IAG March 2016 - page 7

Cover Story
jurisdiction, generally threemiles offshore, it’s freeof restrictions on
gaming and any sovereign regulation of it. International cruise lines
include casinos among their entertainment options, while smaller
operators offer cruises to thehigh seas specifically for gaming.
Cruiseshipgaming remains lucrative inEastAsia,withshipboard
gross gaming revenue estimated at more than US$500million last
year, roughly double the likely size of the Vietnam gaming market.
Gaming cruises stay afloat despite the expansion of the region’s
land-based casinos in terms of location, size and attractions. Many
in the industry deride shipboard gaming as the redoubt of penny
ante players, and contend that it poses no significant competition to
land based casinos. But as VIPs shy away frommajor gaming hubs,
and Macau attempts to diversify as a tourism and entertainment
destination, cruise ship casinosmayproveabigger factor in regional
gaming than thepresumed smartmoney believes.
Walk down Hong Kong’s Canton Road and you may be
approachedwith theoffer of a freeocean cruise. That’s theblunt end
of a surprisingly robust and sophisticated gaming segment. Genting
Hong Kong’s Star Cruises runs overnight outings fromHong Kong
on Star Pisces with a capacity of 1,000, and two-night high seas
cruises fromSingapore in addition to longer itineraries. Lower in the
market,most cruises-to-nowhereoperators sail a single vessel for up
to 500 customers, dubbed “pirate ships” in the industry.
While grabbing customers off the street is a crapshoot, gaming
cruise operators generally run their businesses much like other
casinos in the region. They rate players by average daily theoretical
and run loyaltyprograms. TheyhaveVIP roomsandworkwith junket
agents, most doubling as subagents inMacau. Ships include pawn
shops, “amini-Macau,” one cruise executive says.
Sowhydon’t cruiseplayersgo to the realMacauor another casino in
the region’sburgeoning land-basedgaming industry?For customers,
the main factor is convenience. Passengers board, perhaps have a
quick meal or nap in their cabin and withinminutes of casting off,
they canstart playing.Nohassleswith ferries,Macau immigrationor
shuttle buses. Singapore residents avoid the SG$100 (US$70) entry
tax at the city’s integrated resort casinos. For rated players, cruises
are generally free. Minimum bets are lower than those at Macau or
Singapore tables. On theVIP side, commissions can reach 1.60%of
rolling, compared with 1.25% inMacau. Credit to junket promoters
can runup toHK$50millionper cruise.
On the business side, all cruise ships have significant cost
advantagesover land-basedcasinos.Because theyoperateon thehigh
seas, they pay neither gaming taxes nor compliance costs connected
with regulation. Workers recruited from low wage countries such as
the Philippines and Indonesia get low salaries, though they don’t pay
taxesandhave roomandboardprovided.Agamingcruise’sbreakeven
point for a customer can be as low as HK$100 (US$13), an industry
insider says. International operators,withdozensof ships, buy inhuge
bulk, feeding and otherwise accommodating thousands of people a
day, and can negotiate big discounts from suppliers. The falling price
ofoilhascutonemajoroperatingcost;StarCruises reported fuel costs
decreased 41% though it also recorded a loss on fuel hedges for the
On thebusiness side, all cruise shipshave
significant costadvantagesover land-based
casinos.Because theyoperateon thehigh
seas, theypayneithergaming taxesnor
compliance costs connectedwithregulation
…Agaming cruise’sbreakevenpoint fora
customer canbeas lowareHK$100 (US$13),
an industry insider says.
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