Inside Asian Gaming

INSIDE ASIAN GAMING | October 2009 12 Market Outlook of visitors and localising services raises discussion of the most obvious shortcoming of GGR as a market indicator in Macau. It doesn’t, by its nature, take account of all the discounts and commissions paid to players and/or agents in exchange for the players’ patronage. 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. A difficulty is unless the individual investor or investment institution has a real insight into senior management’s thinking on discounts and commissions, then they can expect a long wait if they’re hoping to see it written down in black and white on the balance sheet. Another key point is that in theVIP-based Macau market with its focus on gambling credit, gross gaming revenue is not the same thing as money in the bank—either for the operator or the government. It’s been reported that Macau is allowed to compute its gross gaming revenue based on play facilitated by credit during a particular reporting period. This is regardless of whether that credit has been honoured and the debt collected during that same reporting period. Under that kind of accounting regime, it’s difficult for investors and the market to get a handle on levels of bad debt. Is the monetary value of the play really held within the formal accounting system of the casino industry, or is the value held only notionally in the ledger of a VIP agent? Given theway that Macau’s gaming gross is calculated, the significant year on year rise in the September GGR figures may be more a function of an improving credit market for high rollers than it is about how much money the industry has made for investors and the community. Transparency Macau’s gambling agent system— whereby a gambling debt is not contracted directly between the casino and the player, but between the player and a third party (or even a fourth or fifth party)—makes it hard for the market to track the performance of those debts. Even with so-called direct play in Macau, where a gambling credit agreement is contracted directly between the player and the operator, the assumption that such a debt is enforceable in law is subject to question. When Wynn Macau took a high roller to court in Hong Kong recently in pursuit of a HK$30 million (US$3.87 million) debt allegedly contracted inMacau and LasVegas, the man’s lawyers argued he was not liable to be exposed to summary judgement. They said this was because the credit agreement had not been signed off by the Gaming Inspection and Co-ordination Bureau, Macau’s gaming regulator. Advocates for Wynn countered that such a sign-off related to the contractual relationship between the casinos themselves and VIP agents, not to direct loans from casino to player. US system In any case, when it comes to