IAG October 2014 - page 7

Cover Story
first quarter to the second, and the growth in Q2 was the softest
since 2011.
In the casino’s elite VIP salons it played out in a 6% decline in
revenue in theApril-Juneperiodon a 3%decline in sales of so-called
“dead chips,” the currency in the rooms, rolling chip volume, as
it’s known, the key indicator of the health of the sector. The volume
decreasewasevenworseviewedsequentially, down 14%, and itdrove
revenue down 16%. It was the sector’s worst performance since the
2008-2009global financial crisis.
While this was unfolding, the Las Vegas Strip was enjoying one
of itsbest quarters for baccarat ever:US$395.4million inwin, almost
double the takeof the year-agoperiod, boostedby a runof good luck
(holdwas 400basis points higher), and a 34% surge inwagers.
This was captured by all of 295 tables, which is interesting,
because at 1.25%, the casino’s advantage on baccarat, it worked out
roughly to $107 million worth of bets per table, high-end action by
any standard.
What’smore interesting is thatmost of those tables (284)were
run by the Strip’s 18 largest casinos by revenue, a group consisting
of four operating companies—MGM Resorts International, Las
Vegas Sands, Wynn Resorts and Caesars Entertainment—three of
which, of course, are ensconced inMacau. This is no coincidence.
Mostof theStrip’shigh-endplay is international, and theconsensus
is thatmost of it originates inAsia. Baccarat, the game of choice of
China’s VIPs, is the biggest game on the Strip five years running,
accounting now for more than 45% of table drop and more than
half the win. Wynn Resorts, for example, noted midway through
last year that Asians accounted for 52% of table revenue at its two
Strip resorts. And it’s more profitable revenue than it is inMacau
by virtue of Nevada’s low tax rate (6.75% versusMacau’s effective
40%) and the absenceof junket commissions—conceptually about
twice as profitable dollar for dollar on a pre-tax basis, according to
research by investment bank CLSA Asia-Pacific Markets—another
incentive to drive the business to Las Vegas, especially for Wynn
andMGM, whichderiveagreater shareof their corporateprofitson
the Strip than LVS does.
It’s impossible to assess precisely how this is impacting
Macau. The Strip’s baccarat win in the second quarter implies
TheStrip’sbaccaratwin in the secondquarter
implies thatdropwasaround$31billion.Notall
of this couldhave comeatMacau’sexpense.But
isprobably conservative—that’s$15.5billion
thatwasn’tgambled inMacau.
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