Inside Asian Gaming

January 2012 | INSIDE ASIAN GAMING 15 In Focus has been relatively lumpy over the last decade. That growth has been affected by a range of external factors including not only fluctuations in the casinos’ baccarat hold rates, but also microeconomic policy out of China (the inward visa restrictions imposed on Chinese citizens in early 2008) and macroeconomic issues such as the credit crisis that began in theWest in the autumn of 2008 and extended into 2009, also impacting China’s export market and therefore Macau’s VIP gambling growth rate. Table 2 (right) shows a mostly positive correlation between the growth of the mass market between 2002 and 2011 and the growth of the VIP market in the same period. The one exception was in 2005, when the VIP market actually contracted by 3.08% year on year, while the mass market—spurred by the opening of Sands Macao in May 2004—grew by 48.2%. But the variation in the rate of upward movement in the mass market as compared to the VIP during the period suggests that the pressures acting on the two segments are different and not influenced only by the positive beta of China’s economic growth. Without further insight into exactly what other pressures are acting on the mass market (and here we are discounting visa restrictions as there have recently been rumours of fresh and selective quotas on permits for mass players but no hard evidence), then it would be difficult to foresee the outcome if casino operators started competing harder onmass market player rewards. InLasVegasorAtlanticCity,casino operatorscantargetpotentialplayers or market to existing players before they even leave the house. In China, that’s harder to do—especially in the mass segment. It’s understandable, therefore, that themarketing focus inMacau has tended to be in battling for customers among visitors already on the streets and in the casinos. But the supply of Chinese gamblers to Macau can be subject to subtle political pressures as well as the positive effects of China’s economic growth. So until such time as the vast hinterland supplying Macau is operating as a pure market rather than as a giant social experiment ultimately overseen by the Chinese authorities, it’s likely that the application of traditional Western techniques for building business will produce yet more lumpy gravy and not the jam that the operators undoubtedly desire. 2002 11 0.70 - - - 10.75 - 2003 11 0.70 - - - 22.18 106.3 2004 13 0.75 0.05 - - 29.78 34.3 2005 17 0.80 0.05 - - 28.86 (3.08) 2006 24 0.90 0.10 - - 36.78 27.4 2007 28 1.00 0.10 - - 55.76 51.6 2008 31 1.35 0.35 - - 73.77 32.3 2009 33 1.35 - - - 79.83 8.2 2010 33 1.25 * (0.10) 45 - 135.64 69.9 2011 34 1.25 * - 47 2.0 200.90 (est.) 48.1(est.) Table 1. Comparison of junket commission growth rates versus VIP GGR growth rates Year Number of casinos Max rolling chip commission to junket % Y-on-Y increase/ (decrease) Max profit share rate to junket (excluding incentives) % Y-on-Y increase/ (decrease) VIP baccarat GGR (billion MOP) Y-on-Y % increase/ (decrease) *Government commission cap implemented Table 2. Mass market GGR growth and y-on-y percentage change 2002-2011 Year Mass market GGR (billion MOP) Y-on-Y change % 2002 5.07 - 2003 6.49 28.0 2004 11.59 79.0 2005 17.18 48.2 2006 19.84 13.4 2007 27.26 37.4 2008 35.00 28.4 2009 39.53 12.9 2010 52.70 33.3 2011 66.77(est.) 26.7(est.)