Inside Asian Gaming

In October, MGM Macau for the first time rose from last place among the six operators in the local market share rankings to the fifth spot, overtaking Galaxy Entertainment Group. Although MGM Macau maintained its lead over Galaxy in November, both October and November have seen Galaxy suffer particularly unlucky months at the hands of high rollers, whereas MGM Macau has enjoyed especially lucky months. Galaxy generates far greater VIP baccarat turnover than MGM Macau (HK$52.3 billion versus HK$39.4 billion in November), and if both operators had experienced market average win rates in October and November, Galaxy would have comfortably maintained its lead over MGM Macau in both months. Also, it appears the VIP baccarat turnover generated by both Galaxy and Wynn Macau has remained resilient in spite of the VIP baccarat price war reportedly instigated by neighbouring MGM Macau, which has, according to sources, begun offering major junkets a 47% share of revenues for basing their operations at its property (compared to the industry norm of 42%). Varying VIP reliance The Macau market has become increasingly dominated by VIP baccarat this year. While VIP baccarat accounted for 70.7% of all table gaming revenue in 2009, it contributed a whopping 84% in October this year and 77% in November. Sands China is the operator least reliant on VIP baccarat—which comprised 62% of the operator’s total table revenue in November—thanks to its sprawling main gaming floors at Venetian and Sands Macao and its diversified entertainment offerings. Sands China stands in stark contrast to the other Macau operator which currently boasts significant mass-market crowd- pulling potential: Melco Crown, operator of the expansive City of Dreams resort, located across the street fromVenetian Macao on the Cotai Strip. City of Dreams unveiled its much-hyped HK$2 billion (US$200 million) ‘House of Dancing Water’ show in September, but the results in October and November suggest the water show has yet to provide a significant boost to the property’s mass market table gaming revenue. Venetian Macao continues to provide a far superior mass market draw, generating main floor table gaming revenue of HK$681.0 million in October and HK$550.1 million in November, versus City of Dreams’ HK$327.7 million in October and HK$302.8 million in November. Deciding factors Commission price wars can be decisive in the war for VIP baccarat revenue share, as Melco Crown proved by grabbing a quarter of the local VIP business at its modest—in terms of size and surrounding neighbourhood—in size and surroundings—Crown Macau (now Altira) on Taipa by offering an unprecedented 1.35% commission agreement with junket consolidator AMA International in late 2007. Melco Crown launched the price war at Crown Macau after the property had struggled for six months from its May 2007 opening to generate business using only its self-proclaimed six-star amenities. On the other hand, the contrasting main floor performances of the US$2.4 billion City of Dreams and the equally-priced Venetian Macao just across the street demonstrate that the battle for the mass market will be decided by less tangible factors. These range from the ease with which visitors can find their way around the Macau table gaming revenue by operator in October 2010 (excluding slot revenues) SJM 153.94 2.72 4.19 1.62 5.81 72 Sands China 53.05 4.08 2.16 1.08 3.24 67 Melco Crown 68.93 2.96 2.04 0.38 2.42 84 Wynn Macau 72.56 2.61 1.89 0.47 2.36 80 MGM Macau 45.98 3.23 1.48 0.36 1.84 81 Galaxy 64.12 2.48 1.59 0.17 1.77 90 Industry Total/Avg 458.57 2.91 13.36 4.07 17.44 84 VIP Baccarat Turnover (HK$ bn) VIP Baccarat Win Rate (%) VIP Baccarat Revenue (HK$bn) Main Gaming Floor Revenue (HK$ bn) Total Revenue (HK$ bn) Share of Revenue From VIP Baccarat (%) Although MGM Macau maintained its lead over Galaxy in November, both October and November have seen Galaxy suffer particularly unlucky months In Focus