Inside Asian Gaming

INSIDE ASIAN GAMING | March 2009 12 Cover Story being added in the last quarter of ‘07. I think there were something like 1,000 tables added in the second half of ’07, and the price war started in Q1 2008. That’s why you suddenly saw that explosive growth that Bob referred to. “The question we were asking ourselves was ‘Is this sustainable? Is this something where we wish to join the fight?’We chose not to. And suddenly you see our market share from 15% drop down to almost below 10% at one stage. That’s a lot of market share. But it wasn’t because we were doing in absolute values worse than before—it’s just that the market had suddenly grown by about 50%, so this means relatively-speaking, in terms of market share, we lost percentage.” Has there been a problemwith bad debt for some operators because of too aggressive an expansion in the VIP sector? Mr Lui: “I suppose looking at it with 20/20 hindsight, a lot of people decided that extending credit was not a wise thing to do. You can see the market share coming back down again and everyone’s becoming more realistic. This year, again, it’s not like last year where you could get credit easily. Liquidity is an issue, therefore people are taking a more conservative approach. “I agree with the call made by Gary Loveman, CEO of Harrah. He said: ‘The arms race is over’. Nobody’s trying to build a bigger, better casino now. Everybody’s trying to improve their bottom line now. I believe that’s a healthier sign.” If the Macau VIP market is now finding its own level, does that mean it is no longer necessary to have a formal, if technically voluntary, cap on VIP rolling chip commission rates? MrLui: “Istillbelievethatthegovernment will issue a cap restriction sooner rather than later and that it will be implemented.” Can you explain the business proposition with CityClubs? Mr Lui: “In the CityClubs, many of the junkets—we call them service providers—own a substantial interest in the property, we are just leasing a space where we run it as a casino, whereas in our StarWorld, the junket doesn’t have to pay the capital costs of providing the venue, which means that the margin we get from StarWorld will be higher than the commission we will get from CityClubs. At CityClubs we have to give something back to the service provider, because they are the ones who invested capital to put up the building.” Robert Drake StarWorld’s Sky Casino