Inside Asian Gaming

INSIDE ASIAN GAMING | January 2012 12 In Focus Lumpy Gravy Macau’s getting richer—but not always thanks to heavy marketing W ith China’s exports growing at a 10-month low in December and an apparent slowdown in the expansion of the Macau VIP gambling market, then it’s devoutly to be wished from an investors’ viewpoint that the higher margin mass market can take up some of the slack. Certainly some analysts are now paying more attention to the mass sector; with a number praising Sands China Ltd (SCL) for its strength in this segment. In the fourth quarter of 2011, SCL had 23.1% of the Macau mass market, where gross margins are 35% to 40% compared to 10% in theVIP segment, according to some analysts. SCL’s mass share that quarter was second only to the historical incumbent SJM, which recorded 35.3%. SCL’s overseas-owned rivals in the Macau market—experiencing not an actual reverse in VIP turnover, but a slowing of growth (see Table 1 overleaf), might be tempted to start getting more Sands-like in their approach to the mass. And by more Sands-like we mean things like SCL reportedly giving away a return ferry ticket for a mere two player points earned under one of the company’s Macau mass-market loyalty schemes. The trick is to get the player to redeem the return voucher bringing him back to Macau, but no one could accuse Sands China of being half-hearted in its commitment to player reinvestment on the main floor. There are a couple of points to make there. One is to ask how ‘sticky’ that subsidised mass player’s loyalty will prove to be over the course of six months or a year. Even Chinese VIPs—who have far more care and attention (andmoney) lavished on them than mass customers—have a reputation for following the money in terms of commission on rolling chip volume; changing venue and even swapping junket for the right offer. At least one junket room investor in Macau is said currently to be rebating so much of its net margin to its players that industry insiders are wondering if the directors are living on fresh air. Another question to ask is how worthwhile SCL’s apparent levels of reinvestment are, if the mass player is from mainland China and may only visit three or four times per year at most? It used to be said around town that the return to player percentage on SCL’s slots was generally at or near the de facto jurisdictional minimum of 85%. The argument from market watchers was that SCL’s approach—at least as far as electronic games was concerned—was to relieve mass players of their money on their first trip, as it wasn’t expecting to see them again. Such anecdotes certainly don’t chime with the effort SCL seems to be making currently with its mass players, as we report elsewhere in this edition. Another point to make is that marketing involves not only reinvesting in your current players, but in growing your own market by recruiting new ones. And that often means reaching first-time visitors before they get on the boat, train or plane to Macau. Everybody knows that marketing