Inside Asian Gaming

INSIDE ASIAN GAMING | 44 INSIGHTS The labor cost as a proportion of revenue must go down in the premium mass compared to grind mass? Yes, but reinvestment also goes up. So, effectively, in premium mass, operators use what they get from the efficiency enhancement from the players gambling more, and they invest a little bit back to them, and also keep a little bit more. At the low end of the mass, 3%-5% of revenue goes to player reinvestment, and at the high end about 15%. The operators give most of their premium-mass players hotel, buffet vouchers and ferry tickets, etc. The big news since the beginning of 2013 has been the pickup in the VIP sector. Is VIP back in solid growth mode? It is too early to say how sustainable it is, because inherently this segment is pretty volatile, and it all depends on how the macro economy trends. The junket operators say the customers seem to be gradually coming back. I think, in part, because of the more stabilized political environment in China, the VIP players have become more confident about the economic and political outlook and have resumed their normal activities. What about the claim that Macau casinos are widely used to launder money and transfer funds out of mainland China? How can you measure that? From talking to junket operators, I think there are much easier and more cost- effective ways to get money out of China rather than through the gaming tables. Because on the gaming tables you have a chance to lose, and the transaction costs can be pretty high. How about capacity in Macau, especially in light of the table cap allowing 3% growth in annual supply of live tables until the end of the decade? Is capacity going to be increasingly a limiting factor for Macau casinos? Near term, I don’t think capacity will be a constraint, especially at Sands China for example, which has so much capacity. There’s still capacity that needs to be absorbed. It’s not like the situation in 2004 or 2005 when Macau was pretty much at full capacity? “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” Galaxy Macau high-limit area “The hard-core gamblers still prefer the peninsula relatively. The atmosphere there is better for them, and the casinos are more densely located—it is convenient to travel across casinos.”