Inside Asian Gaming

INSIDE ASIAN GAMING | May 2012 8 Cover Story U sually it’s the non-gaming stuff, usually the stuff at the top of the food chain, the five-star rooms, gourmet restaurants, the many purveyors of Rolex watches and Louis Vuitton bags, that observers point to whenmounting a case for Macau’s evolution as a bona fide destination for the pan-Asian leisure traveler. In part this reflects the enormous private investment in high-end resort product, both existing and soon to come. Yet, the holy grail, or at least what everyone says they want—the casino concessionaires, the larger business and investment communities, local government, the powers in Beijing—is that vast middle class coming of age in China andwithin a few hours’ flight time: tourists, holiday travelers, vacationing families, the MICE trade, which if you had to describe their tastes and purchasing power it’d be decidedly more Las Vegas than Dubai or Cannes. Macau’s relevance to those millions isn’t found at the counter at Tiffany’s. It isn’t in the VIP rooms. It’s unfolding on the main casino floors, in the soaring revenues from small-stakes table games, and particularly in the remarkable growth of the machine gaming market. Slots in Macau have grown into an industry approaching US$2 billion in annual revenue, and that’s a far cry from even a decade ago, when they were all but invisible. In 2003, the last effective year of Stanley Ho’s monopoly, there were about 800 machines in the entire city, laughably archaic devices by Australian or US or even Asian club standards. They generated about $29 million, accounting for less than 1% of a market worth in total about $3.6 billion across 11 casinos. Last year, the city’s 30 or so operating casinostookinUS$33.5billion,theequivalent of more than five Las Vegas Strips. Revenues have grown 547% since the opening of the first post-monopoly casino in 2004, driven by floods of tourists and gamblers from Mainland China traveling on the Individual Visit Scheme, which was launched in 2003. Slots have grown to account for 4.5% of this tremendously larger pie, good for US$1.43 billion last year. When a smidgen of your market is doing this kind of money, there is definitely something going on. “It shows that Asians certainly aren’t averse to slot machine gaming,” says Grant Govertsen, equities analyst with Union Gaming Research Macau. “You can even draw parallels to Japan with the pachinko and pachislot markets. There are something like 5 million of these machines in Japan. Something like 17 million people play them. EGMs in Asia are the real deal. But it gets lost in the mix.” It’s an interesting point. VIP baccarat, which drives better than 70% of casino revenues, tends to overshadow everything when you’re talking about Macau. It so Macau is home now to some of the most advanced slot floors in the world Seriously Big Slots are powering Macau’s appeal to a new breed of consumer