Inside Asian Gaming

October 2009 | INSIDE ASIAN GAMING 13 Market Outlook computing the economic value of the gaming revenue gross, most US casino regulatory regimes say that credit-based play—often referred to in the US under the ‘markers and credit instruments’ heading—should not be included in a casino’s winnings until the credit has been honoured (i.e., any losses paid) by the player. Such credit-based revenue appears instead on a casino’s balance sheet in parentheses under the heading ‘net credit play adjustment’. In this way, investors can judge the health of the business because the credit-based play is in effect noted as a receivable. Once the credit has been honoured, the brackets are removed, and the revenue is recorded in the relevant period’s balance sheet. It’s possible to argue that because US casinos issue credit direct to players with no third party agents, it’s easier to maintain some transparency in the system and for regulators to police it. SomeUS states evencreate tax incentives for casino operators to deflate gross gaming revenues. New Jersey’s Casino Control Act, for example, says casino licensees are for tax purposes “entitled, subject to certain limitations, to take a deduction from gross revenue for the value of promotional gaming credits wagered by patrons in slot machines”. Least worst? Despite all the caveats and health warnings attached to any discussion of gross gaming revenue in Macau, it may in the end be the only effective way of judging the market’s overall trajectory and operators’ performance relative to each other. With other indicators such as operator EBITDA, the statistical waters are muddied by the differing accounting protocols used by the operators—a legacy of their accounting practices in home or core markets. The American Gaming Association, the educational and lobbying body of the commercial casino entertainment industry in the US, describes GGR as “a true measure of the economic value of gambling.” That may be true and very useful for government and society at large. But in the end, investors want to know not only about sales, but also about profitability. We won’t know that until the raw data of the GGR has been sifted and the credit ‘wheat’separated from the credit ‘chaff’. Asia Pacific-based casino brands in Macau outperformed their US-based counterparts in terms of customers’ perceived quality