As more gaming facilities open in Macau, the slot machine will play an increasingly important role in the ultimate success or failure of casino properties. But is the predominately table game oriented Chinese gambler ready to spend money on ‘hungry tigers?’
Over the next few years, Macau is pegged to experience greater slot machine growth than anywhere else in the world. The growth, however, comes against a woefully low base.
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Slot Technology Gains in Macau Macau slot operators are cautiously starting to embrace modern slot technology. Mocha Slot, Wynn Macau, Sands Macau and the Galaxy properties all use customer relationship management (CRM) systems, particularly as part of rewards programs. Mocha and Wynn use the IGT system, while Sands uses Bally. Mocha Slot General Manager Ted Chan said he believed that “apart from doing it yourself,” the IGT system provided the best room for customization of any patron management system, and added that the system fits best into a club membership environment. Chan also added that cashless gaming was not yet appropriate for the immature Macau market, because people still need something “physical you can hold.” Wynn started using a ticket in-ticket out (TITO) system when it opened in September this year, while Mocha will start using TITO in the first quarter of 2007. None of Macau’s slot operators currently use downloadable gaming systems, opting primarily for server-based games. |
Macau Slot machines earned US$65 million in the third quarter of 2006, compared to a mere US$29 million for the whole of 2003. Despite the explosive percentage increase, “slots haven’t really grown in terms of revenue,” said Mocha Slot General Manager Ted Chan.
Indeed, slot machines contributed a mere 3.8% of total gaming revenue in Macau in the third quarter — up from 0.8% in 2003 — compared to well over half of the revenue on the Las Vegas Strip and over 70% in downtown Las Vegas.
However, on a more positive note, the ratio of slot machines to gaming tables in Macau is now less than 3 times, compared to over 20 times on the Las Vegas Strip. So there is clearly potential for big growth. David Green, director of PricewaterhouseCoopers’ Macau gaming practice, predicted there will be as many as 13,000 slot machines in Macau by 2008. Las Vegas Sands Corp’s Venetian Macau resort alone will add as many as 4,000 slot machines when it opens in mid-2007.
Chan predicted the slot market will start showing strong growth in absolute terms after three to five years as new developments such as the Venetian Macau bring greater entertainment, retail, dining and other nongaming draws in the Vegas-mould to Macau, drawing a new type of visitor to the city. This, along with the big growth in the number of middle-class mainland Chinese, will raise demand for slots relative to the 1,000 pataca minimum baccarat tables favoured by the small group of big-spending mainlanders that currently contribute the bulk of the city’s gaming revenue in VIP gaming rooms (US$1 = 8 patacas).
“Gradually, slots will become very popular in Macau,” predicted Chan, who sees potential for the contribution of slots to total revenue to rise to 20%. Slots are also drawing in Macau residents, and about 70% of customers at Mocha Slot are locals, as are more than half the customers at Emperor’s slot hall. Macau residents have an aversion to casinos which are “still perceived as a symbol of sin,” according to Chan, while slot halls “though still gambling,” are regarded as an acceptable way of “killing time.”
Transition Slot
Still, getting customers to play tables less and slots more will be far from an easy task. CLSA analyst Aaron Fischer offered the following explanation for the greater popularity of tables than slots among Chinese gamblers in his authoritative Macau Mania report. “The style of gaming is different, with a much higher level of player intensity in Macau than in Las Vegas. Gaming in Macau is a battle against the house whereas in Las Vegas it is treated more as a source of entertainment. Players in Macau are more likely to be from a lower socioeconomic background but are also prepared to spend more of their disposable income on gaming. These reasons favour table games where the stakes are higher.”
Until recently, gamblers in Macau also believed that slots—known in the Cantonese dialect as “hungry tigers”—were rigged by casinos to offer meager payouts. With increasing competition in the slot market following the liberalization of the gaming industry in 2002, slot machines in Macau are paying out more.
Another explanation for the dominance of table games in Macau is that Chinese gamblers supposedly believe they can influence the outcomes by spotting patterns and picking lucky cards or numbers, whereas they leave their destinies to unfeeling and possibly corrupt computers when playing slots.
Such attitudes are quickly changing however, in large part due to the efforts of Macau’s slot hall operators to educate Chinese gamblers.
For example, to make table-loving Chinese gamblers more comfortable with machines, Macau slot hall operators brought in electronic versions of popular table games such as sic bo, baccarat and roulette. These electronic table machines, known as multi-terminal games, offer a hybrid between tables and slots, and are a fairly new innovation globally.
But while Macau remains the primary market for multi-terminal machines, patrons appear to be transitioning away from this style of device and to the standard slot machine, according to slot hall operators like Mocha Slot. Indeed, when Mocha Slot first opened in 2003, multi-terminal games made up 70% of the machine mix. Today, multi-terminal devices take up less than 50% of Mocha Slot, replaced by regular slot machines.
Game Approach
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When it comes to slot machines, the undisputed market leader in Macau is Australia’s Aristocrat Technologies, which claims 41% of the installed upright slot market. IGT declined to provide its own market share, but is likely to command up to 20% of the market.
These leadership positions will likely be challenged going forward however, largely because Macau appears to be regarded as a potential goldmine by slot machine manufacturers from around the world. Many international manufacturers, including Bally Technologies, Shuffle Master’s Stargames.
TCSJohnHuxley and RGB have set up marketing offices in the city in order to get closer to local clients. Other niche players like Slovenia’s Interblock — which provides the bulk of Mocha Slot’s sic bo and roulette multiterminals — have also established a foothold in Macau.
Aristocrat’s top performer in Macau is the theme-based linked product “Cash Express” (featuring a mystery jackpot), according to the company’s local account manager, Kurt Gissane. The linked progressive jackpot is particularly popular among Chinese gamblers seeking big payouts. Gissane pointed out that “the Macau gambler seems to be chasing higher jackpots more than the Australian gambler.”
IGT marketing analyst Loren Stout pointed out that “here there are people who’ve never seen a slot machine before in their life. A lot of things that manufacturers have put in games that make it successful in other markets don’t work here.”
IGT’s linked product “Great Escape” (featuring a linked symbol-initiated bonus), performs strongly in Macau at locations like Mocha Slot and Sands Macau. IGT’s stepper reel product “Yee Hah Hi” (chicken, crab and fish) does well at the Sands, and IGT has just obtained approval to deploy other Chinese-specific steppers in the city. Stout also expected future strong results from the Chinese-themed video-linked “Three Kingdom Wars,” developed in conjunction with Sega, which is currently awaiting regulatory approval for launch in Macau.
Not to be outdone, Aristocrat recently chose Macau as the international launch pad for three Chinese themed games — “Fifty Dragons,” “Water Margin” and “Monkey Challenge” — and has several more such games in the pipeline. Gissane claimed that Aristocrat owns the top-performing standalone games in the market, including the Chinese-themed “Choy Sun Doa” (initially created for Australia), the Chinese themed “Five Dragons” and newer “Fifty Dragons,” in addition to a locally marketed version of the popular “Fifty Lions.”
China First
Despite the recent move by manufacturers to produce Chinese-themed products, Mocha’s Chan pointed out that the existing major slot manufacturers do not fully address the Asian market, perhaps because the tiny Macau market makes up such a small proportion of worldwide slot sales. “Over the past 20 years, Asian players have contributed too little to the slot market,” Chan said. “Most slot games are developed by U.S. and Australian slot makers for their own markets. Unfortunately, we have to choose from what is available. The products are not customized for our market.
“What I hope eventually happens is that some big [Asian] slot operators to negotiate with the slot manufacturers or to cooperate with them to develop new games and then re-export them to the US”
Chan suggested manufacturers develop games with greater volatility to appeal to Chinese gamblers, as well as games with Chinese-language interfaces (some manufacturers are only willing to translate the machines’ buttons and displays to perfunctorily satisfy their clients) and Chinese-themes.
Even the popular electronic baccarat machines are not properly customized for the Macau market. The established practice in Macau is for the house to take a 5% commission on winning banker bets. But manufacturers only offer electronic baccarat machines that run according to Las Vegas rules, where there is no commission but the house takes half the bet if the banker has a six. This can, of course, confuse players in Macau unfamiliar with Vegas rules. “We are forced to take it. Fortunately, it is still very popular in Macau,” Chan said.
The alliance between Shuffle Master and Melco subsidiary Elixir will improve the game mix at Mocha Slot outlets by providing devices more attuned with the Asian market. “We will put our experience into the design [of Elixir’s products].
These games hopefully will be the most popular games in Asia,” said Chan, who added, “Mocha is a very important platform. Without this platform it is very hard to know what the market wants exactly.”
This article, by Kareem Jalal, was commissioned for and originally appeared in the December issue of International Gaming & Wagering Business (IGWB).
