Inside Asian Gaming

INSIDE ASIAN GAMING | February 2011 12 the medium to long term. Sands China’s better balance betweenVIP andmass also arguably offers a more stable business model than some of its rivals, providing some cushioning against potential macro shocks. Taking up the ‘lies, damned lies and statistics’ theme again, gaming revenue figures alone don’t give weighting to the potential hedging factor provided by the multiple revenue streams offered by an integrated gaming resort such as The Venetian Macao. Steady as she goes The risk implied in Galaxy Entertainment Group’s current 90% weighting toward VIP baccarat is probably offset to some extent because of its reputation around town for good relationship management with junkets. Some operators blow hot and cold with junkets, suddenly hiking up their offer on revenue share or profit share when pressure to grab more VIP market share builds up from investors (a typical short cycle Western investment model). Galaxy seems to prefer a slow and steady approach. The fact the Lui family and ‘connected persons’ still hold a majority stake in GEG is probably a factor in creating that consistency. Galaxy’s overall dependence on high roller play is also likely to reduce significantly when the predominantly mass-market Galaxy Macau resort opens on Cotai later this year. Melco Crown Entertainment, weighted in January at 84% dependence on VIP play, has form when it comes to heavy discounting on its end as a way of attracting high roller volume, as witnessed by the commission wars sparked by the VIP-focused Crown Macau (now Altira) four years ago. But MPEL does at least have two clubs in its golf bag. City of Dreams on Cotai is designed (in theory) for mass market entertainment. As such has the space (if not the clarity of layout) to expand its mass market offer as circumstances and the Macau government allow. At MGM Macau, Wynn Macau and Encore at Wynn Macau on the peninsula, VIP business accounts for an above market average 79% of gross revenue. The two operators have already seen some month to month volatility in market share ranking—a function, according to some sources, of the two properties tussling for access to the same VIP business. Both operators plan Cotai projects. Wynn’s appears further down the track in terms of the planning, though the idea of a 2013 opening seems to have been knocked back by the government’s apparent moratorium on immediate further expansion of gaming capacity on Cotai. According to Steve Wynn’s assessment in June last year, Wynn Cotai would be more a case of Wynn Macau super-sized than ‘Venetian 2.0’. But things can and do change in response to market conditions. Back in 2006, Mr Wynn referred to the possible creation of some mid-market accommodation at Wynn Cotai as “a Taiwan guest house”. Macau is a market that is not only in thrall to the junket operators. It is also a market where the junket sector itself has seen consolidation, with smaller operations coming under the branding of larger entities acting as junket investors. Those investors have in turn provided the working capital that has helped to expand high roller play so effectively. That means that in many cases a junket investor/operator/consolidator is working with several casino operators simultaneously. That enables the junkets not only to compare the deals on offer from operators for their VIP business, but also makes the casinos’ management of the operator-junket relationship a key component in creating VIP volume and ensuring business retention. Whether that relationship is driven principally by price or by more intangible factors such as goodwill is potentially a multi-billion dollar question. Advertise with Inside Asian Gaming For advertising enquiries, please email: ads@asgam.com or call +853 2832 9980 Steve Wynn Macau Revenue