Inside Asian Gaming

February 2013 | INSIDE ASIAN GAMING 13 Morgan’s Kenneth Fong. “Over the past few years, casinos gradually introduced products targeting different mass segments, and these include electronic table games.” This “allows casinos to subdivide customers into distinct homogenous segments that share similar characteristics,” he says, “and helps companies prioritize marketing campaigns and tailor different service levels. This can help companies to extract maximum value from both high- and low-profit customers or increase their share of wallet.” As MGM China Chief Executive Grant Bowie explains it, “What we’re all trying to do is get the range between the top- performing and lowest-performing tables closer together.” With its 3% annual cap on new table supply, the government certainly has added some urgency to this quest. Part of the attractiveness of ETGs as a response is that only the live dealer version designed for theater- or “stadium”-style installations counts against the cap, depending on the number of seats (every 50 or 60, it’s not clear). So a 200-seat installation linked to three live games might count as three tables or it might count as four. “The advantage is you have one game with 50 seats, so in effect you replicate a normal manual table game with a hell of a lot more bettors,” notes David Green of Macau- based Newpage Consulting, an advisor to governments and the industry on regulatory and other issues. It’s why e-tables are fast becoming “the preferred method of gaming directed at the lower end,” says Grant Govertsen of investment analysts Union Gaming Research Macau. “We have noticed most operators embarking on efficiency exercises that ultimately pull live-dealt traditional table games from the lower-end mass market and reallocate them to VIP or higher-yielding mass market segments,”he says.“In turn, and in order to accommodate lower-end mass- market play, these customers are being pushed towards ETGs as the best option to play at low stakes.” Necessity has played a similar role in establishing Singapore’s sizable business in ETGs. Like Macau the city-state is capacity- restricted, each of its two IRs, Resorts World Sentosa and Marina Bay Sands, limited by law to 15,000 squaremeters of gaming space and 2,500 machine games. Fertile ground for what the technology has to offer, and not surprisingly, there are more than 1,200 ETG positions in the market divided about evenly between the two properties. Thus they account for about 25% of the machine market, which proportionately is much larger than Macau’s as it generates close to one-third of total gaming revenues. There is something else that strongly recommends the technology: the speed of play. “Hands per hour, I suspect, is much higher than a traditional game,” says Mr Green. “You can afford to drop back a little [on bet limits] if you’re getting the velocity. Andmy impression of ETGs is they’re velocity games.” There being no physical cards to handle, there is no “squeezing,” where the biggest bettor at a baccarat table gets to enjoy the spotlight and indulge his or her superstitions by dragging, peaking, bending, folding, dog-earing or otherwise mangling the cards in the belief that they can influence the values printed on them. It’s a time-honored ritual among Chinese gamblers in Macau, and it costs the casinos a lot of money in reduced volume. An ETG can turn over a hand in 30 seconds, theoretically 120 hands an hour, as opposed to maybe 30 an hour on a traditional table. (A VIP room hand can drag on for four or five minutes.) At HK$200 per hand at the e-table (not counting simultaneous bets on multi-games) versus $500 per hand at a conventional table it’s the difference between $24,000 in drop and $15,000. At a 1.24% house edge that’s $298 in win per ETG player per hour versus $186 at a regular table. A nine-seat baccarat table fully occupied with the $500 bettors earns the casino a hypothetical $1,674 an hour. A 50-seat ETG installation filled with $200 players, which may count as only one or two tables under the government cap, garners the casino $14,900. These lower rollers also cost less in terms of comps and other perks. “Obviously, the fact that they’re proliferating in the market says they must have significant advantages over table games,” says Mr Green. Factor in their other virtues—the privacy and anonymity they provide, the ease of use, their modularity, the automated accounting, monitoring and data-collection functions, the ability to market to the player directly at the game—in other words, the fact that they do everything a slot machine does, including offering any number of bonus betting options—then factor in the labor Tech Talk Macau Gaming Tables Supply and Growth 7,000 No of tables Mass VIP YoY chg 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% 6,000 5,000 4,000 3,000 2,000 1,000 2007 2008 2009 2010 2011 2012E 2013E 2014E 0 Soiurce: DICJ.J.P.Morgan estimates Macau: Minimum Bet by Segment Soiurce: CLSA Asia-Pacific Markets No. of table Minimum bet (HK$) Est Ebitda margin (%) VIP gaming 2,335 5,000-50,000 10 Premium mass gaming 295 1,000-5,000 40 Grind mass gaming 2,909 200-1,000 40