IAG June 2015 - page 4

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IPbaccarat’sshareofMacau’sgrossgaming revenuehit apeakof 74% in the thirdquarter
of 2011, but has declined steadily since then.
Last month, it accounted for 58% of reported revenue. However, owing to the move by
casinos to reclassify a good chunk of their premium-mass business as VIP following the
total smokingbanonallMacaumain-floorgamingareas inOctober, a trueradjustedestimateofVIP’s
current share of total revenue is around 50%. If the trend continues, as it seems likely to, themass
marketwill outweigh theVIP segment inamatter ofmonths—possibly even thismonth—something
that just three years ago seemedunlikely tohappen this sideof 2020or even 2030.
Slot machine revenue inMay accounted for just 5% of Macau’s gross gaming revenue, a far cry
from the respective sharesof 67% and 53% it held acrossNevada andon theLasVegasStrip inApril,
themost recent month for which data is available. Most observers don’t believe that machines will
account for a significant proportionofMacau’s gaming revenue any time soon. That consensus view
is also likely tobeprovenwrongby the rapid evolutionof themarket.
Slots inMacau used to be known as “hungry tigers,” a pejorative suggesting at best fear and at
worst distrust. That’s probably because during Stanley Ho’s 40-year casino monopoly that officially
ended in 2002, slot machines were merely a device for wringing any remaining change out of table
playerson thewayoutof thecasino. The return toplayer (RTP)washorribly low (estimatedat60%), the
machineswereoldanduninvitingand their reputationamong consumerswas correspondinglypoor.
Macau’s current slot offering bears no comparison to the gloomy, wall-mounted, electro-
mechanical monsters from yesteryear. The major slot suppliers from Australia, the United States,
EuropeandAsiahavebrought toMacau thevery latest electronic ‘mousetraps’withall kindsof bonus
features and storylines to hold players’ attention. And thanks to the competition between Macau
casinooperators, thosemousetrapshavebeenmarketedmuchmore effectively bothovertly—via the
offering of major jackpots and carded play—and covertly, through dramatic improvements in RTP.
Although there is not yet amandated jurisdictional minimum RTP in themanner of Singapore, it’s
generally accepted that inMacaunomachines offer lower than 85%RTP.
Clearly, electronic gaming still has a long way to grow inMacau. At the end of Q1 2015, there
were 12,688 slotmachines inoperation across the city, the only part of Chinawhere non-VLT gaming
machines can be offered legally to players. By comparison, there are some 200,000 slots across
Australia, and around 100,000 in the state of New South Wales alone—meaning the replacement
cycleofNSW is equivalent toMacau’s entire existing slot inventory.
Conditionsare ripe for anexplosion inMacau’sEGM capacity. Inparticular, the local government’s
capon themarket-widenumber of gaming tablesmeans that the stringof newmegaresorts scheduled
to open on Cotai over the next two years will have to fill the spaces previously allotted for tables with
electronicgamingmachines. The tippingpoint isnigh, but hasn’t yet occurred.GalaxyMacau’sPhase2
opened lastmonthwith fewer than400EGMs, although theproperty’snewgamingareascouldhandle
closer to 3,000, and that’swhere thecountwill probably soonexpand to. IfCotai’sotherupcomingnew
resorts follow suit,Macau’sEGM capacity couldmore thandoubleover thenext coupleof years.
The city’s slot machines earned US$363 million in the first quarter, while its dealer-assisted
electronic gamingmachine terminals took in an additional $67million. Average daily win per device
last quarter equated to a very respectable $320. Although the average daily win per device is likely to
decline slightly as capacity increases, overall revenue could still almost double by the end of 2017,
while table revenue continues to stagnate.
Until recently, soaringgrowthof the live tablemarket ingeneral and theVIP segment inparticular
made it commercially impossible for operators to ignore that consumer demand. But the tables have
nowquite literally turned.EGMswill becomemoreprominentacrossMacau’s futurecasinofloorsand
adequatemarketing resourceswill be allocated tonurturing their growth, feeding further expansion.
TheEGMoffer toAsianplayerswill alsodramatically improve, asevidencedby the richassortment
of new releases from theworld’s leadingmanufacturersdeveloped specifically for the region’splayers
on display at lastmonth’sG2EAsia expo at The VenetianMacao. The product ismore enticing than
ever, including electronic table gameswith side bets andother features that arguablymake the ETGs
more attractive than the traditional live-table versions.
It’s early days yet, but if the rapidly evolving tastes of China’s fast-growingmiddle class is any
guide, expect EGMs to soonbecome a force tobe reckonedwithunderMacau’s “newnormal.”
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