IAG 2006-01 Jan - page 6-7

Editorial
WhatLiesBeyond theTables?
WhenCirqueduSoleil performed inHongKongat theendof last year, thereweren’t toomanydodderyoldChinese ladies in fadingblousesandUS$1 slippers in the
audience.Such ladiesare regularfixturesatMacau’s casinos,andyou’ll often spot themhobblingup to thecashier tobuyUS$25,000worthof chips. Somehow, the
gamblinggranniesnever seem togetmuggedon theirwayhome.
Whenyou’vegot aprovenmarket,providing thebestofferingcanproveprofitable. It’sno surprise that theLasVegas-styleSandsMacauhasprovedahit sinceopening in
May2004. Its50-foot ceilingsandplush interiorsofferedamorecomfortablegamblingenvironment than thoseof theerstwhilemonopolycasinooperator,StanleyHo’s
STDM.
In this issueof InsideAsianGaming,StanleyHo’s right-handman,AmbroseSo,admits thathis company’sflagshipCasinoLisboa,whichwasbuilt in the60s,obviously
fallsbehind in termsof“hardware.”STDM’sgaming subsidiary,SJM, isbusycarryingout renovationsandbuildingnew facilities tokeepupwithMacau’snew foreign
casinooperators.TheLisboa remains the top-grossingcasino in theworldbya fairmargin,but thatwill change, if onlybecauseVIPgamblersbrought inby itsestablished
networkswill soonmigrate to theGrandLisboabeingbuilt across the street.
SandsMacauhasdonewell inattracting themass-market crowd,yetCasinoLisboacontinues toearnat least twiceasmuch revenuewitha smallerproperty thanks to the
company’sgripon the lucrativeVIPmarket.According toaBloomberg report, theVIPmarket consistsof about 4,000gamblers,primarily fromMainlandChina,whobet an
averageUS$1millionper visit.
VIPbaccarat accounted for 77%ofMacau’s casino revenue in2003,butmadeup just 63% in2005.CorePacific-Yamaichi expectsVIPbaccarat’s share to fall below60% this
year.Thereare twoexplanations for this:firstly, themassmarket isgrowing thanks to the lureof newcasinos. It isalsopossible that someof theVIPmarkethasbeendrawn
toSandsMacau’shighqualitymass-market facilities.
Still, the issueof creditwill keepmostVIPgamblerswithSJM.ThebulkofVIPgambling isdoneoncredit,and thenewUS-basedoperators face seriousobstacles in
extendingcredit toMainlandpatrons,sincecollectionof crediton theMainlandoftennecessitates resorting toquestionable relationshipswhichcould jeopardise their
gaming licenses in theUS.
Gaming revenuewill continue risingacrossAsia,and inMacau inparticular.Globalysis,aLasVegas-basedfirm that tracksAsia’s casinogamingmarkets,predictsgross
casinogambling revenueacrossAsiawill grow20%year-on-year toUS$13billion in2006.Thebiggest revenuegain isexpected tooccur in the fourthquarterof 2006,
following theopeningof theWynnMacaucasino resort inSeptember.
Thequestionnow,asdiscussedbyCLSA’sAaronFischeronpage30of this issue, iswhethernon-gaming revenueswill rise too.Macau’sgaming revenuecould soon
overtake thatof theLasVegasStrip,butMacau’snon-gaming revenue lags farbehind.
WynnMacauwill be thefirst full-fledgedVegas-style resort toopen inMacau since theendof StanleyHo’s40-year casinomonopoly in2002.Granted, the600-roomWynn
Macauwill beamuch smaller versionof the2,716-roomWynnLasVegas,and itsentertainmentofferingshaveyet tobe revealed,but itwill providean initial indicationof
whetherChinesehaveanappetite formore than justVegas-stylegambling.
AmbroseSoargues that theUS-basedcasinooperatorsdescendingonMacauhave thus farquietly scaledback their ambitiousnon-gamingplans,putting inmore tables
to tapprovendemand.Thegamblinggrannieswill come if yougive themmore luxurious casinos,but theywill not likely support theotherofferingsof thegrand resorts
set toopenover thecoming twoyears.Macauwill need toattract anew,unprovendemographic.
LasVegasSands (LVS)ChairmanSheldonAdelson is confident thatVegas-styleentertainment anddiningwill proveahit inMacau,drawingMainlandChina’sburgeoning
middleclass.Hisoft-quoted soundbyte:“If youbuild itwill theycome? Inmymind,notonlywill theycome,but they’ll come indroves.”LVS isbettinghardcashon that
vision,with theUS$2.3billionVenetianMacau scheduled toopen inmid-2007 featuringadiversifiedofferingofVegas-styleconventionandentertainment facilities.
SandsMacaumerelyproved thatChinesegamblersprefergambling inmoreplush surroundings.MainlandChinesewill eventuallydemandVegas-styleentertainment and
dining,but it could take some time.Theywill surelycome. It justmight take themabit longer togethere thanLVShopes.
Kareem Jalal
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EditorandPublisher
Kareem Jalal
Director
JoãoCosteiraVarela
Contributors
EdwinKarmiol,VivekRamani,AaronFischer,KristianNygaard
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HerbMoskowitz
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