Inside Asian Gaming

21 20 SJM’s moribund Macau Palace Floating Ca- sino, where the new terminals will make their debut. The refurbished Macau Palace will open in August, as a showcase for 500 Para- dise Box terminals offering players a choice of four live games: roulette, baccarat, sic-bo and fish-prawn-crab. A large LED out front will keep a running tally of the jackpot, beckoning the crowds back to a casino “which has not been doing well for SJM for some time,” points out Mr Park. Macau Palace will also make Paradise the operator of the world’s largest electronic table gaming venue, adds Mr Park, though he admits that is largely because electronic table gaming is such a recent innovation. The Macau Palace will bring the number of terminals operated by Paradise around Macau to 780, and the company is now on track to have 1,000 terminals installed by the end of the year, surpassing its previous target by 200 terminals.In addition,Paradise recent- ly announced it would supply the Philippine Amusement and Gaming Corporation (Pag- cor) with 120 terminals in the Philippines, up from the previously agreed 40. If the Macau Palace is a success, Mr Park argues it will create demand for the Paradise Box “at a lot of other locations.” He believes Paradise’s business model provides “a very good fit” for prospective casino partners, who can call on Paradise to install terminals in sections of their properties which are not generating returns. “It’ll cost them nothing. We’ll put in these machines at our own capex cost.In order for us to recoup our side,we will profit share with them.” Value proposition The major value proposition of the LIVE Bac- carat system is a more than 90% reduction in labour costs,which have been spiralling since the government liberalized the local gaming industry in 2002, ending Stanley Ho’s 40-year monopoly and allowing five new operators to open casinos in the city. The number of gaming tables in Macau has surged from a mere 424 in 2003 – a year prior to the open- ing of Sands Macau, the first casino from one of the new operators – to 2,970 by the end of the first quarter of 2007. A string of new casino resorts will add thousands more over the coming years. The Macau government also requires that casinos only hire local Macau residents as dealers. With the city at virtually full em- ployment, this, together with the surging ta- ble capacity, has resulted in a sharp increase in dealer salaries. Starting salaries for dealers have risen from as low as HK$5,000 (US$640) per month during the monopoly era to as high as HK$16,000 (US$2,000) now. The LIVE Baccarat system “will take care of these costs immediately,” claims Mr Park. He cites a case study of one of Paradise’s part- ner casinos, where “labour costs per month were easily about HK$30 million. They were barely breaking even because of the labour issue, because not enough people can go to a game. Now we’re coming in there saying la- bour costs will be HK$7 million max. So that’s HK$23 million plus money in their pocket im- mediately.” Detractors The lower labour costs allow LIVE Baccarat to offer a minimum bet of just HK$20 (US$2.6), compared to the HK$100 minimum on normal baccarat tables. Given the massive planned increase in the number of regular baccarat tables around Macau, Mr Park says: “Some people ask ‘won’t they have no choice but to lower their minimumbet fromHK$100 to HK$50? How will you compete then?’” Mr Park does not think casino operators in Macau will ever introduce significant num- bers of baccarat tables with minimum bets below HK$100, because at that level, with labour costs so high, “there is no reason to actually go and launch that table to begin with.” Any tables with minimum bets below HK$100 would be “loss leaders in order to bring in people, so they’ll go and play other games. But in that case, the casinos are re- ally crossing their fingers that those people who are betting less than HK$100 per hand are going to go and lose money somewhere else,” argues Mr Park.“How are you going to justify paying somebody HK$15-16,000 per month in salary, and you’ve got a table with a minimum bet of less than HK$100? It doesn’t make sense.” Life-changing jackpot Another Paradise innovation is its recently launched progressive jackpot as a side bet on LIVE Baccarat. Progressive jackpots – “we call it the‘life changing jackpot,’”says Mr Park – hold great allure for Chinese gamblers. Par- adise’s trademarked Paradise Jackpot is the world’s first baccarat-based jackpot, which pays out when specific card sequences are dealt during a LIVE Baccarat game.The “Para- dise Jackpot”pays out 100%of the pool when the five cards constituting a Royal Flush are dealt, while fixed payouts are also available for four of a kind, three of a kind and banker or player pairs. Paradise has also developed a system to implement the Paradise Jackpot on regular baccarat tables, which could become its big- gest earner. The company is poised to sign an agreement to supply its Paradise Jackpot to regular tables at SJM and Galaxy casinos by the end of June, with the first set of tables featuring the jackpot operational by July. “Over time we would have a penetration for the majority of all baccarat tables in SJM and Galaxy,” says Mr Park. “We think we can get 800 mass market tables and 300 VIP tables at SJM and Galaxy properties by the end of the year,”he predicts. Last year, Macau casinos generated about US$6 billion in baccarat revenue.“If for each game 50% of players place the side bet, the pool will grow by about half a million a day.The potential payout will take about one month or even longer.I wouldn’t be surprised if the jackpot goes up to 50 million.” The world’s leading gaming systems sup- pliers are paying close attention to Paradise, often with a touch of envy.Apart from having the potential to drastically alter the fortunes of a lucky gambler in Macau every other month, the Paradise Jackpot could vault Par- adise Entertainment Ltd to a leading position in the industry. The company’s stock price has almost quadrupled since the beginning of this year, and looks poised to keep soaring heavenwards. A Paradise Jackpot-ready table