Inside Asian Gaming

October 2009 | INSIDE ASIAN GAMING 11 Market Outlook some other important structural issues. Those issues relate to the business model of VIP gaming. Weighty VIPs Because VIP rolling chip volume has such an important role in calculating GGR in Macau, the loss of one or two big players by a particular casino can have a significant impact on its market share. Of course, the loss of any one player by one casino constitutes a competitive advantage gained by another casino (assuming the player hasn’t left the market entirely through lack of liquidity, insolvency or an appointment with a branch of the People’s Court on the Mainland). If, however, an operator’s share of the gross yo-yos back and forth frommonth to month, that doesn’t necessarily indicate a trend in terms of the quality of that particular casino’s facilities. It may be more about VIP agents flip-flopping between casinos to look for the best commission deal—which those agents may then pass on in part to their clients in the form of incentives such as discounts on losses. There may, however, be a qualitative difference between the operators in Macau that is reflected in the market share element of the GGR figures. A recent study by Hong Kong Polytechnic University suggests SJM does well in Macau because it’s a Chinese company and its customers are mainly other Chinese people. To sum up the findings of the study as if it were an exercise in speed dating is to do something of a disservice to the authors, but that’s essentially the point they make. As they put it: “Asia Pacific-based casino brands in Macau outperformed their US- based counterparts in terms of customers’ perceived quality, suggesting the need for US-based casino brands to better cater for the needs of Macau casino visitors and to localise their services.” Limitations The topic of catering for the needs In a high-volume, low-margin segment such as the Macau VIP baccarat trade (which accounted in the second quarter of this year for 64.1% of the gross), the price a casino is paying for its business is an important element in establishing true investor value MGM GRAND Macau