Inside Asian Gaming

INSIDE ASIAN GAMING | May 2012 12 Cover Story from Hong Kong, and this is greater than what we all thought originally from a tables perspective. There’s a market there. There’s a player there.” “Entertainment is becoming more and more a part of Macau, and slots do bring that sense of entertainment.” With their relatively smaller wallets, slot players by definition are more casual players than what Macau is known for—more of a “Las Vegas”-style player—and far more profitable pound for pound than VIPs in terms of their impact on gross margins. In the longer run, the degree to which they help diversify the industry away from high- volume, low-margin VIP baccarat and its inherent volatility on returns and provide operators with amore stable and predictable source of income remains to be seen. Thedistancethatseparatesthemfromthe denizens of the VIP rooms is more than just economic, however. They are representative of a new kind of customer, one perhaps less focused on hard gambling and more interested in a multifaceted entertainment experience. What this says about the evolution of the Chinese consumer has obvious significance for Macau’s future as a destination. The high end the city has down pat. The greater challenge will be to grow effectively with the desires and inclinations of a lower- and middle-income population that is coming in increasing numbers. “Entertainment is becoming more and more a part of Macau,” says Mr Crisafi, “and slots do bring that sense of entertainment.” “Grossly Underpenetrated” The rate of unit growth in slots since 2004 has closely followed the arc of the market at about 28% per year. Revenues, however, have grown at better than 43% a year. Average slot win per day, which stood at about MOP778 in 2004, according to figures compiled by the Center for Gaming Research at the University of Nevada, Las Vegas, stood at the end of last year at MOP1,950—13,500 slot machines later. That’s an average of $244 in win per slot per day in US dollar terms. Given that there is six times more supply today than eight years ago, this implies a market that remains considerably underserved—“grossly underpenetrated,” in the words of Galaxy Entertainment Group CFO Robert Drake, who has noted, “We do six times as much revenue as Las Vegas, but they have six times as many hotel rooms.” The imbalance also implies, among other things, a measure of sustainability in current daily win over time that allows for some educated speculation about how large the market can get as more supply comes on line and as it continues to labor to catch up to levels of demand which themselves are anything but static. Win Per Slot ( MOP millions) Year #Slots Slot Win Win/Slot Win/Slot (US$) Win/Slot/Day (US$) 2002 808 231 285,891.09 35,736.39 97.91 2003 814 236 289,926.29 36,240.79 99.29 2004 2,254 640 283,939.66 35,492.46 96.97 2005 3,421 1,250 365,390.24 45,673.78 125.13 2006 6,546 2,053 313,626.64 39,203.33 107.41 2007 13,267 3,594 270,897.72 33,862.21 92.77 2008 11,856 5,653 476,804.99 59,600.62 162.84 2009 14,363 6,503 452,760.57 56,595.07 155.05 2010 14,450 8,618 596,401.38 74,550.17 204.25 2011 16,056 11,425 711,572.00 88,946.50 243.69 Source: Center for Gaming Research, University of Nevada, Las Vegas Mocha’s high-margin locals formula is about offering players“a little more”