Inside Asian Gaming

May 2013 | INSIDE ASIAN GAMING 43 MGM, Grand Lisboa and Altira. When they first opened, they did not have such a clear idea of who their customers were or what they wanted. Back then the mass gaming floors in Macau were pretty unstructured, with a big mass floor, maybe a little bit of high-limit area, and that’s it. And back then the VIP was so strong that everyone was focused on VIP. They were relatively easier to serve. Give them credit and commission, the players will come. Not until 2011 and 2012, when the VIP sector started slowing down, did operators start paying more attention to their mass-market business, which was still growing strongly. They started looking at how they could improve yields. Over the past couple of years they have accumulated a customer data base and gained knowledge of what the customers want and their preferences. The operators saw there was still room to get more yield from their mass-market customers. One of the ways to do that was to segment them. Like airlines, in the past they only had economy, now they have economy, premium economy, business class and first class. It’s the same thing for the casino floor, where you have the pure electronic tables, the stadium ETGs with a live dealer, the regular tables, the high-limit and the premium mass. So by segmenting the customer you actually improve the yield on a per customer basis. You’ll notice nobody really talked about premium mass two years ago—not analysts and not even the casino operators. It was only last year that everybody started talking about premium mass as a result of slowing VIP, the table cap and the shortage of dealers. So casinos needed to think of clever ways to get higher yields on a per customer basis and started to look for good ways to segment customers. Are the margins on premium mass higher than on the regular mass? How do the costs break down in the mass segment? It depends on how much the casinos spend in reinvesting back to the customer. If a customer loses $100, if it is grind mass, $40 goes to the government as tax, and approximately $15 to salary and overhead expenses, $5 is the reinvestment such as lucky draw promotions, different offers, hotel points, etc., and the remaining $35-$40 will be the margin. J.P. Morgan Leisure and Gaming analyst Kenneth Fong “A lot of investors think mass market growth is purely a function of higher table limits, but they are only seeing part of the picture. It is actually also the result of the customer-segmentation efforts of the casino operators.”