Inside Asian Gaming

INSIDE ASIAN GAMING | January 2008 28 Happy landings Another potential cloud on the Crown Macau horizon is that A-Max investors may not be as fully familiar with Macau’s gaming business models as they might be. Dazzled by the spectacular early perfor- mance of the Crown VIP venture, they may have overlooked the fact that the business risk—just as with the traditional model— is being borne principally by an outside agent (in this case A-Max) despite the en- ticement of daily commission settlement offered by the casino.VIP gaming in Macau means baccarat and baccarat produces volatile returns. Until Dore Holdings— formerly known as Teem Foundation and operator of VIP rooms in the Wynn Macau, Sands Macao and The Venetian Macao— listed in Hong Kong in early 2007, the idea of a publicly quoted junket operator had seemed almost taboo to the investment community, given the notorious opacity associated with Macau VIP room opera- tions during the monopoly era. Now that taboo has been broken, the last thing investors need is a heavy landing.If A-Max has made promises to Crown Macau to deliver certain levels of rolling chip turn- over every quarter,then it will have to pay up even if in some quarters the players are the ones cleaning up. Any loss of investor confi- dence in A-Max’s junket consolidation busi- ness model could ultimately do more harm to the long-term prospects of VIP gaming in Macau than even a commission war. Layout Change Prior to thecommencement ofCrownMacau’sarrangementwith A-Max, Melco PBL Entertainment undertook a “reconfiguration of Crown Macau to further target the VIP gaming segment.” The reconfiguration was facilitated by the “flexibility of the multi-floor layout” at the property—a layout criticized for making Crown Macau less attractive to main-floor players. Melco PBL said the reconfiguration would “substantially reduce mass market table game and gaming machine capacity at CrownMacau, althoughwedonot expect amaterial impairment to Crown Macau’s mass market gaming volumes as a result of this reduction in capacity”—presumably because mass market volumes were so low to begin with. According to a Melco PBL release, “following completion of the reconfiguration, Crown Macau is expected to have approximately 204 VIP gaming tables, 55 mass market gaming tables, and 230 gaming machines.” Prior to the reconfiguration, the property hosted around 80 VIP tables, 142 mass market tables and 550 gaming machines.