Inside Asian Gaming

T 5 4 he menu featured Beluga Caviar with truffles, Australian lobster, abalone and Norwegian King Crab, all washed down with Cristal champagne and Chateau Haut Bris- son.The entertainment was provided by Dra- gone,and the event coordinated by Ketchum PR. The expectations for the Crown Macau grand opening on May 12 were certainly set high—but I won’t comment on what actually transpired. Enough has been said about that already. The cost of the property was originally Things Can Only Get Better The devil is in the details when you pitch yourself as providing a uniquely six-star experience. The following two-part article begins with casino marketing columnist Octo Chang detailing the myriad teething troubles suffered by Crown Macau since its May opening. Then, Inside Asian Gaming considers the positives, as Macquarie analyst Gary Pinge explains why the stock price of Crown operator Melco PBL Entertainment is ripe for a re-rating budgeted at US$192m in 2005, but the final bill came to US$583m—double that of the original Sands Macao at US$285m, although Crown sits on a fraction of Sands’ plot size. The opening date was progressively pushed back from September 2006 to May 2007—shades of Crown in Melbourne, which also blew its original budget and opening deadline in a similarly spectacular fashion. Proba- bly one of the two slowest building works we have seen in Macau (MGM is the other), the numerous delays make you wonder whether Melco PBL used their Macau connections at all, or opted to go the“MelbourneWay”—ap- parently often cited in their indoctrination classes for new employees—in their ap- proach to local authorities. The location and size of the property was always going to be a problem. Situated in Taipa, away from the thriving Friendship Avenue strip (along which Sands, Wynn, and the new and old Lisboas sit), and the upcom- ing Cotai strip (anchored by Venetian Macao, which opens on August 28), Crown is flanked by residential apartment blocks and cor- nered by the gaudy Greek Mythology. With the battle shifting to the main floor as a result of shrinking junket margins, one would have thought Melco PBL’s first prop- erty would have been a relatively low cost af- fair, an entry vehicle to allow the company to familiarize itself with the market, fine tune its marketing weaponry and acclimatize its Mel- bourne-sourced managers in preparation for its flagship City of Dreams—just as Las Vegas Sands Corp (LVS) chose to do with Sands Macao, which LVS refers to as its “laboratory,” testing what works and what doesn’t in the city in preparation for its main draw,Venetian Macao. Instead, Crown became a huge in- vestment hole, consuming more and more of the group’s resources, to the point where ru- mours are now bouncing around about cash flow problems for the construction of City of Dreams on Cotai. Those niggling details On paper, the Crown strategy appears to be straightforward—leverage your existing ex- perience by pitching to the top end of the market. From the MOP$38 (US$4.8) charged for a bowl of noodles at Crown (compared to MOP$25 at Sands) through to the property’s intimate corner bars and well thought out table design and flow-like arrangements, Melco PBL would seem to have executed its strategy quite well. That is, until you consider the niggling details—because when you pitch yourself as the best product in the market and award yourself an unprecedented six-star rating, it all comes down to the details. Details like confusing the customers with the reversed colours for the digital baccarat score display screens. Pioneered by the Dia- mond Casino at Holiday Inn, these electronic scorecards have become de rigueur in all Macau casinos, and always with the banker results displayed in red and the players’ in blue—until Crown came along and decided it was unique and reversed the colours. Weeks after Crown opened, it had no hotel rooms or restaurants, and all the time, Melco PBL has been enriching the coffers of advertising agents and various media with its branding blitz (arguably its biggest cock- up, and more on that later). The uniforms of the table staff feature gaping collars—not quite in linewith Crown’s stated objective of creating a premium mass hall. The casual and untidy look certainly clashes with the beautifully sculpted flowing arrangement of the gaming tables. On the service side, for such a small oper- ation, there have been numerous anecdotes circulating of dealers not being able to add up to 21—hard to believe given the length of time they had to train their staff, but yours truly experienced it personally—and pit bosses employing strong arm throw-them- out-the-glass-door tactics rather than subtler face-saving discussions. Even before the customers get into the property, they are finding cause for com- plaint. I went to try out Crown’s bus service from the border (with Zhuhai city) to the ca- sino. It was around noon on a Saturday, peak time for the weekend crowd. I counted 5 to 7 Crown buses on constant stand-by at the terminal, and about 80-90 people queuing (enough for about three bus loads). Rather than allowing the buses to set off imme- diately to shuttle players to the tables, the fresh-faced supervisor (barely old enough to shave) stuck firmly to the fifteen minute de- parture schedule. Furthermore, the supervisor only al- lowed the passengers to board every fifteen minutes, despite the long queue in the hot noon sun with no shade. The people queu- ing got angry and asked the supervisor why he would not let the buses set off early when plenty were waiting in reserve, or at the very least, let them board the air-conditioned buses while they waited. The supervisor an- swered he needed to keep the buses in their positions at the terminal or risk losing their spaces to other casino buses. Never mind the reason for the buses being there in the first place—to bring the customers to the casino. Nice buses by the way, but after 40 minutes under the hot sun without even a bottle of water being offered, there was no goodwill whatsoever earned with the potential cus- tomers. That audacious ad Melco PBL went on an advertising binge to brand Crown, only to have the government of neighbouring Guangdong province in mainland China—by far the biggest source of visitors to Macau casinos—ban its ads. Apart from the numerous Crown ads on billboards lining the highways from Zhuhai/ Shenzhen to Guangzhou, the ads also ap- peared on China’s Phoenix TV, Guangdong Zhujiang TV, Guangzhou Cable TV, Guang- dong Nanfang TV, Hong Kong’s TVB Jade (watched widely in Guangdong), Shenzhen TV 1, Shenzhen TV 4, Shenzhen TV 7, and Shenzhen Cable TV. The Crown ad features movie star Chow Yun Fat, whose credits include the popular Hong Kong celluloid trilogy “God of Gam- blers” before his Hollywood breakthrough, and who was reportedly paid US$3.2 million for the Crown campaign. China has a strict ban on ads promoting gambling, so Macau casinos are careful only to promote their non- gaming facilities in ads appearing across the border. The Crown ad does not feature gam- bling per se, but the image of Chow Yun Fat tossing around a gold casino chip in the TV spots was deemed by Guangdong authori- ties as not being subtle enough. Some even argue the audacious Crown ads may have been the step too far that, in May, prompted Guangdong to impose re- strictions on its residents travelling to Macau on individual permits (more on that in “Kill- ing the Chicken”on page XX of this issue)—a contentious claim, but so is the official expla- nation that the restrictions are primarily in- tended to stem the flow of mainland Chinese using the permits to come to work illegally in Macau. Let this lowly marketing person of- fer Melco PBL a word of advice. Junk that ad campaign. It does not matter what you spent on it. That is, in business parlance, a sunk cost. Not only has the ad—rightly or not—become associated with the Guang- dong crackdown, it has also become a run- ning joke with the customers, junket op- erators and even Crown staff. Time to shift gears downwards, toss out the old plans, and bring new ones in quickly. Almost every competing operator I have spoken to about Crown has expressed sym- pathy (with a subtle upturn at the corner of their mouths and matching twinkle in their eye) for the property’s performance to date. They say they don’t like to see a competitor fail because it would not augur well for the overall market. Yeah right. They then invari- ably reveal their true feelings by asking:“So is that what a six-star experience is?” More of the same Melco PBL had said itsmain strengths coming into the market were its established brand name and its VIP business connections, both with junket operators and through its direct client list established at Crown Melbourne. It had also said it would not join Macau’s in- tensifying junket commission war,and would only pay the prevailing rate of 1.1% of roll- ing-chip turnover. The two caveats to Crown’s self-pro- claimed strengths are:i) for Mainland Chinese