesitate to try it, but if you give them some kind of incentive to try it, like free gifts—umbrellas, t-shirts, souvenirs, that kind of thing—they will be more inclined to try it.”

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