Inside Asian Gaming

May 2008 | INSIDE ASIAN GAMING 23 Galaxy Results T he third quarter of 2007 could prove in the long run to have been a defining moment in Galaxy Entertainment Group’s Macau adventure. In that quarter, revenue from VIP gambling at StarWorld Hotel & Casino, Galaxy’s flagship property and key earner, fell back after two consecutive quarters of growth following the property’s opening in late 2006. To put things in perspective, the fall was part of a trend across all operators and coincided with a short-lived policy initiative by the Guangdong government in neighbouring mainland China to reduce the number of visas for visits to Macau. Market leader In fact, in that quarter Galaxy claimed market leader position on VIP revenue in terms of win per VIP table per day. Nevertheless the fall in VIP volume must have reminded the company just how important the VIP trade is to its long-term success in Macau. Gross earnings on any operator’s VIP trade only tell part of the story of course. Margins on baccarat in general are known in the gaming industry for their volatility. The operator’s win on VIP business is also a lot lower than in the mass market, and in Macau those margins are further reduced by the commissions operators must pay VIP agents as an incentive for them to deliver high rolling customers to their tables. Even with all those caveats, a fall on the VIP gross at StarWorld in Q3 2007 clearly had alarm bells ringing within the company because of the pressure that an underperforming quarter can put on annualised market share and ultimately on profits. VIPs rule GrossVIP earnings and their contribution to all gaming revenues have been going up year-on-year in Macau despite the introduction of more mass-market capacity. In these market conditions the Star Performance Jumbo junkets are Galaxy’s answer to Crown’s VIP challenge competition between operators to retain or win the affections of VIP agents has been intensifying. Existing allegiances between agents and operators—some of them formed over several years—can no longer be guaranteed since VIP and junket consolidators such as A-Max Holdings moved into the Macau VIP market. Galaxy’s response in 2007 was to more than double the number of VIP tables at StarWorld from 32 in January to 69 by year- end,and to signupmoreVIP roompromoters, taking the number from seven to 12. The VIP operation revamp included the StarWorld