The Supplier Awards - Inside Asian Gaming

Transcription

January 2009 • MOP 30 • ISSN 2070-7681
The Supplier Awards
Our judges vote on the best performers of last year
Macau 2009 Outlook:
Rolling Downhill
Cotai Stripped
Plodding On
Taiwan Gaming: ‘Casino Lite’?
House on Edge
Time for an Encore
Slot Pick: Mocha Millions
INSIDE ASIAN GAMING | January 2009
CONTENTS
January 2009
The Supplier Awards
2009
The Supplier
Awards
7
Inside Asian Gaming
Supplier Awards 2009
14 Slot Pick
15 House on Edge
18 Rolling Downhill
25 Cotai Stripped
29 Quotes of the Week 2008
32 Plodding On
36 Time for an Encore
38 ‘Casino Lite’ for Taiwan
Gaming?
25
40 Changing Face of Reform
44 Regional Briefs
46 International Briefs
48 Events Calendar
15
January 2009 | INSIDE ASIAN GAMING
2 INSIDE ASIAN GAMING | January 2009
3
Editorial
Waiting for Better Days
Editor and Publisher
Kareem Jalal
Director
João Costeira Varela
Business Development Manager
Matt Phillips
Operations Manager
José Abecasis
Contributors
Michael Grimes, Desmond Lam
Steve Karoul, I. Nelson Rose
Richard Marcus, Shenée Tuck
Andrew MacDonald
James J. Hodl
William R. Eadington
Graphic Designer
Brenda Chao
Photography
Ike
Inside Asian Gaming
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Macau’s air quality has improved discernibly following the suspension or slowing of
construction on several major casino resorts in the city. The clear skies contrast with the
cloudy outlook for the gaming industry.
In this issue’s “Rolling Downhill,” “Plodding On” and “Cotai Stripped”, we attempt to lift the
fog by offering analysts’ forecasts for the Macau market in 2009. The overriding sentiment: Be
prepared to slog through a tough year, and wait for better days ahead.
Hong Kong-based Citigroup gaming analyst Anil Daswani believes “it’s not so much the
global downturn that’s having an effect on Macau; it’s the visa restrictions that are having the
most impact.” He adds: “Clearly there was way too much capital coming into Macau, and the
mainland is trying to cool the economy.”
In the first half of 2008, the world tumbled into recession but Macau’s casino revenue
continued its spectacular year-on-year growth as aggressive competition for VIP players led
to the offering of higher junket commissions, which in turn drove revenue higher.
Even the visa restrictions in their initial form could not halt the revenue growth. China
had to progressively limit the frequency with which mainlanders could travel to Macau until
finally, in September, a combination of the deteriorating Chinese economy and sufficiently
limiting travel restrictions turned back the revenue growth.
Though the restrictions were so recently imposed, it was hoped they would soon be lifted
in light of the rapidly deteriorating economic conditions and credit-crunch driven delays in
the opening of several crowd-pulling mega resorts in Macau.
Chinese Vice President Xi Jinping’s visit to Macau on January 10th offered the ideal occasion
to announce a rollback of the travel restrictions. Unfortunately, no such announcement was
made. Instead, Mr Xi urged Macau to diversify its economy away from the current overreliance on gaming. Thus, it seems unlikely that Beijing will extend a lifeline to Macau’s casinos
anytime soon.
In 2009, Macau’s casino revenue is likely to contract for the first time since China began
easing travel restrictions on Macau-bound mainlanders in the second half of 2003. In addition
to freer travel (which has now been curtailed), the mainland visitor deluge was also fed by
a steady stream of new world-class casino properties coming online from 2004, following
the liberalization of the gaming sector two years earlier and ending of Stanley Ho’s 40-year
monopoly. Since then, growth spurts in Macau’s visitation and casino revenue have coincided
with the opening of dazzling new casino resorts. Several ambitious mega resorts originally
scheduled to open this year have now been shelved, which will hold back growth further in
an already difficult year.
The dark clouds from the current financial crisis have spread from their epicenter in the
US and are creating ripple effects. The unexpected speed and magnitude of the slowdown in
the US and Europe created an unexpectedly sharp impact on China’s factories.
High-rollers playing high-stakes baccarat in private VIP rooms contribute around 70% of
Macau casino revenues. Since many of those high-rollers are owners or investors in China’s
manufacturing sector, Macau’s VIP rooms face a murky year ahead.
It also does not help that an increasing number of Communist Party bosses and
government officials in China have been caught pillaging state funds, company accounts and
municipal treasuries in order to fund their gambling in Macau. This has become a big source
of embarrassment to Beijing.
A study of 99 high-rollers from mainland China conducted last year by Zeng Zhonglu, a
professor at Macao Polytechnic Institute, showed that 59 had some sort of state affiliation: 33
were government officials, 19 were senior managers at state-owned enterprises and 7 were
cashiers at state businesses. They were typically men, between 30 and 49 years old, and lived
in mainland areas close to Macau.
The government officials reported losing an average of US$2.7 million each, state
managers lost an average $1.9 million each, and cashiers dropped $500,000. Most said their
gambling careers lasted less than four years before they were found out. Their losses at the
tables bankrupted at least 10 companies. An editorial in the Beijing Youth Daily said gambling
by public officials “threatens the safety of the national treasury.”
Many of the party bosses and officials caught misappropriating funds to gamble in Macau
have been sentenced to lengthy prison terms. For at least 15 who were executed, there will
be no better days.
5
Supplier Awards
Inside Asian Gaming
Supplier Awards
2009
A
mid all the talk of the challenges
facing the Asian gaming industry in
2009, it would be easy to forget the
outstanding good news story of 2008—
record revenue growth in multiple markets.
The aim of the Inside Asian Gaming –
Supplier Awards 2009 is to celebrate and
recognise all the hard work that gaming
suppliers across the globe have put into
making that record 2008 growth possible.
The prizes were based on reader
nominations of gaming equipment
products available in Asia in 2008 and on
the votes of a panel of judges made up of
industry professionals. The nominees were
all products and companies with proven
performance where it matters most—on the
casino and club floor.
The winners and those receiving an
honourable mention have proven track
records in terms of return on investment
thanks to their ability to satisfy the demands
of players and operators alike.
Even those that didn’t make the
nominations this time round are playing
a vital role in the industry by pushing up
standards through constant competition.
Thank you to everyone who took part,
and on behalf of the publisher and everyone
at Must Read Publications Ltd, we wish you
a Happy New Year and a prosperous Year of
the Ox in 2009.
Without further ado, the categories are:
Best Standalone Game
Nominees:
Manufacturer
Title
Aristocrat
Choy Sun Doa
Aristocrat
50 Dragons
Aristocrat
5 Dragons
Bally
Mega Winner
IGT
Davinci Diamonds
Winner: Aristocrat Technologies
- Choy Sun Doa
Choy Sun Doa is an apt first winner,
as this Chinese-themed game features
something that’s a common sight in Macau
and elsewhere during the Lunar New Year.
This is the giving and receiving of small
red packets containing gifts of money,
known as lai see. In Aristocrat’s Choy Sun Doa
game, red packets also spell good luck. They
appear during the free game feature of this
medium volatility video slot. A red packet
anywhere on reels one and five results in
a random prize of 50, 20, 15, 10, 5 or 2. The
random prize is then multiplied by the total
number of credits staked.
Choy Sun Doa is our judges’ first winner
thanks to its popularity across Asian markets
as one of six proven performers in Aristocrat’s
Reel Power series.
Best Linked Progressive Product
Nominees:
Manufacturer
Title
Aristocrat
Cash Express
Aristocrat
Fa Fa Fa
Bally
Blazing 7s Hot Shot
IGT
Party Time
Konami Fire & Ice
WMS
Jackpot Party
WMS
Life of Luxury
– Cash Express
Aristocrat’s Cash Express powered its
way onto the US market back in 1992 as the
company’s first linked progressive. Since
7
Supplier Awards
Cash Express
then, Cash Express has gained traction all
over the world, including Asia, showing the
benefits that come when a company gets a
product right first time.
In Cash Express, a random trigger signals
the train whistle to blow during play on
Aristocrat’s MKVI base game. The lucky
player is transported into the second-screen
bonus with five spinning reels. The player
touches a button to stop each reel, which
reveals a number. The numbers are added
together to accumulate the score and the
score determines which of the four levels of
jackpots are won. Once in the bonus round,
a player is guaranteed to win one of the four
progressive jackpots.
Such is the power of ‘The Train Game’,
as it is popularly known among players in
Macau, that it will take a very strong product
to knock Cash Express off the top spot in
next year’s IAG Supplier Awards.
Not only is Cash Express popular on the
mass gaming floor in Macau, but it has also
been installed in the VIP room run by Hong
Kong-listed junket aggregator Neptune
at Galaxy’s StarWorld resort on the Macau
peninsula.
A Hyperlink version of Cash Express
featuring four-level random progressive
games was launched on the US market in
2005. Aristocrat’s Hyperlink progressive
suite of products includes Cash Express;
Cash Express Penny Train; Jackpot Carnival;
and Millioni$er, which offers players the
chance to win up to a US$1 million jackpot
on a penny slot.
It features a free spin bonus and frequent
mid-level progressive wins—a highly popular
feature with Asian players. Successive
jackpots create player anticipation as they
move through six levels.
Party Time! is available on three
platforms—Game King, Reel Touch, and
S2000. This progressive product is linked to
a variety of IGT games on the Party Time!
in-house link system. The Party Time! library
allows for mixed or independent theme
game banks.
Linked, multi-progressive game play with
the IGT Progressive Controller can handle up
to 63 games at once, and offers a selection of
payback percentages and reset amounts.
The product has as an eye-catching top
box with 19-inch flat screen LCD monitor
to display six progressive jackpot levels. It
features the hit song, ‘Let’s Get This Party
Started’.
Best Multi-Player Terminal
Nominees:
Manufacturer
Title
Alfastreet
R8
Aruze Dealers Angel
Royce & Bach
Roulette
Gold Club
Omega
Interblock
Megastar Roulette
Jumbo Technology Co., Ltd Baccarat
Shuffle Master
Winner: Alfastreet – R8
Alfastreet’s R8 roulette proves a successful
multiplayer doesn’t have to be totally re-
Honourable Mention: International
Game Technology – Party Time!
This six-level mystery progressive is
another quality product from IGT that
performs well across Asian markets.
Vegas Star
Alfastreet’s R8
engineered to stay top in its class. It has
been described by many commentators as
the ‘queen’ of multiplayer electronic roulette,
praised for its player ergonomics and all
packaged at a very competitive price.
Slovenia’s Alfastreet isn’t complacent,
though, about the R8. Slovenia is a world
capital of multi-player roulette machine
manufacture, as proven by our list of award
nominees. The R8, featuring an automated
roulette wheel and eight player stations,
has been upgraded with new technological
features and improved design. Operators
have the option of player touch-pad, touchscreen or a combination of the two. Its 17inch touch screen and outstanding graphics
allows quick and near-effortless betting.
Industry customers also have the option of
bill or coin acceptors or a ticket-in-ticket-out
(TITO) system.
The proof of R8’s success is in the playing.
It is a real revenue generator in the Asia
Pacific, one of few regions where multiplayer
terminals have a higher net win than stand
alone slots. In a still developing gaming
machine market its return on investment
can’t be disputed—especially in Indochina.
Player features include: player privacy
and comfort; easy touch screen betting; onetouch betting; multilingual screen menus
and low or high wagering functions.
The company says plus points of the
R8 for operators include: three to five times
greater profits in comparison to live gaming;
high security and easy maintenance.
Honourable Mention: Gold Club
– Omega
Gold Club from Slovenia has taken great
care to ensure the latest ergonomics of its
Omega roulette multi-player are perfect for
maximising player comfort and time-onmachine.
Even in its basic configuration the
machine boasts an inclined touch screen
monitor and arm rests in leather. The high
quality wheel is RNG GLI-approved and the
unit comes ready prepared for TITO, cashless
gaming and player tracking.
Gold Club products are a particular
hit in Indochina, where operators value its
reliability and ease of deployment. All the
software running Gold Club’s roulettes is
tried and tested, and the player interface
of the Omega and its stablemates is user
friendly, allowing players to enjoy their
experience regardless of their level of
multiplayer knowledge.
9
Supplier Awards
Honourable Mention: Interblock –
Megastar Roulette
Interblock, yet another Slovenia success
story, has justifiably been referred to in some
quarters as the Ferrari of the multi-seat,
multi-player market. The company’s products
may not be the cheapest on the market,
but operators know they’re getting quality.
Megastar Roulette and its product siblings
such as Dicestar in its sic-bo configuration,
are popular with players and with gaming
operators, and they perform well, especially
in Macau.
Megastar Roulette, one of Interblock’s
best-selling products, is available with
either American or European virtual roulette
wheels and can serve anywhere between
five and ten roulette players at once.
Interblock ascribes its success to high
quality technical research and development;
careful market research; awareness of
compliance issues, and a customer-driven
approach to sales, service and product
support.
Best Asian Themed Slot Game
Nominees:
Manufacturer
Title
Aristocrat
50 Dragons
Aristocrat
5 Dragons
Atronic
Dragonboat
Bally
Chinese Kitchen
IGT
Red Hot Jackpots/
Super Lucky Red Wins
Weiki Gaming
King of Prosperity
quick follow up in July.
Dragonboat offers the flexibility to
run tournaments in a variety of formats at
random or preset times for a predefined
period. Among the possible structures are:
• The Classic Tournament: During the
preset duration, players have to accumulate
as many score points as possible by using
their own funds. The player ranked first at
the conclusion of the tournament wins the
prize and a special win animation celebrates
the victory.
• The Special Event Tournament: During
the preset duration, players play with preloaded credits and have to accumulate as
many score points as quickly as possible.
Multiple heats are played to determine the
top-ranking players who will qualify for the
finals. The prizes (usually cash prizes) are
funded from participation fees.
• ‘All Winners’ Tournament: During the
configured period, all players are winners:
Either players collect wins through the base
game, or they are awarded Dragonboat
prizes. Minimum play activity is required.
The ranking of the players is continually
displayed on the upper TFT-screen of
Atronic’s e² cabinet. At the end, the ‘first’
ranked player (with the largest loss during
the tournament) wins the consolation prize.
Honourable Mention: Aristocrat
Technologies – 50 Dragons and 5
Dragons
Winner: Atronic – Dragonboat
Atronic’s recently-released Chinesethemed Dragonboat is powered by the
successful Tournamania slot tournament
concept. Dragonboat has been leading the
way in nurturing Asia’s growing love affair
with slot tournaments.
The dragon boat is a powerful sporting
concept in Asia. The real-life boat, used in
races on rivers and in coastal areas, requires
a combination of close cooperation between
fellow crew members and fierce competition
with rival teams.
MGM Grand Macau was one of the first
operators to spot the potential of Atronic’s
Dragonboat, powered by the Tournamania
slot concept. The casino used the equipment
in its first slot tournament in mid-May, with a
50 Dragons’ five-reel, 50-line product
is a low volatility, high excitement video
game mounted on Aristocrat’s MKVI
hardware platform. It includes a ‘feature
within feature’ element during free
game play.
50 Dragons is also related in its medieval
Chinese theme to 5 Dragons, a five-reel video
slot machine first launched by Aristocrat in
2004.
Best New Slot Game
Nominees:
Manufacturer
Title
Aristocrat
Lucky 88
Bally Technologies S9E Stepper Quick Hits
IGT
Wild Wolf
Stargames
Pink Panther “I Ching”
WMS
Monopoly Big Event
Winner: WMS Gaming – MONOPOLY
Big Event
WMS definitely passed go with the Asia
launch of its community gaming-focused
MONOPOLY Big Event series, based on the
popular property board game.
Chinese players in particular, already
familiar with communal board games such
as mahjong and definitely familiar with
capitalism after 30 years of reform, love the
mixture of personal competition and group
wins offered by the series.
When the Big Event bonus triggers, all
qualifying players enter the bonus round
and win together. A Big Event multiplier,
determined by the player’s bet and speed
of play, is also awarded in the bonus round.
WMS says the table-game-like camaraderie,
never seen before in a slot, creates a hotspot
on the slot floor.
Honourable Mention: Stargames
– Pink Panther “I Ching”
Aristocrat’s 50 Dragons and 5 Dragons—two
honourable mentions for Best Asian Themed
Slot Game
Aristocrat is an expert at building on a
winning formula in incremental ways. The
company’s 50 Dragons video slot game
continues in that vein, taking the excitement
and game style of the company’s successful
50 Lions, which was first seen on the market
in 2003, and enhancing it for an Asian
audience.
Quality products don’t happen by
magic. They require excellence in the
research and manufacturing process. Shuffle
Master restructured Stargames’ product
development team in Sydney Australia after
acquiring the company in 2006, with the aim
of building on Stargames’ already strong
reputation.
Shuffle Master/Stargames’ Pink Panther
progressive link, and its accompanying titles,
including I Ching, use a top quality PC-based
platform that was diligently developed over
five years.
Supplier Awards
Best Industry Innovation
Nominees:
Manufacturer
Products
Aristocrat
Viridian
technology that reads the rank and suit of
each card being dealt. It also has a decksorting function.
Bally Technologies i-View Display
Manager
IGT sbX Media Manager
MEI
EASITRAX Soft Count
Shuffle Master
i-Deal
TCSJOHNHUXLEY Touch Table
MultiPLAY Roulette
WMS
BLUEBIRD2 Slot
Cabinet
Winner: Bally Technologies
– Bally iVIEW
Honourable Mention: Jumbo
Technology
Shuffle Master’s i-Deal
Best Asian Manufacturer
Nominees:
Manufacturer
Country
Aruze Japan
Astro Crop
Taiwan
Cybercash Technology
China
Jumbo Technology
Taiwan
Pact Game
Hong Kong
Paradise Entertainment
Hong Kong
Weike Gaming Technology Singapore
The interactive iVIEW display runs Bally Power
Winners—a configurable floor-wide mystery
progressive jackpot system that allows
casinos to offer their guests a wide variety of
player-centric bonusing events
Even at a time of corporate belttightening and recession, many gaming
operators are excited about the marketing
potential and revenue-building potential of
Bally iVIEW.
Bally iVIEW, an interactive screen for slot
cabinets about three quarters the size of
the screens used for in-flight entertainment
system, was launched in mid-2008.
Bally iVIEW’s display can be fitted to
all slot machines produced by the major
suppliers and can be used in conjunction
with server based systems for in-venue
promotions, marketing messages targeted
at individual players using membership
databases or even live television.
Honourable Mention: Shuffle Master
– i-Deal
The i-Deal is Shuffle Master’s third
generation and fastest single deck speciality
shuffler.
It features several key enhancements
including standard card recognition
the platform: Yokoso Japan; Oriental Fantasy;
Cat Safari and Circus.
The company also won GLI approval
for its multi-player table equipment. The
testing and certification was undertaken
by Australia’s BMM Compliance, one of the
world’s foremost testing and certification
laboratories for gaming equipment.
Further games are expected to be
approved during 2009.
Winner: Weike Gaming Technology
This small and nimble Singapore-based
manufacturer looks set to give the giants of
the industry a run for their money.
Weike has come far in 12 months under
the command of CEO David Kinsman. Serious
poker players have praised the company’s
Pal X electronic poker table as one of the
best on the market.
Weike, which has its head office in
Singapore and its manufacturing base
in neighbouring Malaysia, particularly
impressed the industry with its product line
up at G2E Asia 2008. Now it looks forward to
translating that into significant sales success
in 2009. The company is tipped to sign at
least one deal with a Macau casino operator
early in the New Year.
The exceptional quality of its game
graphics enables Weike to use a standard
off-the-shelf Pentium motherboard for
its systems, keeping its finished product
costs highly competitive without, it says,
compromising system security.
Weike passed an important milestone
recently when it achieved GLI-11 (Gaming
Laboratories International ) Certification for
its Infinity platform and gaming machine
range, as well as for four individual games on
The Taiwan-based manufacturer has
built a strong reputation for well-engineered
products in many different formats that are
highly popular with players.
Jumbo has developed the good habit of
excelling at key game categories popular in
Asia, whether it’s baccarat, sic bo, roulette or
bingo. It has also produced some outstanding
and innovative configurations that offer high
tech alternatives to live human dealers—a
resource that can be expensive in a market
such as Macau or even banned in some
Indochina slot club markets.
Jumbo’s 3D Virtual Dealer, Jessie, the ‘star’
of the Baccarat Queen series unveiled at G2E
Asia 2008, includes state of the art graphics.
Jessie’s realistic facial expressions were
simulated using a real model and motion
capture technology, then transferred to 3D
animation.
The company tips its Genetic Sic Bo
product as another potential hit in Macau.
Unlike competing products from European
manufacturers, Genetic Sic Bo uses normal
sized dice. Also true to the traditional version
of the game, the dice are covered when they
are being rolled.
Jumbo’s Robot Baccarat uses a robotic
arm to turn cards, getting around the
restriction on dealers being employed in
gaming venues in Vietnam, for example, and
allowing it to be placed in some amusement
arcades in Taiwan, where casinos are being
considered but have not yet been legalised.
Jumbo’s 3D Virtual Dealer, Jessie
11
Supplier Awards
Editor’s Pick
Winner: TCSJOHNHUXLEY – Touch
Table MultiPLAY Roulette
Supplier of the Year
Nominees:
Manufacturer
Alfastreet
Angel Playing Cards Co., Ltd
Aristocrat
Bally Technologies
Gold Club
GPI
TouchTable MultiPLAY Roulette
Touch Table MultiPLAY Roulette has
earned praise from operators and players
alike for taking the best elements of live
roulette and combining them with the
best features of touch screen technology,
producing intense, exciting play. It’s a
formula that provides operators with robust
return on investment.
Touch Table Roulette also looks
good, and is engineered to stand the
rough and tumble of non-core gaming
venues such as hospitality lounges. It’s a
top performing game at Genting City of
Entertainment in Malaysia.
Touch Table MultiPLAY Roulette’s new
spin on the traditional live version means
that instead of standard loose gaming
chips, stakes are placed and bets made via a
plasma touch screen laid out like a standard
roulette table. It has four separate stations
for players, but as with traditional roulette,
friends and onlookers can gather round to
encourage the players, cajole them or even
place their own bets.
The whole system is linked to a live
roulette table so that players can experience
the excitement of real time betting. Results
are captured directly from the live wheel via
the company’s trade marked ‘Saturn Wheel’
wheel reading device. To make sure players
don’t miss the action, a fixed camera focused
on the roulette wheel feeds live images back
to the table.
The equipment playing surface has been
deliberately designed to be tough and drink
proof so that spillages will not cause damage.
In the event of a drink being knocked over,
a temporary screen lock function can be
quickly activated to allow for cleaning of
the surface without affecting active bets or
losing any customer credits.
IGT
Shuffle Master
TCSJOHNHUXLEY
WMS
Aristocrat’s name kept coming up
again and again when the judges asked
operators for comment on Supplier of the
Year. Aristocrat’s winning games such as
Cash Express are as popular across Asia as
they are in North America, proving that
if a game’s good it can translate across
cultures and languages.
Almost as important as Aristocrat’s
strong product range is the reported
quality of its after sales. As long ago
as 2007, Aristocrat made the decision
to set up an assembly line in Macau to
build gaming slot machines for the Asian
market.
The establishment, known as an
order fulfilment centre, employs local
people to assemble Aristocrat machines
by putting together pre-built modules
imported from other parts of Asia under
the supervision of technical experts from
Aristocrat’s home base in Australia and
beyond. This helps to shorten supply lines
and speed up delivery times.
By employing local people in the
centre, Aristocrat is also helping to create
a group of future experts able to speak
to local gaming managers in their own
language and on their terms. That helps
to create a virtuous circle of trust vital to
sales and marketing success in Asia.
Honourable Mention: Bally
Technologies
Bally made strong progress in Macau
in 2008, and is slated to provide a
healthy portion of the slot machines at
Melco Crown International’s new Cotai
resort City of Dreams when it opens
later this year.
Bally already has a major contract
to provide gaming equipment and
management services to Las Vegas
Sands Corp’s Asian venues in Macau and
Singapore. This is part of a global deal with
LVS worth US$56 million signed in 2007
and covering slot, casino management
and bonusing systems.
Bally’s impetus is provided by its
quality slot products, including the
highly popular Hot Shot and Quick
Hits series. In 2008, Blazing 7s Hot Shot
Progressive maintained its position as
Bally’s most popular standalone slot
game world wide, and has been issued
in Hot Shot Classic format as a tribute
to its staying power. At G2E Asia 2008
Bally launched Chinese Kitchen, the
first slot to come out of Bally’s product
development centre in India.
Bally also offers innovative marketing
tools such as Bally iVIEW and Bally Power
Bonusing, and industry-leading systems
such as floor networking.
Last, but by no means least, the
company’s gaming management tools
include Bally Business Intelligence
Solution. It aids operators in the analysis
of dense operational data by allowing
them to visualise what’s happening on
the casino floor on a minute-by-minute
or even a year-by-year basis thanks to
thermal imaging-style visualisation of
traffic and usage.
Honourable Mention: Gaming
Partners International (GPIC)
GPIC supplies all the casino
operators in Macau with gaming security
equipment and has a 90% share of the
market. With such a strong market
presence the company was a clear
contender for top prize in the Supplier of
the Year category.
At G2E Asia 2008, GPIC displayed
an unrivalled range of chips, including
the Bud Jones, Paulson and B&G brands.
The company also featured on its stand
some exclusive security features to fight
counterfeiting and a new collection of
its famous state-of-the-art plaques. The
company also held a demonstration of its
leading RFID applications in both 125 KHz
and 13.56 MHz frequencies.
Cover Story
13
Mocha Millions
Slot Pick
A tailor-made solid gold pick will be
awarded to the first 100 players who win
the mystery jackpot on Mocha Millions.
The picks, which can be stuck into slot
machines’ ‘play’ buttons to stick them on
auto-play, cost about HK$4,000 each
Despite a worsening global economy, Mocha Clubs President Constance Hsu believes
the company will continue to register “sustainable growth” in 2009. The company
has also become the frst casino operator in Macau to tailor-make a slot machine
according to its valued customers’ preferences
M
ocha Clubs President Constance Hsu officially unveiled the
Mocha Millions stand-alone mystery jackpot slot machine
at the company’s flagship Mocha Marina Plaza branch early
in January.
The new Mocha Millions slot machines will be available to players
at Mocha Clubs’ locations in Macau and Taipa, including Mocha Marina
Plaza, Mocha Hotel Taipa Square and Mocha at Crown Macau.
“Mocha Millions are the first slot machines in Macau especially
tailor-made to meet the evolving needs and preferences of our
Mocha players. As one of the leaders in electronic gaming in Macau,
we are committed to bring innovation to the industry—and to create
a new level of exciting Mocha experiences to all,” said Ms Hsu during
the launch.
“The launch of Mocha Millions demonstrates our creativity and
deep understanding of customer needs and preferences in today’s
electronic gaming industry. These new and interactive machines
were developed based on Mocha Clubs’ years of experience in
Macau slot machines and proactive outreach to our customers—to
establish what they look for in new and exciting gaming experiences
” added Ms Hsu.
Mocha Millions offers three unique features offering players the
chance to win a million Hong Kong dollars or more on a single standalone slot machine. Mocha Millions also offers a higher probability
to players of winning free games and multiplying wins, with the hit
frequency greatly increased on the feature games.
Mocha Clubs maintained its share of Macau slot machine revenue
in 2008, at around 13-14% of the market, according to Ms Hsu. “In
2008, we recorded a double digit growth when compared to 2007,”
she revealed. “We foresee that in 2009, we will still have a sustainable
growth because of our different composition and customers
segmentation.”
Ms Hsu pledged that in the year ahead, the company would
focus on “superior customer service in the way of product offering”
as well as its “unique club atmosphere where we know what our
customers like and why they like it”. That club atmosphere also
provides more privacy than playing slots on the main floors of the
city’s sprawling new casino resorts.
At the end of 2007 there were about 13,000 slot machines in
Macau, and in 2008 the figure was “about the same”, said Ms Hsu.
Although Venetian Macao and MGM Grand Macau were opened in
the second half of 2007, greatly adding to the city’s slot machine
capacity, Mocha Clubs managed to maintain its market share at 1314%, pointed out Ms Hsu.
“That means Mocha has the ability to keep having customers
return,” she claimed. “We don’t target one-time visitors but loyal
customers who are looking for good service and intimate interactions
with our staff.”
Although Mocha Clubs is owned by Melco Crown
Entertainment, whose Crown Macau casino
recently
implemented cost control measures including pay cuts and
more non-paid leave for its employees, Ms Hsu said Mocha had
no plans to follow suit right now.
At the Mocha Millions launch ceremony, the company also
presented a 100,000 pataca cheque to Caritas Macau to support its
community projects and social service development.
Constance Hsu (left) presents a cheque for 100,000 patacas to Ms. Helle
Sou, Director of the Asilo de São Francisco Xavier of Macau Caritas,
during the Mocha Millions launch
In Focus
House on
Edge
There’s no silver bullet to deal with table hold volatility
M
acau’s VIP gamblers may love
baccarat, but it’s a game that can
occasionally give casino executives
sleepless nights. It’s likely to give them even
more hours of restless sheep counting in
2009.
This is because of baccarat’s welldocumented volatility. Volatility does,
though, work both ways. It can hugely
benefit casino operators at times, but it
can also put a severe crimp on the
bottom line if the house has a run
of bad luck.
In Las Vegas, Harrah’s got
out of the high roller baccarat
market after losing money in that
segment. CEO Gary Loveman
was quoted as saying “it
didn’t make sense” to have
10,000 to 12,000 people
enjoying themselves
in your property but
be nervous that
one ‘whale’ in the
high limit room could undo it all.
A shellacking
In light of Las Vegas Sands Corp’s recent
troubles in Macau, a losing streak in VIP
baccarat is probably the last thing on its
executives’ minds. Nevertheless, the US$48.5
million net loss recorded by LVS in Q3 2007
was attributed in part to a run of bad house
luck on its VIP tables in Macau.
“We got shellacked. It is what it is,” is
how LVS President and Chief Operating
Officer Bill Weidner memorably put it.
One of the reasons the nonnegotiable
chip
system
was
introduced to VIP table gaming was
to deal with the potential threat to
junket operator liquidity posed by
high-rollers walking away after big
wins. Too many of those runs on the
bank in a short space of time can
threaten not only the working capital
of the junket operators, but also wipe out
casino profits.
Rolling chips do not, however, deal
with the wider issue of smoothing table
hold volatility. To achieve that effect,
other mechanisms are needed. In that
context, Deutsche Bank analyst Karen Tang
found things to praise in Melco Crown
Entertainment’s Macau strategy in a recent
report on the outlook for the territory’s
economy in 2009.
By special arrangement
Ms Tang mentioned in particular that
MPEL had “mitigated” volatility risk to highend table games by signing a “volatility
hedge arrangement” with Hong Kong-listed
A-Max Holdings Ltd, the junket aggregator
that feeds MPEL most of the VIP players that
attend Crown Macau.
In case ‘volatility hedge arrangement’
sounds like a silver bullet for dealing with VIP
Rolling chips do not deal with the wider issue of smoothing table hold volatility
15
In Focus
volatility risk in the baccarat-heavy Macau
market, it’s worth making a few points.
The first is that one cannot change
the laws of probability or the laws of
mathematics. If a game of chance has a
certain theoretical house edge, that house
edge ‘will out’ in the long run. As IAG has said
enough times to risk boring our readers, the
mitigation of volatility risk in table games
such as baccarat is to a certain extent an
illusion designed by casino managements
to smooth returns and placate the mood
particularly of institutional shareholders
who tend to prefer quick and smooth returns
over short investment cycles.
School of hard knocks
A second point worth making is that
if the recent meltdown in the financial
markets proves anything, it’s that there is no
such thing as complete mitigation of risk in
any market. Some of the financial derivatives
products sold to Hong Kong’s high net
worth community as hedges against
equity price volatility were themselves so
oversold that they created a mini bubble
that burst spectacularly when the markets
crashed in the fourth quarter of 2008. These
‘accumulator’ derivatives have now been
bitterly nicknamed ‘I’ll kill you later’ products
by some of those who lost out.
A third point to make is the ‘volatility
hedge arrangement’ mentioned by Ms Tang
isn’t exactly an innovation. Simon Dewhurst,
MPEL’s Executive Vice President and Chief
Financial Officer, was talking about volatility
management as long ago as MPEL’s Q1 2008
earnings conference. He pointed out that
hedging against volatility is standard practice
for casinos with high-roller operations.
Here’s what Mr Dewhurst said: “In our
business, risk mitigation straddles a wide
array of concern, including table hold
volatility. There are a number of things that
we can do to mitigate the impact of table
hold volatility and we believe that this is
especially important for us given that we
have one property [Crown Macau] that
currently delivers the vast majority of our
revenue and earnings. And that property
caters to the most volatile segment of the
market [the VIP sector] with respect to luck.
Pump up the volume
The headline-grabbing offer of 1.35% rolling chip commission helped Crown Macau grab around
18% of Macau’s entire VIP baccarat business by the end of the first quarter of 2008
“The most effective way to reduce
table hold volatility is to increase volume.
Since the commencement of operations
by AMA in mid-December [2007] and the
commensurate increase in rolling chip
volume, the volatility and our daily rolling
chip table hold percentages dropped as
expected,” added Mr Dewhurst.
In Focus
So there we have it from the horse’s
mouth. A ‘volatility hedge arrangement’
with a junket consolidator is only the second
best way for a casino operator to mitigate
volatility risk in high stakes baccarat. It will
have to do for the time being though.
Maintaining high volume of play to
create a smoothing effect in liquidity doesn’t
look such an easy option when the Macau
government has effectively outlawed a price
war on VIP commission. It was, after all, the
headline-grabbing offer of 1.35% rolling chip
commission that helped Crown Macau grab
around 18% of Macau’s entire VIP baccarat
business by the end of the first quarter
of 2008. Maintaining or building VIP play
volume is also going to be tough at a time of
global recession and when visa restrictions
are still in place for visitors from China.
During the Q1 2008 earnings call, Mr
Dewhurst went into more detail about
MPEL’s hedging arrangements with AMA.
“We’ve also always offered a revenue
shared base junket compensation model,
which shares the impact of table hold
variation between the casino and the junket
operators,” explained Mr Dewhurst.
“Some of the tables allocated to
AMA have recently been included in this
programme,” he added.
“Last we have constructed a win rate
sharing arrangement that allows us to
smooth the peaks, and [that] rallies the table
hold within our commission based junket
business with AMA. All this is designed to
make our cash flows and earnings more
stable and predictable.”
This is all good stuff, but a fourth point
worth making is that MPEL and A-Max are
a lot closer than is typically the case in a
conventional customer-supplier relationship.
Ted Chan, the current President of Crown
Macau, was until November 2008 CEO of
A-Max Holdings. And before joining A-Max,
which started trading in December 2007, Mr
Chan was head of Mocha Clubs, the Macau
slot club unit of MPEL.
There is nothing illegal about all of this,
and Inside Asian Gaming and its publishers
would like to point out we make no suggestion
of impropriety in the arrangement. This
closeness between customer and supplier
does, though, arguably make it harder for
investors to assess the effectiveness of MPEL’s
VIP gaming business model as set against its
competitors, and to judge how transparently
the volatility hedge arrangement will be
implemented.
One thing seems clear. Table hold
volatility will remain a topic of intense
interest for all operators as long as Macau
remains a baccarat focused market. Global
recession, regional economic slow down
and a mini-credit crunch among Chinese
high rollers may all work to make it harder
for those operators to smooth the effects
of this volatility on behalf of their investors,
but it won’t stop them from trying. After
all, many of them are likely to have
searching questions posed by analysts on
the hunt for upside in what’s likely to be a
challenging 2009.
17
Market Outlook
Rolling Downhill
ItIt will
will be
be hard
hard to
to improve
improve on
on the
the 2008
2008 performance
performance of
of Macau’s
Macau’s
high-roller
high-roller segment
segment during
during 2009
2009
C
hina’s manufacturing sector is on the brink of technical
recession, according to an influential monthly report produced
by CLSA, a provider of brokerage and investment services.
Deutsche Bank was already predicting a 14% contraction in
Macau’s gaming revenue for 2009, but that forecast was based on a
more bullish assessment by its regional economist that the Chinese
economy would keep growing, but at a slower rate. An actual
technical recession is likely to have gaming analysts reaching for
their calculators to make a fresh and possibly gloomier assessment
of Macau’s prospects for 2009.
The reason for special concern about the CLSA report is that
Macau’s gaming industry is heavily dependent on VIP players (they
account for around 70% of all revenues). Many of these VIP players
are owners or investors in the manufacturing sector now reportedly
threatened not just with a much-heralded downturn but a fullblooded recession.
Down and down
CLSA’s snapshot of local business conditions is based on a survey
of the intentions of manufacturing purchasing managers, and known
as the PMI.
“With five back-to-back PMIs signalling contraction, the
manufacturing sector, which accounts for 43% of the Chinese
economy, is close to technical recession,” said Eric Fishwick,
CLSA’s chief economist, after the latest index was published on
2nd January.
Another PMI issued two days later on 4th January by a
Beijing-sanctioned body, the China Federation of Logistics
& Purchasing, rose slightly to 41.2 for December, compared
with 38.8 in November. The trend, however, is still recessionbound.
A PMI reading above 50.0 indicates manufacturing growth,
and a reading below 50 indicates decline. Both the CLSA index
and the CFLP gauge stayed below 50 in the fourth quarter of
last year.
China’s share market indices reportedly ended the year
down 65% on average, adding further gloom to the regional
economic picture.
Market Outlook
revenue to fall at least 14% next year, dragged by a 25% fall in
VIP revenue,” she explains.
Rolling—but not everywhere
Karen Tang, an analyst at Deutsche Bank, issued an overview
report just before Christmas on the Macau market and its prospects
for 2009. The report, though written without the benefit of the latest
PMI data, pointed out that during an earlier downturn in 1998,
Macau’s gaming revenue declined 18% and then a further 10% in
1999, dragged initially by a contraction in VIP rolling and by a fall in
mass revenue.
“A year ago, for every HK$100 million of working capital, junket
operators could typically generate HK$400 million to HK$600 million
in VIP rolling per month. Now, many can generate only HK$300-400
million,” she adds.
“Hence, the multiplier on VIP rolling is down 30%. The reason is
that VIPs are delaying repayments. Longer credit cycles tie up working
capital, and slow the process through which junket operators can
lend to the next customer,” she asserts.
Macau gaming revenue growth by segment (1995-2010F)
Soft landing?
“This time around, the decline might be slightly less, as in recent
years new resorts have put Macau on a spectacular growth path,”
says Ms Tang. However, she had a caveat. “…with travel restrictions
likely to remain for the next six months, we expect gaming revenue
to fall 14% in 2009, in line with comments made by Macau’s Chief
Executive in early November. For 2010, we expect industry growth to
fall a further 6%,” she adds.
Macau gaming revenue yoy growth (1995-2010F)
Source: Deutsche Bank, Macau government
In December, Jun Ma, Chief Economist for Greater China at
Deutsche Bank, lowered his China GDP forecasts for 2009 and 2010.
He did it because of a sharper slowdown in China’s exports than
economic analysts had generally predicted. He suggested GDP
increases of 7% and 6.6% respectively over the next two years, from
the 7.6% and 7% tipped previously. The latest economic picture
painted by CLSA and the CLFP is even bleaker than the bank’s
assessment.
Because of Macau’s dependence on VIP gaming, the loss of
a small number of players or a reduction in their rolling is likely
to have a disproportionate impact on the local market compared
to mass play. “Our recent conversations with junket operators
suggest that the market is still underestimating the downside for
Macau,” says Karen Tang of Deutsche Bank.
“First, junket operators are cutting their lending to VIPs
as their customers’ net worth is falling. Second, and more
importantly, the amount of VIP rolling which can be generated
for the same amount of lending is now 30% lower than a year
ago, and can get much worse. We expect Macau’s gaming
Source: Deutsche Bank, Macau government
Celeste Mellet Brown and Thomas Allen, analysts at Morgan
Stanley, make broadly similar points in their overview of the Macau
and Las Vegas markets, published just before Christmas.
“Macau was able to thrive in 2008 because of junket consolidators
and operators offering large amounts of credit to both players and
junkets,” they state.
“While the impact of less credit from junket consolidators is at
least partially understood by the market, we believe reduced credit
from some operators is not. We believe the reduced credit will have
a more significant negative impact on VIP gaming revenue and now
model Macau VIP gaming revenue down 17% in 2009. While we
expect mass-market revenue to increase in 2009, we have lowered
our estimate to 10% year-on-year growth (from 20%).”
Macau VIP Gaming Revenue
Source: Morgan Stanley Research
Morgan Stanley says its conservative estimate reflects the
impact of an economic slowdown in China and the rest of the world;
lower spending per Mainland visitor as more come on whistle-stop
package tours rather than using Individual Visit Scheme visas, and
lower growth in the second half of 2009 as City of Dreams will now be
the only new venue to open this year, following the suspension of Las
19
Market Outlook
Vegas Sands Corp’s Cotai plots five and six, and the postponement of
the opening of Galaxy’s Cotai IR until 2010.
The points made by Ms Tang of Deutsche Bank about the
mathematics of the VIP market apply to all operators and their
agents. They are likely to be of particular significance to any VIP
venues that were already underperforming relative to the Macau
market’s general growth in the first eight months of 2008. In this
context, Galaxy’s CityClubs immediately come to mind.
Survival of the Fittest
Macau’s legacy casinos are likely to face particular pressure in a tougher VIP market
Group, another early entrant to the new-look Macau market, was
the ability of a new venue’s ‘buzz factor’ to build margin through
volume of play.
Although SJM and Galaxy already had plans of their own for
new resorts, they realised that in the short term, they needed to
organise refurbishment of legacy properties in order to hold or
build market share.
There was, though, an important problem. The sheer scale of a
purpose-built new venue such as Sands Macao gives an operator
the chance to offer a wider range of facilities than legacy casinos,
thereby boosting the mousetrap effect.
Old versus new
L
egacy casinos are so-called because they were built before Dr
Stanley Ho’s Macau casino monopoly ended in 2002. All of them
operated on SJM gaming licences, though other companies managed
a good number of them. Another thing they all had in common was
a relatively uniform approach to provision of facilities. To have seen
one legacy casino prior to 2004 was pretty much to have seen them
all. They had the same smoky gaming rooms, the same style of rather
tired furnishings and the same unrelenting focus on VIP play. The few
mass-market players there were at the time mainly came from Hong
Kong and Taiwan—the players’ tired and pinched faces often hinting
more at financial desperation than leisure and relaxation.
The liberalisation of the gaming market, the relaxation of travel
rules for Mainland Chinese citizens and the introduction of Las Vegasstyle casinos dramatically changed the picture. First on the scene in
May 2004 was Sands Macao, a mass-market focused casino operated
by Las Vegas Sands Corp. The culture shock caused by Sands Macao’s
arrival and the fact it generated enough cash to recoup its US$265
million initial investment within a year did more to raise product
quality standards across the Macau market than anything that had
happened in the previous four decades of monopoly.
Eye opening
One of the things that made a particular impression on the
incumbent SJM and on Hong Kong-listed Galaxy Entertainment
The Grand Lisboa towers beside the legacy property
Here’s what Karen Tang of Deutsche Bank said about legacy
versus non-legacy venues in a report released before Christmas on
Stanley Ho’s casino operating company SJM Holdings.
“Grand Lisboa [a new property] has proven that, under new
management, EBITDA margin at new properties can be substantially
higher than at legacy casinos (1H08: 18% vs. 2%).”
Revenue mix from legacy and new casinos
Source: Deutsche Bank, SJM data
Core EBITDA margins at legacy and new casinos
The same logic appears to apply to Galaxy Entertainment
Group, when the performance of its purpose-built StarWorld
resort on the Macau peninsula is compared to its loss-making
CityClubs, three of which are refurbished buildings aimed at the
VIP market. Since StarWorld opened in October 2006, as a mixed
VIP and mass-market casino resort, its performance has been
solid, enabling that one venue alone to maintain a 6% share of
the entire Macau market.
EBITDA margins of flagship properties by concessionaire (1H 2008)
President Casino—one of Galaxy’s underperforming CityClubs
Clubbed
By contrast, Galaxy’s CityClubs, consisting of three refurbished
buildings and one purpose-built resort, all aimed at the VIP
market, have been going into reverse. City Clubs recorded a HK$4
million loss on fee income stream in Q3 ’08. In Q2 ’08, they made
a HK$1 million loss.
Part of the problem with CityClubs may be that they have outlived
their purpose. It’s possible to argue that at least part of the reason for
that is faulty strategy and execution on the part of Galaxy. Three of
the four CityClubs were supposed to be an instant foothold in Macau’s
lucrative VIP market, refurbished quickly and opened in advance of
Galaxy’s purpose-built venues StarWorld and its integrated resort on
Cotai. In the event, CityClubs were delayed and opened only months
before StarWorld, which made its debut in October 2006.
The revamped President Casino and the Rio Casino didn’t open
under the CityClubs banner until the first quarter of 2006. The
purpose-built Grand Waldo Casino, with accompanying hotel and
spa, joined the party in May that year. The Waldo Casino & Hotel was
the only one to open well in advance in July 2004.
Jumbo junket
StarWorld’s Q3 ‘08 revenue was up 2% quarter-on-quarter to
HK$1.71 billion. VIP rolling was up 12% quarter-on-quarter to
HK$19 billion per month (a 2.2% table hold), while mass table
win was up 5% quarter-on-quarter to US$4,400 per table per day.
In Q3 ’08, StarWorld’s EBITDA was up 21% quarter-on-quarter to
HK$136 million due to slight margin expansion from 7% in Q2 ‘08
to 8% in Q3.
Galaxy’s long-term commitment to the CityClubs concept must
now be open to question, given the company’s decision in the
second half of last year to open a jumbo-sized 100-table VIP facility at
StarWorld with junket aggregator Neptune. If the VIP market stands
still or even contracts in 2009, then there is a distinct chance that
the StarWorld VIP facility could cannibalise some of the CityClubs’
business.
“While management guides that three of the company’s
[CityClubs] properties have now been moved to top-line revenue
agreements, the effectiveness of this strategy in generating positive
21
Market Outlook
earnings over the near term remains uncertain, in our view,” says
Deutsche Bank’s Karen Tang.
Although Grand Waldo has facilities that compare favourably with
the foreign operators, it has suffered to some extent from its location,
being on the border between Taipa and Cotai but physically isolated
from the growing buzz factor of the Cotai Strip™ by a piece of no
man’s land. While visitors to Las Vegas Sands Corp’s Venetian Macao
and Four Seasons Macao properties will soon have the option of
making a short walk to Melco Crown Entertainment’s City of Dreams
site if they want fresh entertainment options, anyone wanting to go
to the Grand Waldo must take a taxi or make a ponderous and circular
10-15-minute journey by foot using the local vehicle service roads.
Grand Waldo—so close, yet so far away from the Cotai Strip
Job cuts
Even before the global financial disaster, Galaxy was laying
off workers at its CityClubs. In the first round of redundancies the
company cut 140 mid-level foreign workers at the Grand Waldo and
President casinos. Then, in July, Galaxy let go of 270 local casino staff,
mostly dealers. While there may have been solid commercial reasons
Progress update on cost rationaization initiatives
Source: SJM company presentation
for the decision, it attracted a lot of negative publicity and censure
among legislators. The fallout was so great, in fact, that it appears
other operators seeking to cut costs in the downturn are effectively
protecting local employees from redundancy, regardless of their
qualifications or competency.
On the plus side for CityClubs, the A-Max inspired junket
commission price war seen across the market in the first half of 2008
now seems to have abated. Anecdotally, it appears that the net effect
of that price war was to push up junket commission rate averages
across Macau, which must inevitably have put further pressure on
any VIP venues that were already underperforming.
Light in the tunnel?
During 2009, Galaxy will need to show investors that it has turned
the corner with CityClubs and re-established the business model for
the unit on strong foundations even if it cannot immediately return
them to profit. One method will be to expand the volume of VIP
turnover, although as Karen Tang points out, this is a big ask during a
regional economic slowdown and credit crunch.
Another method is to dramatically cut costs. Galaxy may try to
follow the formula adopted by SJM to improve the efficiency of its
legacy properties.
“For self promoted casinos, it [SJM] will reduce the dealer-totable ratio to lower labour costs; 2) For third party-promoted casinos,
it will increase its revenue share, or reimburse more expenses; 3)
For VIP operations, it will consolidate underperforming VIP rooms,”
says Ms Tang of Deutsche Bank in her report on SJM issued before
Christmas.
“We estimate that cost savings [to SJM] could amount to HK$280
million,” she adds.
If such measures are impractical for Galaxy’s legacy properties,
then the company could as a last resort seek government approval
to sell one or more of the CityClubs to an outside promoter to run
as a cheap and cheerful junket venue. But the property would need
to operate under a licence from Galaxy or one of the other existing
operators or sub-operators. Galaxy cannot sell on a sub-licence,
as that went to LVS as a compromise deal organised by regulators
when the original plan to pair Galaxy with LVS in a joint venture
in Macau fell through. One thing seems sure. With the opening of
Galaxy’s new Cotai integrated resort now put back to 2010, Galaxy
must be wary of reducing its already slender footprint in a highly
competitive VIP market.
23
Cotai
Stripped
Yet another Macau casino operator
may be forced to halt building work in 2009
because of the global credit crunch
G
alaxy Entertainment Group may
need to suspend construction of
its flagship integrated resort at
Cotai in 2009 because of a likely funding
gap, according to Deutsche Bank.
If the cause of Las Vegas Sands Corp’s
Cotai work suspension was too much
bullishness, then the cause of any Galaxy
suspension could be excessive caution.
By deciding to put back the opening
of its Cotai IR until 2010 in the name of
cash conservation, Galaxy is arguably
robbing itself of the very moneygenerating machine it needs in order to
maintain its liquidity and help pay back
its debt. Instead, Galaxy has opted to
drain cash from the business by paying
off some debt first.
DB says it has identified a capital
shortfall of approximately HK$2.1 billion
(US$270 million) in Galaxy’s plans. At
least a third of that is accounted for by
the cash DB estimates Galaxy will spend
this year in the debt buy back.
After the offer closing date on 29th
December, GEG said it had received
acceptances from investors for 48.6%
of the bonds it offered to repurchase.
The company will pay US$86.35
million (HK$670.1 million) for fixed and
floating-rate notes with a combined
face value of US$170.22 million. DB
says that could leave Galaxy short of
cash for the Cotai project.
Cold water
“Given prevailing market conditions,
it in unlikely that the company will
successfully raise the required funds, in
our view,” says Deutsche Bank analyst
Karen Tang in a review paper on the
Macau market in 2009 published just
before Christmas.
In essence, DB says the ‘cure’ of
improving the medium term integrity
of Galaxy’s balance sheet by clearing
debt could be worse than the ‘disease’
of continuing to hold the debt. This is
particularly the case because of the
delay to the Cotai IR. DB does, though,
acknowledge there will be one time
and recurring benefits from the debt
buy back in the form of reduced interest
payments.
A number of analysts at various
institutions had flagged as long ago as
last November that Galaxy was likely to
have a gap in its project financing. DB
appears to be the first institution to state
openly that Galaxy is unlikely to be able
to plug the gap by going back to the
money markets.
Vivian Fu, Senior Investor Relations
Manager at GEG, told Inside Asian
Gaming the company had no comment
to make on the DB report.
Played down
Back in November, Galaxy played
down the chances of the company
needing further cash to complete the
Cotai project. Some analysts remain
sceptical of those assertions. They’re
worried that the decision to delay the
opening of the Cotai IR until 2010 from
25
Market Outlook
Perspective of the future GalaxyWorld Resort in Cotai: Will Galaxy Entertainment Group need to suspend construction of its flagship integrated
resort because of a possible funding gap?
its scheduled first phase opening of mid2009 will starve the company of much
needed new revenue. They say such income
is necessary, given that Galaxy’s other
Macau gaming assets have underperformed
relative to the boom times witnessed in the
first eight months of 2008.
Galaxy says its decision to delay
the opening of the Cotai mega resort
and buy back debt is a sign of its
commitment to responsible management
and determination to control costs and
maintain in the medium term the integrity
of its capital funding. Galaxy’s original
plan had been to open the first phase of
its HK$10 billion Cotai resort, including a
1,500-room Galaxy-branded hotel tower,
in the third quarter of 2009, followed by
a 400-room Okura hotel and a 254-room
Banyan Tree hotel by the end of that year.
It’s been reported recently that Galaxy still
needs to spend HK$7.8 billion (US$1.01
billion) to complete the Cotai IR project. The
rescheduled opening spreads that spending
over a longer period, in the expectation
that revenues from Galaxy’s existing Macau
venues can support the balance sheet.
Opportunity knocks
In early December, Galaxy seized the
opportunity presented by a collapse in
regional bond prices by announcing a
US$180 million offer to buy back some of
its fixed and floating rate bonds bearing a
face value of US$350 million. This consists
of all of its US$250 million guaranteed
senior floating rate notes due in 2010 and
up to US$100 million of the principal on its
US$350 million guaranteed senior fixed rate
that investors originally paid—will
drain the company of cash in the
short term, without the prospect of
a quick regeneration of liquidity now
that the Cotai IR has been delayed.
Back to market
“If Galaxy is successful in
repurchasing a significant amount of
its outstanding debt, the reduced cash
position further reinforces our view
that Galaxy will need to go back to the
market to raise new financing to close
the funding shortfall,” says Ms Tang in
her report on the economic outlook for
Macau in 2009.
“Given prevailing market conditions,
it in unlikely that the company will
successfully raise the required funds, in
our view.
“Hence, we continue to attribute
zero value to the GalaxyWorld Resort
Galaxy—funding needs
Source: Deutsche Bank
StarWorld got positive reviews from the public but will that be enough to weather the
rough conditions widely expected in 2009?
notes due in 2012. Deutsche Bank estimates
that if half of all the bondholders accept the
offer, it will save Galaxy HK$128 million per
year in interest charges.
“If 50% of the bondholders accept the
offer, we estimate the annual cash interest
savings to be HK$128 million, and there
would be a one-time non-cash gain of
HK$644 million in 2009,” says DB analyst
Karen Tang
Ms Tang and others say buying back
Galaxy’s bonds—even on favourable
terms amounting to nearly half the price
27
Market Outlook
as we believe Galaxy may have to suspend
construction in Cotai,” explains Ms Tang.
In November, Galaxy described the
decision to delay the opening of its Cotai
integrated resort as a “tactical response
to wider market conditions”. This was
widely interpreted as a coded reference to
the negative impact on Macau’s gaming
revenues of China’s visa restrictions and of a
regional economic slowdown influenced by
the recession in North America and Europe.
Galaxy Entertainment Group
performance indicators
Macau casino executives
are seeking to put
the best gloss
on tough market
conditions
Ratings scrutiny
Deutsche Bank isn’t alone in its
scepticism regarding the state of Galaxy’s
project funding. Moody’s Investors Service
said in late November that GEG’s gaming
unit, Galaxy Casino SA, was having its
B1 corporate family rating and senior
unsecured debt rating put under review
for possible downgrade because of the
company’s decision to delay the opening of
the Cotai project.
Moody’s analyst and Assistant Vice
President Kaven Tsang explained that while
the delay could lower Galaxy’s overheads
and spread out its capital outlays to some
extent, it will also reduce cash flow.
“As a result, Galaxy’s key financial metrics
will remain weak for the next two years and
this situation could pressure its ‘B1’ ratings,”
added Mr Tsang.
The essential concern for analysts is that
despite a positive showing from StarWorld,
Galaxy’s flagship property on the Macau
peninsula, the company has had some
difficulty gaining traction in the Macau
gaming market in order to produce the kind
of revenues that will allow rapid pay back on
its project debt and on its amortised gaming
licence fee (though HK$7 billion of the latter
debt owed to the company’s founder was
effectively written off late last year).
Underwhelming
Galaxy found it tough going in the
Macau gaming market in 2008, even
during the bullish first half of the year
where the territory’s gaming revenues saw
unprecedented 50% year-on-year growth.
StarWorld, Galaxy’s Macau peninsula
flagship, has had positive reviews from the
public. It managed to capture a revenue share
of around 6% of the entire Macau market all
by itself soon after opening. However, it has
been treading water since then and could do
no more than hold its 6% market share in Q3
‘08, points out Deutsche Bank. In the context
Spin Doctors
Source: Deutsche Bank
of the soaring growth of the Macau market
in the first eight months of the year, that has
to be viewed as underperformance.
StarWorld’s Q3 ’08 revenue was up 2%
quarter-on-quarter to HK$1.71 billion. VIP
rolling was up 12% quarter-on-quarter to
HK$19 billion per month, representing a table
hold of 2.2%, pointed out Deutsche Bank.
The venue’s mass table win was up 5%
quarter-on-quarter to US$4,400 per table per
day. DB adds StarWorld broadly maintained
a 6% market share in Q3 ‘08, with earnings
before interest, taxation, depreciation and
amortisation (EBITDA) up 21% quarteron-quarter to HK$136 million. DB adds the
property enjoyed a slight expansion on
margin from 7% in Q2 ’08 to 8% in Q3 ‘08.
But some of the company’s other assets
have performed less well. At group level,
Galaxy’s building materials unit has been hit
by the rising cost of commodities and the
rising cost of bulk transport.
And as we explain elsewhere in this
edition, Galaxy’s CityClubs in particular have
struggled to establish a niche audience
and a clear marketing identity in the VIP
market. That will need to change if Galaxy is
comfortably to weather the rough conditions
widely expected in 2009.
The possible scenario of Galaxy
being forced to suspend work on Cotai
would have seemed shocking just a
few months ago. Given what’s been
going on in the Macau market since
the final quarter of 2008, it now looks
perfectly rational—normal even. In
any case, since Las Vegas Sands Corp’s
decision to halt work on its new Cotai
projects in November, few events
retain the power to shock.
The terms ‘phased opening’ or
‘soft opening’, when applied to one
of Macau’s new integrated gaming
resorts, used to be accepted by industry
observers as a practical solution to a
genuine logistical problem—i.e., how
to organise the smooth transition of a
massive project from building site to
paying attraction. Now, following the
global meltdown of debt and equity
markets, ‘phased opening’ seems to
be a term used increasingly to cover
the backs of casino executives as they
scramble to meet their massive capital
commitments in order to avoid having
their stocks and bonds classified as
junk because of missed payment
deadlines on debt.
An awful lot of casino executives
were busy in the final weeks of 2008
making a virtue out of necessity, with
phrases such as “realignment with
existing market conditions” to explain
away their embarrassment on funding.
Such talk may not be entirely selfserving. A consensus view appears to
be forming that oversupply of product
in an immature market has been at
least one contributing factor to Macau’s
current woes. The spectre of the global
credit disaster does, though, continue
to cast a long shadow over the Macau
gaming market and Asian gaming
markets in general.
Top Quotes
Quotes of the
Week 2008
Here’s the end-of-year list you’ve all been waiting for. Inside Asian Gaming is pleased to
present our collection of the best quotes uttered over the past year.
As we only started gathering quotes in the second half of 2008, it’s not really an annual
award at all, more a light-hearted recognition of the role of public pronouncements and the
media in the modern gaming business.
Most of the quotes from 2008 were intentionally amusing or provocative when they left the
minds and mouths of the industry leaders concerned. One or two are unintentionally funny. We’ll
leave you, the reader, to decide into what category each quote should fall.
Roughly speaking, there was a correlation between the actual market share of the casino
operators in Macau and the number of times a representative of one of those companies appeared
in our quotes section. Has IAG discovered something profound about human behaviour, i.e., that the
more savvy a boss is in speaking to the media and summing up his or her company’s vision, the better the
chances of success for his or her enterprise?
In the northeast of England, there’s certainly a saying that “The shy bairns get nowt”. This roughly
translates as ‘If
you hang back in life, you don’t succeed’.
When it comes to Macau’s gaming resorts, size increasingly matters, so we decided to give the IAG Quote of the Week 2008 award
not to an individual utterance but to the person whose words of wisdom got the most weekly mentions.
One candidate put on a late surge with a real corker. The coup de grace for the other contenders was the fact he was also the
subject of two of the quotes uttered by other people.
He is none other than SJM’s Dr Stanley Ho. Very warm congratulations from the whole team at IAG.
Ranking
Name
Company
Appearances
1
Stanley Ho SJM
3
2
Sheldon Adelson
Las Vegas Sands Corp.
2
2
Frank McFadden
SJM
2
4
Thomas A. Anderson
Seeking Alpha
1
4
Anonymous Asian Poker Tour
1
4
Ian Coughlan
Wynn Resorts
1
4
Edmund Ho Macau Chief Executive
1
4
Lawrence Ho
Melco Crown Entertainment
1
4
Guy Laliberte
Cirque du Soleil
1
4
Lai See South China Morning Post
1
4
William Weidner LVS
1
4
Steve Wynn
Wynn Resorts
1
4
Thomas Wu
Hopewell Holdings
1
29
Top Quotes
IAG Quotes of the Week 2008
5th Aug
August 15 I will be going on summer holiday.
I am planning to be sitting by my cottage in
Donegal, Ireland, watching a late summer
sun rise up over empty sandy beaches and
clear, clean blue water; smelling the ozoneheavy, salty air of the north Atlantic Ocean
and preparing for a day where I will be kept
busy doing nothing.
“I will be returning to Macau and SJM
in September suitably refreshed and
looking forward to contributing to SJM’s
exciting future.”
Frank McFadden, President of Joint
Ventures and Business Development for SJM,
issuing a pre-emptive statement before he flew
off on leave. Last year when he went on annual
break a local newspaper reported he had left
the company.
often a consequence of the environment.”
Frank McFadden, former professional
rugby player and President of Joint Ventures
and Business Development for SJM, on why it’s
fun to work for the grandfather of the Macau
gaming industry.
30th Sept
“Macau is just taking a deep breath at
the moment—nothing more.”
Lawrence Ho, co-chairman of Melco
Crown Entertainment and chairman of Melco
International Development, on why there’s
no need to panic despite the tumble in share
prices for Macau gaming operators.
26th Aug
“Adelson stands taller than basketball
players—when he’s standing on his wallet.”
Las Vegas Sands Corp. chairman Sheldon
Adelson, speaking during his company’s Q2
earnings call and recounting a third party’s
anecdote about him.
12th Aug
“I don’t know why you’re thinking I’m
selling Cirque du Soleil to the world. I’m not
selling Cirque du Soleil. I’m giving up 20% of
the company.”
Guy Laliberte, the Cirque’s Canadian
founder, explaining he will stay in charge of
the firm that produces shows in Macau and
Las Vegas casinos (among other places). Mr
Laliberte had just sold a one-fifth share to two
Dubai companies owned by the government
of the Gulf state.
19th Aug
“I am writing to advise you that from
“First of all, congratulations on your
eight gold medals and world record
breaking feats—what a supreme sporting
achievement—and I hope superstardom
treats you well. However, I write this open
letter to you to say that I am in a position to
add weight to the argument that you should
be crowned history’s ultimate sportsman.”
The organisers of the Asian Poker Tour
Macau event inviting poker player and US
Olympic swimmer Michael Phelps to join the
event on his way home from the Beijing 2008
Olympics.
15th Sept
“Wynn is a luxury speedboat, graceful
and agile. The Venetian is an ocean liner—
slow to build speed and difficult to steer.”
Wynn Macau president Ian Coughlan on
why Wynn Resorts had bucked the trend of
declining share prices among Macau casino
operators.
23rd Sept
“Actually, Stanley Ho is very paternal.
And he’s very patient. That doesn’t mean
he’s not a tough, driven businessman. But he
understands when things don’t go the way
you would like them to go, that they are not
always a consequence of management but
14th Oct
“Short selling is pure gambling. You
might as well come into our casino over
here and play at the craps tables. Listen, at
least [in the casino] you’ve got a 49 per cent
chance. You don’t have a 49 per cent chance
in the marketplace.”
Las Vegas Sands Corp’s chairman
Sheldon Adelson speaking at The Venetian
Las Vegas on why casino capitalism is less
fun than the real thing.
Top Quotes
21st Oct
Steve Wynn, giving his typically forthright
view on the reasons behind Las Vegas Sands
Corp.’s difficulties in Macau.
“Hard times won’t stop gamblers from
betting, partygoers from drinking and
smokers from puffing.”
Seeking Alpha columnist Thomas A.
Anderson on why so-called ‘sin stocks’
may bounce back during an extended
economic crisis.
10th Dec
“My employees are not only treasures to
me, they are extremely precious and I can’t
afford to cut their jobs.”
Macau’s veteran gaming operator Dr
Stanley Ho on why his casino workers can
sleep soundly—though not at the gaming
tables.
“I cannot gamble because I hold a
gaming licence and am accustomed not to
gamble or even speculate.”
Dr Ho again explaining the serious aspect
of running pleasure palaces for the public.
29th Oct
“A good son does not dig into his father’s
inheritance.”
Hopewell Holdings’ chief operating officer
Thomas Wu, backing his father Sir Gordon Wu’s
decision not to fund the Hong Kong-MacauZhuhai ‘super bridge’ project.
12th Nov
“If necessary, the government will
take over. We will not allow any casinos
to shut down.”
Edmund Ho, Macau’s chief executive,
explains during his annual policy address why
The Venetian empire’s Chinese branch will
continue to flourish.
Operating Officer of Las Vegas Sands Corp.,
giving a viewpoint on the internal debate
within the company prior to its securing of
emergency funding.
19th Nov
26th Nov
“It was pretty much a monumental
screw-up.”
William Weidner, President and Chief
“If someone tries to build six hotels at once
and finds the market can’t accommodate it,
there’s a problem with the planning.”
17th Dec
“Betting on Mr Ho’s horses yields much
better returns than his stocks, based on
empirical and mark-to-market data.”
South China Morning Post columnist ‘Lai
See’ on why in current economic conditions
investors might be better off backing Stanley
Ho’s successful thoroughbreds than investing
in his companies.
22nd Dec
Stanley Ho stands beside Macau Chief Executive Edmund Ho at last month’s official opening of
the Grand Lisboa Hotel
“We love Macau and we love our country,
it shows in this lotus-shaped hotel.”
A patriotic Dr Stanley Ho, singing the
praises of China and his flagship casino
property The Grand Lisboa in the same
breath.
31
Operator Outlook
Plodding On
Macau’s operators steel themselves for steady though perhaps unspectacular
performance in 2009’s Year of the Ox
M
acau’s market performance in
2008 was a hare and tortoise race.
Gaming revenue raced ahead for
the first eight months of the year, only to be
caught at the end by the creeping tortoiselike effects of visa restrictions and global
recession.
In 2009, it looks as though the Year of the
Ox will live up to its name, with operators
and players determinedly plodding through
recession in the expectation of better days
ahead.
In the first eight months of 2008,
Macau’s gaming income was growing at an
unprecedented rate of 50% year-on-year.
At that time, the suspension of any casino
project was unthinkable. Asian equity and
debt markets seemed to have escaped the
worst ravages of the US-focused sub prime
lending crisis, and financial institutions and
investors based in the Asia Pacific region
appeared to have enough liquidity to back
Macau operators in the roll out of their
building programmes.
LVS—bloodied but unbowed
That all changed in the final quarter
of 2008, when the big wave of the world
financial tsunami finally hit the shoreline
of China. First there was the dramatic
announcement in November to the US
Securities and Exchange Commission made
by PricewaterhouseCoopers, auditors for
Las Vegas Sands Corp, that the very survival
of LVS was in question. It followed the
company’s unsuccessful attempts to interest
the debt markets in issuing fresh funding
in order to meet covenants on existing
loans and to provide fresh capital for its
construction projects in the US and Asia.
LVS chairman Sheldon Adelson, his
Operator Outlook
Macao Studio City—2011 and
counting?
Marina Bay Sands will open in phases from end-2009
wife and family injected a staggering US$1
billion of their own cash into the business in
the space of a month from the beginning of
the financial world’s own ‘Black September’.
Then, in November, the company announced
it had succeeded in raising a further US$2.1
billion from the sale of extra shares and
warrants without the need for pre-approval
by existing shareholders.
Despite these remedial measures, LVS
suspended building work on its new projects
on Cotai, resulting in around 11,000 subcontracted building workers being laid off. In
December, the company announced it was
shedding 500 casino workers in Macau—all
foreigners and including a number of people
at executive level.
LVS said many of the managers removed
from the Macau payroll would be offered the
chance of reassignment to the company’s
Singapore resort, the Marina Bay Sands,
though that project is also a victim of the
financial crisis, experiencing its own bout
of ‘phased opening’ syndrome. LVS says it
expects to open at least 1,000 hotel rooms
and a portion of the casino by the end of
2009, but other key elements such as the
convention centre and the shopping mall
are unlikely to be fully open to visitors until
the first quarter of 2010.
Melco Crown Entertainment—steady
as she goes
City of Dreams is sticking to its 2H ’09
opening schedule
Until LVS’s historic announcement that
it was mothballing its new Cotai sites, the
company’s chairman, Sheldon Adelson, had
always been proud to highlight what he
said was LVS’s excellent record for executing
projects on time.
On the face of it, Melco Crown
Entertainment (MPEL), the joint venture
between Lawrence Ho and James Packer,
is sticking to its own timetable for opening
its City of Dreams integrated resort on
Cotai in the second half of 2009, despite
the credit crunch and toughening trading
conditions. In practice, the City of Dreams
project has already seen some deadline
creep, some of it related to funding
issues. At the time of the ground breaking
ceremony in spring 2006, the JV said it
planned to open the resort in “the second
half of 2008”. Cost overruns and delays
on MPEL’s Crown Macau project were a
significant factor in pushing back the City
of Dreams timetable. Since then, MPEL has
been working to improve its balance sheet
and its execution on its Macau projects.
In November, Crown Ltd, Mr Packer’s
Australian casino unit, which has a
37% stake in MPEL, announced it had
negotiated a A$1.6 billion syndicated
loan from ten banks. Depending on how
one looks at it, this can be seen either as
a consolidating measure or a rolling over
of existing loans. In any case, it allowed
Crown to make an early pay back on debt
that had been due in August 2010. Crown’s
next major refinancing is now reported to
be due in late 2011.
In December, a few weeks after the
syndicated loan was announced, Crown
revealed it had raised a further A$300
million, this time in equity. The company has
other spending commitments aside from
Macau, namely in Las Vegas and Canada.
Nonetheless, these measures, taken together,
are a sign of the determination of Mr Packer
and his team to maintain the confidence of
analysts and investors at a testing time for
the whole world economy.
Macao Studio City is now expected to open in
2011—two years later than originally planned
Maintaining investor confidence in
ongoing projects is one thing. Getting
sufficient backing to move beyond the
foundation phase of a project is another.
Spare a thought then for Cyber One Agents
Ltd, the joint venture behind the US$2.4
billion Macao Studio City, the entertainmentfocused casino resort planned for the
northern end of Cotai, near the Lotus Bridge
immigration point. At the time IAG went to
press, there appeared to be very little activity
on the Macao Studio City site.
It’s no secret that the global credit crisis
has had a negative impact on funding for
Macao Studio City and pushed back the
projected opening date of phase one of the
project to 2011.
Richard Hamilton, Vice President,
Development for Taubman Asia, which has
a 25% stake in the retail portion of Macao
Studio City, told IAG recently: “When I started
on this project we were talking about 2009.
Now we’re talking about 2011.
“In some regards it’s frustrating, but
in many other ways it’s an opportunity,”
he added, suggesting that by the time the
project is up, the economy and visa situation
for Chinese visitors will probably have
improved.
SJM—the lotus hoping to blossom
in 2009
Before the markets went on holiday for
the Christmas break, Dr Stanley Ho went
on record as saying the balance sheet of his
casino operating company SJM Holdings is
solid, despite the global economic turmoil.
“We are all aware of the impact that
the current economic situation is having
on Macau and the gaming industry, but
SJM’s strong financial position and our
prudent steady growth strategy have left
us well placed to weather this storm,” Dr
33
Operator Outlook
Ho said in comments reported in the Hong
Kong press.
“Our development plans are moving
ahead as scheduled and we will come
through these times stronger than ever,”
he added.
SJM received considerable criticism
over the summer last year for launching
a public share offering that many market
commentators regarded as ‘too little
too late’. It raised only around half the
US$1 billion that analysts had thought
the company was worth even six months
earlier. In the light of subsequent world
Profit & loss forecast
events, however, SJM’s limited exposure to
new commitments regarding shareholder
dividends, its low levels of debt and
the fact it is one of only two casino
operators in Macau currently turning a
profit for shareholders (the other being
Wynn Resorts) means SJM now looks
like a prudently managed company with
strategic planning of the highest order.
SJM recently opened a new 430-room
hotel tower attached to its HK$7 billion
Grand Lisboa site—across the road from
the original Lisboa Hotel and casino on the
Macau peninsula.
Operator Outlook
SJM will also operate a franchise casino
at the L’Arc Macau, a property on the
Macau peninsula opening in the first half
of 2009. The casino, hotel and residential
project is being jointly developed by Dr
Ho’s wife, Angela Leung, and International
Entertainment, a company listed on Hong
Kong’s alternative share index known
as the Growth Enterprise Market (GEM).
International Entertainment is controlled
by the family of New World Development
chairman Cheng Yu.
SJM is also developing Oceanus, a
HK$1.1 billion SJM owned-and-operated
casino on the site of the former New
Yaohan department store opposite the
Macau Maritime Terminal on the peninsula.
Oceanus will be opened in stages, with 300
mass-market gaming tables available by the
end of 2009.
In a recent report on SJM’s prospects for
2009 and beyond, Deutsche Bank analyst
Karen Tang was generally upbeat.
“By 2010, SJM should have opened
five new projects. We forecast that these
properties will generate HK$2.2bn EBITDA
by 2010, based on 17% market share with
14% EBITDA margin,” she says.
“Grand Lisboa has proven that, under
new management, EBITDA margin at new
A hotel room at the Grand Lisboa
properties can be substantially higher
than at legacy casinos (1H08: 18% vs. 2%),”
she adds.
Deutsche Bank says that even though
in 2009 SJM’s share of total Macau casino
revenue may fall below 25% for the first time
ever, it expects the launch of new products
will help SJM claw back share to around 23%
in 2010.
Ambrose So, SJM’s chief executive, is
confident the company can square the circle
of expanding operations while at the same
time controlling day-to-day costs. One way
to achieve this is to transfer existing staff to
new sites as they are opened, rather than
recruiting new people.
Mr So said the recent troubles
experienced by competitors in Macau were
because some had “over-leveraged, overborrowed and over-projected the market”.
Mr So and his boss certainly have
long experience of operating in the
roller coaster world of the south China
economy, with its potential for rapid
boom and equally rapid bust. It’s possible
this may have given them an edge over
some of their foreign rivals when it came
to anticipating the downside of the
Macau gaming market.
Ms Tang of Deutsche Bank says: “SJM
has a long-serving senior management
team that has substantial experience in
the management of casinos, and local
connections in Macau. Strong understanding
of local culture and customer preferences
will be advantageous when formulating
business strategies in a fast-changing
competitive landscape.”
She adds the company has also brought
in new executive blood in the last few years
from Macau and beyond, and this may
also help maintain its position in a highly
competitive market.
“Since 2006, SJM has expanded its
strategic and operational management
team through an additional 150 experienced
personnel,” says Ms Tang.
“Many of them have held senior
positions in other casinos in Macau or
overseas. For example, Frank McFadden,
President of JV and Business Development,
was formerly COO for Venetian Macau
Ltd. Similarly, John Catt, Tim Gilbert, and
Lindsay Stewart, who are now overlooking
public relations, table games, and slot
machines, have all previously worked for
Sands or Venetian Macau Ltd. We believe
that the new blood will bring industry
best practices to SJM, and help improve
operating efficiencies.”
The truth about SJM’s good positioning
following 2008’s market turmoil may in fact be
more prosaic than Mr So and Ms Tang suggest.
At least some of SJM’s modest exposure to
global financial markets is probably due to
what American commentators call ‘dumb
luck’. The company was originally very keen
to raise money via an initial public offering.
The fact it only managed to raise around half
of the cash the markets had been hoping
for actually led some analysts to mark down
the company’s stock during the summer. If
SJM is to capitalise in 2009 on its own good
fortune and the hard luck of some of its
rivals in 2008, it will certainly need shrewd
leadership.
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35
New Property
Time for an Encore
The latest signature resort in the Wynn collection was unveiled on December 22.
Here’s a glimpse of what’s on offer
Located next door to flagship property
Wynn Las Vegas, Encore is a distinct
destination with its own selection of
accommodations, dining and leisure
activities. Central to Encore’s fanciful and
intimate environments are sunlit corridors
with flowering atria and sprawling pools
visible from throughout the property.
Natural light floods the resort to reveal
gardens, vibrant butterflies and signature
mosaics.
Encore’s accommodations are comprised
of 2,034 suites that offer casual elegance in a
comfortable, residential setting. The Resort
Suites span up to 700 square feet and Tower
Suites measure up to 5,800 square feet. Two
separate arrival and check-in areas pamper
guests and showcase the textured details of
Roger Thomas’ interior design.
In keeping with the culinary standards
set by Wynn Las Vegas, Encore introduces
a new all-star team of chefs to the dining
family, each of whom is in their kitchens
cooking dinner every night. Five signature
restaurants pair these master chefs with
personally prepared gourmet fare. Sinatra
is a salute to Ol’ Blue Eyes. Chef Theo
Schoenegger’s modern Italian cuisine riffs
with Sinatra tunes as guests revisit the
entertainer’s legendary charisma. A surprise
awaits at Switch, Chef Marc Poidevin’s
French-inspired seafood and steakhouse.
Diners can appreciate the art collection by
Columbian artist Fernando Botero at Botero
Steak while sampling Chef Mark LoRusso’s
modern cuisine. Society Cafe Encore was
designed with the whimsical era of Oscar
Wilde in mind, to match the imaginative
cooking of Chef Kim Canteenwalla. Turn a
corner in the casino and come face to face
with a 27-foot crystal dragon, mounted at
Wazuzu, where rising star Chef Jet Tila serves
Steve Wynn in Encore Atrium
New Property
Spa Lobby
up pan-Asian cuisine.
Todd-Avery Lenahan designed The
Spa and The Salon at Encore, sure to make
a statement. Upon arrival in the grand
Spa Court, guests are welcomed into
a vaulted, softly-lit and glass-enclosed
courtyard. The Salon is full-service and
The Spa contains 37 treatment rooms,
14 naturally-lit garden rooms and four
oversized couples’suites for massage, body
treatments and facials. Two movement
studios offering spinning, yoga, pilates,
conditioning and meditation classes are
part of the new Fitness Center.
Encore also brings a new nightclub to
the scene. At XS, after-dark impresario Victor
Drai combines an outdoor pool environment
with the sizzling club atmosphere. Destined
to be the gold standard in Vegas nightlife,
the club’s design is inspired by the sexy
curves of the human body and embraces the
European pool and island bar it envelopes.
The dance floor at XS is highlighted by a tenfoot rotating chandelier.
The Esplanade at Encore consists of a
selection of 11 boutiques. The edgy Rock &
Republic, the distinguished Hermes and the
eternally classic CHANEL anchor an array
of clothing, shoe, jewellery, home decor
and accessory stores. The Rock & Republic
store is the designer’s first venture as a retail
boutique.
Inspired by the festive energy of the
French Riviera, the pools at Encore are
Spa Treatment Hall
central to the resort experience, both
literally and figuratively. Positioned at the
heart of activity, the resort pool and the
European pool present scenic views for
the bars, restaurants, casino and meeting
rooms that envelop them. The pools are
surrounded by sculpted gardens, mosaic
tiling and feature Jacuzzi spas and twentynine luxurious cabanas.
Encore defies casino convention with a
more intimate approach to gaming. The vast,
open area that once defined the casino floor
is replaced by columned pavilions, canopies
and draperies that partition the gaming
areas into private chambers. A butterfly
motif portends good luck and gives way to
the comfortable character of parlor room
environments, each equipped with a garden
or pool view.
Encore offers 60,000 square feet of
custom-designed, configurable event
space, from private boardrooms to an
expansive, column-free ballroom. The
facility is connected to Wynn Las Vegas,
where an additional 200,000 square feet of
space is available.
XS The Nightclub
37
Casino Lite
‘Casino Lite’ for Taiwan
Gaming?
E
arly indications are that Taiwan will
adopt the sort of ‘Gaming Lite’ multipurpose resort model adopted by
Singapore and Vietnam—as and when
Taiwan starts to build casinos following
Monday’s ‘yes’ vote in the legislative
assembly.
While the notion of casinos in Taiwan
naturally grabs all the headlines, the
background information on the most
detailed plan to be announced so far sounds
more like Singapore and Vietnam’s schemes
for holiday resorts with a bit of gaming,
rather than aircraft hangar-sized halls full
of slot machines and baccarat tables found
in gambling-focused Macau’s ‘integrated’
resorts.
On the Penghu Islands, an offshore
archipelago long tipped as the first site
on Taiwanese territory to host a casino or
two, the talk is of an ‘international vacation
village’. This would be a 120-hectare zone,
featuring a tourist hotel of more than
2,000 rooms, a duty-free shopping mall,
an international convention centre, golf
courses and casinos.
Penghu county magistrate Peter Lin said
in remarks quoted in the regional media that
the gaming industry would be small and
heavily regulated, with resort development
trending toward hosting families.
Whether this is an example of the
routine noises made by pro development
lobbyists to head off criticism from
environmentalists and other interested
parties, time will tell.
Another point worth noting is that the
political campaign for casinos in Taiwan
may not be over quite yet. The governing
Kuomintang (KMT) used its large
majority to push through the necessary
preparatory law in the legislative Yuan
on Monday by an impressive 71 votes
to 26. It would in theory allow casinos in
three groups of offshore islands: Penghu;
Kinmen and Matsu.
Opposition Democratic Progressive
Party legislators voted against the bill,
citing concerns about debt, crime and
environmental degradation.
Taiwan’s President Ma Ying-jeou still
needs to sign the bill before it comes into
effect and some political horse-trading
with opponents may take place before that
happens. The locals in proposed casino zones
will also need to be consulted in individual
referenda. In two previous plebiscites,
Penghu’s 90,000 job-hungry inhabitants
gave casinos an emphatic thumbs up. But
diehard opponents on Taiwan’s mainland
are likely to try and rally any antis in what
could be an emotional new referendum
campaign.
Taiwan’s legislature will also need to
amend another law called the Statute of
Offshore Island Development, according
to officials of the Public Construction
Commission quoted in the local media. That
could take time, and as the saying goes, a
week is a long time in politics.
And from an investor’s viewpoint the
number of casino licences issued and
Feature
the gambling tax rate will be important
considerations in deciding the attractiveness
of the Taiwan market.
Taiwan’s cabinet is reportedly setting up
a committee to work out detailed measures
stipulating the regulation of gambling, such
as the number and size of casinos to be
licensed and the minimum capital required
for operators.
The government of Penghu county is
reportedly looking to raise NTD30 billion
(USD909 million) from private investors for a
scheme there.
Two locations—the Houliao Bay area and
the Huhsi Port area—are candidate sites. The
local authority hopes to have finalised the
list of private investors by early 2010, with
building work starting in 2011.
London-listed AMZ Holdings is a
leading contender as either the developer
of a project on Penghu or as a key partner
in a consortium for a scheme. It has access
to an 11-hectare waterside site acquired
in 2007 on a speculative basis at a cost of
USD10 million.
Other contenders interested in
developing gaming resorts are a local
firm called Great Penghu which has
reportedly purchased a nearly five-hectare
site for gaming, and the Penghu county
government which plans to develop a 40hectare site.
“We’ve
wanted
to
stimulate
development of the offshore islands,
particularly tourism,” said Chang Sho-wen,
the secretary general of the governing
KMT’s caucus, in comments reported in the
regional media.
Casinos could attract half a million
tourist visits to the Penghu Islands each year,
generating NTD100 billion (USD3 billion)
worth of revenues in gambling and tourism,
according to an evaluation study prepared
by Taiwan’s Council for Economic Planning
and Development.
Harrah’s for Taiwan?
Speculation is at fever pitch that Harrah’s Entertainment will be
a partner in a Taiwan casino resort.
It follows remarks by Ashley Hines, president of operations in
Taiwan for London-listed AMZ Holdings—which has an 11-hectare
parcel of land on the outlying Penghu Islands, one of the prime
locations for a casino resort—that AMZ would seek to build up to
500 hotel rooms, at a cost of USD200 million, and link with ‘one of
the world’s top five’ casino operators.
Among the top five by turnover, Las Vegas Sands Corp. and
Wynn Resorts appear to have their hands full with projects
in Macau and Las Vegas. MGM MIRAGE recently announced
involvement in Vietnam’s Ho Tram Strip scheme to complement
its 50 percent stake in MGM Grand Macau. Genting Berhad is busy
preparing for the opening of its Resorts World at Sentosa project
in Singapore and may also be a player in the Manila Bay project
in the Philippines. That leaves Harrah’s as the obvious contender.
Harrah’s didn’t just miss the boat in Macau but seemed not to
think at the time that the boat was worth boarding. Currently its
exposure to the Asian gaming market is a casino-free golf course
on Cotai in Macau.
Added to that mix are the recent comments of Gary Loveman,
chairman and chief executive of Harrah’s.
“Taiwan is potentially a terrific market. You have a lot of the
same dynamics that you have in Macau: an enormous population
both locally and regionally with a strong interest in gaming, and a
limited amount of supply,” Mr Loveman was quoted as saying.
“No one knows what the tax rate would be and you can’t
predict all those things in advance. But you certainly have the right
starting conditions,” he added.
Inside Asian Gaming is acutely aware that when it comes to
speculation on business projects adding two and two doesn’t
always make four. We await developments with interest.
A Sure
Bet
Log onto www.asgam.com
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edition — all absolutely free.
39
Changing Face of Reform
Since coming into force in September 2007, UK’s Gambling Act
has given...and taken away
T
he 2005 Gambling Act came into force in September 2007 and
therefore has been in place for over a year. Now would seem
an appropriate time to review its impact on the UK gambling
sector in general and the casino sector in particular.
The Act came after several years of consultation with various
interested parties and followed the publication early in the decade
of a report headed by economist and banker Sir Alan Budd which
contained 175 recommendations for reforming Britain’s 40-yearold gambling laws. Many of the recommendations were finally
incorporated into the Act.
The main change was the creation of the UK Gambling
Commission to oversee the regulation of all gambling. The
commission is paid for by the industry. The Act also allowed for the
expansion of the casino industry by creating a “regional casino”, as
it was officially known (or a “super casino”, as it came to be called),
which would contain up to 1,250 unlimited-prize casino-style slot
machines, and 16 new smaller casinos.
However, the super casino, which finally was designated for
Manchester, was voted down in the House of Lords in the spring
of 2007 and dropped by the new Labour Government of Gordon
Brown that summer. It was a disappointment for the city of
Manchester. But it also raised questions about other provisions
of the Act and Government policy. Specifically, because the super
casino was considered an experiment, a brake was put on further
new licenses so that its impact could be viewed in isolation. Some
now argue that the absence of the super casino removes the need
to inhibit growth in the sector. But such is the state of the UK
casino market at present that even if the industry were allowed to
expand it is doubtful that it would want to. In fact, since the Act
came into force, nine casinos have closed, and there are doubts
about the openings of some of the 16 smaller casinos. The closures
and the absence of new openings are considered visible signs of
an industry in serious decline.
However, the current malaise in the sector is not just
an unintended consequence of the Act but the result of a
combination of factors, some of which have been exacerbated by
the Act. For example, the downturn in consumer spending would
have affected casinos irrespective of the regulatory framework
in which they operate. But the granting of new licenses in places
where casinos already exist can only have an adverse affect on
those existing casinos.
The British Casino Association, which represents around 75
percent of UK operators, including Rank’s Grosvenor Casinos,
Genting Stanley and London Clubs International, says there are four
main reasons for the industry’s problems: the licensing regime, tax
increases in the last budget, the nationwide smoking ban and the
removal of Section 21 machines from casinos.
The BCA argues that new license holders will enjoy “inherent
commercial advantages over current licences in terms of greater
machine numbers, sports betting and, in the case of the eight ‘large’
casinos, bingo.” The BCA says it is in favor of growth in the sector, but
it shouldn’t be achieved in a way “that prejudices the commercial
viability of the existing casino estate.”
Then there is the tax issue. In his March 2007 budget, thenChancellor Gordon Brown abolished the 2.5 percent and 12.5 percent
rates, assessed smaller casinos and replaced them with a flat bottom
Feature
rate of 15 percent. That equates to an average additional annual tax
bill of £200,000, with some casinos paying considerably more. There
was also the introduction of a new 50 percent top rate on casinos
with annual revenues of more than £10 million, which has not only
impacted larger casinos but possibly has deterred operators from
taking up new licenses.
Analysts at Panmure Gordon said after the budget was passed:
“The increased level of duty will probably cause some small marginal
casinos to close. In addition, some planned new casinos are not likely
to be built now.”
The removal of Section 21 machines and the introduction of
the smoking ban in July 2007 have seriously impacted both the
casino and bingo sectors and have been disastrous for Rank, which
operates in both. Gala Coral also operates casinos and bingo halls
but has a large betting shop estate and has benefitted there from
the proliferation of fixed odds betting terminals, which have been
offering £500 jackpots since the Act came into force. Some casino
operators believe they are losing machine players to the betting
shops and they are lobbying for either FOBTs or the return of Section
21 machines.
The BCA also wants Government to allow casinos licensed
under the old 1968 Gaming Act to be transferable between local
authorities. This, they argue, would allow operators flexibility
without increasing the total number of licenses. Currently, if
a casino is losing money the operator will close it down. The
operator can apply for a new license elsewhere, but that is a slow
process and uncertain.
The association met with Government last July, and it was agreed
that the situation would be reviewed in six months. The BCA also
won a review of the machine rules. Government, in the meantime, is
reviewing the impact of FOBTs in betting shops.
Lawyer Richard Jukes, an advisor to the BCA, said that although
the industry was “having a torrid time” he was hopeful that
Government would listen to the industry and act appropriately. “We
enjoy a good relationship with Government and are engaged in a
close dialogue. However, the difficulties we face are very real and
very marked, and we will continue to lobby for changes to taxation,
which the industry cannot currently sustain.”
There is also talk of consolidation and mergers. Harrah’s
Entertainment, which paid around £300 million for London Clubs
in 2006, is reported to have been in talks with Rank and Gala
about selling LCI. However, neither Rank nor Gala would appear to
be in a position to expand their operations through acquisitions
at present. Rank announced that in the first six months of 2008
revenues fell to £275 million from £285 million in the same period
the previous year, while operating profit fell from £47.9 million to
£28.9 million.
Gala Coral operates 28 casinos and 156 bingo halls and more
than 1,600 betting shops. The company is not listed so is not
required to publish results, but the private equity owners have
admitted that they invested an extra £125 million into the business
last April amid fears that it was on the verge of defaulting on its
banking covenants.
Another major operator is Genting, which operates 46
casinos under the Genting Stanley brand. Genting’s head of
strategic investments and corporate affairs, Justin Leong Ming
Loong, has said: “We take the view that things are going to get
worse before they get better in the UK. In the UK you get periods
41
Feature
of respite before things get worse again, and we are battening
down the hatches.”
In the short term there is unlikely to be any significant increase in
the 144 casinos currently operating in the UK. Indeed, there is more
likely to be a decrease.
As for the Gambling Act, it was conceived during a period of
economic growth and massive increases in gambling turnover.
Only if and when the economy recovers and the sector begins to
thrive again will it be possible to pass final judgment on it.
Reprinted with permission from International Gaming and
Wagering Business (IGWB) magazine.
Simon Banks is a freelance writer specializing in the sports and
gambling industries. He is based in London.
UK Project Pipeline
From Solihull to Leeds, gaming development plans span large, small and smaller
Solihull
This West Midlands city of 95,000 has emerged as the most
likely site for the first of the eight “large” casinos authorized by the
2005 Gambling Act. However, before a site can be chosen the local
council has to invite bids from developers and choose whichever it
thinks can deliver the most benefits for the area.
A £90 million joint venture between the National Exhibition
Centre and Genting Stanley featuring a 15,000-square-meter
gaming floor with the statutory limit of 150 limited-prize slots is
seen as the favorite.
But Rank Group has also been lobbying in the area.
Rank Chief Executive Ian Burke is launching a grassroots
campaign to persuade local groups that his company takes the
social concerns of local communities seriously. “We have been
active in Solihull in engaging with influential stakeholders such as
church and faith groups, charitable organisations as well as business
representatives,” he said.
NEC is confident that the Genting-backed venture can win
the backing of the council. “The NEC Group now looks forward to
demonstrating that our partner and proposals represent the best
possible outcome for Solihull, Birmingham and the wider West
Midlands,” said head of communications Deborah Smith.
The council is expected to announce the identity of its preferred
partner early this year.
Yarmouth
Developers have received the backing of the local council in this
North Sea resort town for a “large” casino scheme on the sea front
called The Edge. The £35 million project includes a 138-room hotel,
eight-screen cinema, 18-lane bowling alley, six restaurants and four
stories of car parking. The casino will be operated by Aspers, a joint
venture between Aspinalls and the Packer Organisation.
The scheme was proposed by Councillor Mick Castle, who said,
“The town has embraced this project, and there have not been
any objections apart from extraneous matters such as parking
concerns. This scheme is about jobs, about regeneration and about
improving the offer of a seaside town.”
Aspers says the development will create up to 1,000 jobs.
The plans will go before the Secretary of State, who will decide
whether to hold a public enquiry or allow the decision to be taken by
the council. The granting of a license is expected to take 18 months
from application. There is some opposition to the development with
some conservationists concerned the six-story hotel will obscure
views of the sea and the town’s famous monument to Lord Nelson.
Hull
The Queen’s Gardens and Maritime Museum in Kingston upon Hull
city centre
Developers behind a £100 million development in this Yorkshire
city of 257,000 have been given a two-year deadline to start work
on the city center site. The scheme is incorporated in what will be
Hull’s tallest building, a 23-story high rise that will contain a “large”
casino, a 185-bed hotel and student accommodations.
The developers, Manor Group, say they have two possible
international operators lined up to run the casino and hotel. But
the council is getting impatient and wants work to start soon.
Councillor John Fareham, chairman of the local Planning
Committee, explained: “I am concerned about the level of
permissions we have given in the city centre that have not been
taken up. The city centre is meant to be the jewel in our crown,
Huddersfield Town
and I am keen not to give another permission only for nothing to
happen. This is a key site, and requiring the development to begin
within two years is perfectly reasonable.”
Leeds
It’s been a case of “one in, one out” in this metropolis of 761,000
in northern England where a new casino has opened and an
established one has closed.
London Clubs’ Alea Casino opened in the Clarence Dock
development in September 2008, and in October the Rank-owned
Grosvenor Casino in Moretown closed after 40 years of business.
Rank has two Grosvenor casinos in the city, and a
spokeswoman blamed the rise in betting duty for the closure
of the Moretown site. “The rate of duty for the Leeds casino
increased by 500 percent in 2007, a level which would be difficult
for any business to absorb,” she said.
The £13 million Alea has 17 gaming tables, six bars, two
restaurants and a cinema spread over 50,000 square feet.
R.I.P.
Plans for Britain’s first racino in Reading fell apart after Stanley
Casinos pulled out of a joint venture with greyhound stadium
operators Stadia UK. Plans for the combined dog track and casino
had received the backing of the local council and a site had been
sourced. Stanley, which also operates the town’s Maxim Casino,
cited the financial downturn for its decision.
The collapse of the scheme was bad news for dog and speedway
racing fans in the Thames Valley town. Smallmead Stadium, which
hosted both, was forced to close in October.
Stadia UK is searching for a new partner.
A new £5 million casino in Huddersfield has been forced to
close just eight weeks after opening after the operating company
cited financial difficulties.
Casino Red was operated by a company of the same name,
which also operates an online casino site. It opened in a blaze of
publicity and featured a high-class restaurant and a dance floor.
Customers received news of the closure by text message:
“Casino Red directors have unfortunately had to temporarily
suspend trading at the venue in Huddersfield. We will inform of a
re-opening ASAP. Apologies.”
43
Briefs
Regional Briefs
LVS Favours Singapore Tax ‘Haven’
Marina Bay Sands
The logic of Las Vegas Sands Corp.’s decision to mothball its
Macau projects and press ahead with its integrated resort Marina
Bay Sands in Singapore became clear at a recent investor conference
in the US.
LVS President and COO William Weidner pointed out that with
Singapore’s lower gaming tax burden (10% of the gross on mass
market play and 20% on VIP play, as opposed to an effective 40%
across the board in Macau) the net earnings generated on projected
revenue of US$2 billion in Singapore would amount to $940 million,
compared to only $504 million from the equivalent gross in Macau.
Mr Weidner added Las Vegas Sands Corp.’s revised business plan
envisages the company can complete its Marina Bay Sands project in
Singapore with cash to spare, says Business Times Singapore.
LVS says it needs US$4 billion to complete its Marina Bay site and
that it currently has $6.2 billion in borrowings and liquidity, including
income raised or expected from monetisation of non-core assets.
“There is cash available to open Singapore [Marina Bay
Sands] in the first quarter of 2010,” Mr Weidner told the investor
conference in the US.
He revealed that LVS expects to cut US$100 million in costs
globally in 2009 by reducing expenses, labour, head count and
benefits “everywhere that doesn’t affect the customer experience”.
Mr Weidner projected that with its 2,600 rooms, and an average
daily rate of US$269 per room by 2011, LVS hopes Marina Bay will
achieve initial EBITDA (earnings before interest, taxes, depreciation
and amortisation) of $161 million. He also forecast rental revenue
from its retail component at $179 million.
Addressing the issue of debt, Mr Weidner was quoted as saying:
“The debt that we have is extraordinarily valuable. No one can
generate about $9.8 billion of debt at a blended rate of about five
percent in this environment.”
He said that the first maturity of this debt is May 2011 for a
tranche of approximately US$800 million followed in May 2012 by
about $776 million. chairman and chief executive of Harrah’s.
His comments were made to the China Daily newspaper as
Harrah’s unveiled its 18-hole Caesar’s Golf Macau facility at Cotai
just before Christmas. Harrah’s has reportedly spent HK$200 million
upgrading the course.
Mr Loveman’s warm words do though raise the question as to
why Harrah’s didn’t try harder to get a casino licence the first time
around if Macau is indeed as wonderful as he suggests.
But in the spirit of New Year goodwill, Inside Asian Gaming
will allow Mr Loveman—the owner of probably the world’s most
expensive golf course, a 175 acre plot the lease of which was
acquired from a Taiwanese entrepreneur in late 2007—his two cents
of commentary.
“This is the largest and most prosperous gaming destination
in the world and we think it will widen its leadership over time,” Mr
Loveman stated in another interview to mark the course opening.
“The market is likely to go through a maturation to Macau 2.0,” he
added prophetically.
Exactly what Mr Loveman has in mind for Harrah’s contribution
to ‘Macau 2.0’ isn’t entirely clear, though medical tourism and
theme parks were apparently referred to in one conversation with
journalists.
Harrah’s investors would certainly welcome a money-spinning
new scheme in Macau, especially if it avoided the need for one of
those troublesome gaming licences that can cause such a lot of
litigation and heartache for companies. Although Harrah’s has never
officially confirmed the price it paid for its golf course, at the time the
bill was widely reported as US$575 million, which some wag worked
out was US$31.9 million per hole. It is though the second biggest
parcel of land on Cotai after that granted to LVS, so the course could
potentially be converted to miniature crazy golf at a later date to
make way for a higher yield leisure operation.
Mr Loveman’s comments about medical tourism and theme parks
reminds IAG of what Robert de Niro’s character Sam ‘Ace’ Rothstein
says about modern Las Vegas in the 1995 film Casino.
“Today it looks like Disneyland. And while the kids play cardboard
pirates, mommy and daddy drop the house payments and junior’s
college money on the poker slots.
“You get a whale show up with four million in a suitcase, and
some twenty-five-year-old hotel school kid is gonna want his social
security number.”
IAG doubts the US government’s Medicare system would pay
for the sort of medical tourism potentially on offer at Cotai. And
the medical insurance companies would need to be careful not
to advance cash to policy holders to pay for treatment, otherwise
granny could be forced to wait a bit longer for that hip replacement. Look East Young Men
Macau 2.0
Macau’s medium-to-long term prospects as a gaming market
are undimmed despite the current downturn, says Gary Loveman,
City of Dreams
Briefs
Macau gaming developer Melco Crown Entertainment said
on Tuesday it expects the Macau market to rebound from a sharp
contraction. It is also monitoring expansion opportunities in Taiwan’s
emerging casino market.
“The worst period for Macau’s tourism industry is probably over,”
said Lawrence Ho, co-chairman of Melco Crown Entertainment. The
company added it is on track to open its City of Dreams integrated
resort on the Cotai strip by early summer.
Short term hopes—recently dashed—that Beijing would ease
visa restrictions and a global rebound in equities from multi-year
lows helped Melco shares rise around 70% in the last three months,
though the stock is still down nearly 80% over the last year.
“2009 should get gradually better,” Lawrence Ho told reporters
in Macau.
Mr Ho said 7,000 new jobs would be created in the first phase
of the US$2.1 billion City of Dreams on the Cotai Strip. Melco Crown
and Wynn are the only two casino operators adding new capacity in
Macau over the next 18 months.
Mr Ho added Taiwan’s move on Monday to legalise gambling
on its offshore islands represented a possible opportunity for Hong
Kong-listed Melco, which has a joint venture in Macau with Australia’s
James Packer.
“We are interested in the [Taiwan gaming] market, but we have to
do further studies into the political environment there,” said Mr Ho.
“Our main consideration is to check there’s no impact on Macau...
the Taiwan market could be very large, yet because it’s not on the
[Taiwan] mainland, but an outlying island, we’ll have to study how to
set up the infrastructure,” he said.
Mr Ho said, however, the tough economic conditions meant
bank financing for even a mid-sized resort there would likely remain
difficult in the next one or two years.
Despite Melco’s bullishness, some analysts still take a dim view of
Macau’s gaming prospects in the short term. eSun Share Issue Blocked
Macao Studio City
The Hong Kong media company eSun, a partner in the Macao
Studio City project, has cancelled a share issue after a US investor
challenged the move in the Hong Kong courts.
San Francisco-based investor Passport Capital won an injunction
in late December from Hong Kong’s Court of First Instance
The share issue would have raised HK$177 million (US$22.9
million) but was opposed by two funds belonging to Passport Capital
that alleged eSun was acting in breach of its fiduciary duty.
“The [eSun] board believes that the interim injunction in favour
of Passport should not have been granted. The company and its
executive directors will continue vigorously to pursue their respective
rights and remedies against Passport at (an) inter parties hearing on
Jan. 22 and otherwise,” eSun said in a statement.
The statement said the board still believed eSun needed to raise
funds to strengthen its capital base and develop the business, adding
eSun would consider other options.
Passport was ordered by the court to provide a bank guarantee of
US$15.5 million to compensate any potential loss to eSun, the media
and property group headed by Peter Lam Kin Ngok, or alternatively
to cover any damages awarded by the court. Rolling in the Isles
Amax Entertainment Holdings Limited, which has interests
in Macau’s VIP junket aggregation market, reported a 564%
increase in revenue to HK$300 million in the six months to 30th
September 2008.
The revenue increase figures are skewed somewhat by the
fact that the six-month totals are being compared with an initial
performance over three and a half months. Amax only started
operations in the Macau market in mid-December 2007. The figures
also exclude the final four months of 2008, when Macau’s gaming
revenue started to contract.
In the relevant six months Amax said it recorded a consolidated
net profit of HK$219 million, compared to a loss of HK$51 million in
the previous period.
The company added that the results were primarily due to the
contributions of the junket aggregation business operated by AMA
International Limited (AMA) in which Hong Kong-listed Amax has
an indirect 80% effective interest. AMA helped Amax grab an 18%
share of the Macau VIP market within months by offering a headline
grabbing 1.35% commission on rolling chip volume.
Rolling chip volume generated by AMA totalled HK$215 billion
for the six months ended 30 September 2008, said Amax, including
HK$95 billion of rolling chip volume for the three-month period
ended 30 September 2008.
Amax added that its rolling chip volume for the September 2008
three month period “continued to represent market leading levels of
VIP gaming volume achieved at an individual casino in Macau.”
Amax conceded though that it expected performance in the latter
part of 2008 to be weaker than in the first half of 2008, due principally
to visa restrictions, explaining the rules had “reduced travel of junket
players, including primarily the lower tiers of Amax’s junket players,
as well as creating a challenging consumer environment.”
The company said it had recently taken steps to enhance its
operating and capital structure in order to “more accurately reflect
the leverage of its junket aggregation model”.
In August, Amax disposed of its non-core, legacy LCD business.
Also that month, Amax announced a share premium cancellation
to eliminate the company’s previously accumulated losses, with the
remaining balance credited to its contributed surplus account.
The company said it was relaxed about the expected
imposition by the Macau government of a commission cap on
rolling chip volume.
“We expect that, when effected, the implementation of a
commission cap of 1.25% will further clarify Amax’s competitive
advantages,” said Brian Cheung, Amax’s chairman. January 2009 | INSIDE ASIAN GAMING
45
Briefs
International Briefs
Caesars Palace Delays Tower Opening
Mandalay Bay
Caesars Palace Octavius Tower
Joining a string of other companies delaying or cancelling
building projects amid the floundering economy, Harrah’s
Entertainment is delaying the opening of its Octavius Tower
expansion at Caesars Palace until demand for hotel rooms improves,
reports the Las Vegas Sun.
The company had planned to open the 660-room tower, part
of a US$1 billion hotel expansion, this summer. Some 110,000 sq.
ft of convention space, three 10,000 sq. ft villas and an expanded
Garden of the Gods pool and garden area will open by mid-summer,
as planned.
While demand for the convention space remains high in spite of
the downturn, hotel demand has suffered in this economy, Harrah’s
spokesman Gary Thompson said.
With additional hotel rooms opening in the next few months “it
was not prudent to bring this to market,” Thompson said. “We have
not had the advance bookings we anticipated for those rooms.”
Harrah’s has a tight balance sheet because it was taken
private last year with billions of dollars in debt. The company,
like many others, has been cutting costs and shaving staff. Still,
financing for the US$1 billion expansion was in place before the
credit markets collapsed.
The company said it doesn’t expect any staff reductions related to
the hotel tower delay and anticipates being able to bring the rooms
online within a few months once demand picks up.
The Las Vegas Sun also reported that winnings at Strip casinos
dropped to a five-year low in November as the resorts recorded their
second straight month of double-digit declines. The gross win at the
41 Strip casinos was US$437.6 million, off 16.2% from a year ago.
MGM Mirage Scales Back
Bloomberg reported that MGM Mirage will write down the value
of Mandalay Resort Group by US$1.2 billion because cash flows at
the casino company acquired in 2005 have weakened and buyers are
paying less for gaming assets.
The goodwill and trademark expense will be taken in the
fourth quarter, MGM said in a regulatory filing. The Las Vegas-based
company, controlled by billionaire Kirk Kerkorian and the Strip’s
largest casino operator, paid US$7.67 billion for Mandalay.
Casino values have been hurt by 11 straight declines in Las Vegas
gambling revenue during the US recession. Gaming companies,
which had been expanding, have reversed course and are now
scaling back. Chief Executive Officer James Murren agreed last month
to sell MGM’s Treasure Island Hotel & Casino to real-estate investor
Phil Ruffin for US$775 million.
Fourth-quarter results will be a “kitchen sink for a lot of the
companies,” Deutsche Bank AG casino analyst Bill Lerner said today on
a conference call. “We should
be expecting any impairment
or any other charge that was
going to happen.”
Murren, who was promoted
to CEO after Terry Lanni
quit, inherited an indebted
company still expanding in
the face of a recession and
declining revenue in Las Vegas
and Macau. The company will
“dramatically” reduce debt and
will consider further casino
sales to strengthen the balance
sheet, Murren said in a January
7 interview.
Treasure Island
Top Tier
In an apparent effort to boost its standing in the analyst
community, Nasdaq-listed Melco Crown Entertainment has been
accepted as a member of Nasdaq’s Global Select Market.
The tier within the Nasdaq index was created in July 2006 and
has higher standards in terms of company finance and liquidity than
for the main bourse.
The company will maintain its existing MPEL ticker.
Melco Crown’s City of Dreams integrated casino resort on Cotai,
Macau, is due to open in the first half of 2009.
A Cool Head
Jamie Odell, the recently appointed chief executive of Aristocrat,
Briefs
a leading supplier of slot machines and gaming equipment based
in Australia, knows all about brand building and the challenges of
competition.
Mr Odell was previously a senior executive for another ASX 100
company, Foster’s Group, where he worked as managing director of
its Australia, Asia & The Pacific division.
The global beverage business owns world famous brands
including the eponymous Foster’s lager, as well as the Australian
wine houses Penfolds and Wolf Blass.
IAG would like to offer a toast to Mr Odell’s success in his new
post at Aristocrat.
GigaMedia and Victor Chandler Team Up
GigaMedia, the Taiwan-based parent of Everest Poker and
Everest Gaming, says it has formed a strategic partnership with the
Gibraltar-based land and online gambling company Victor Chandler
International.
Gigamedia said the deal, focused on sports betting products,
would significantly expand the online capability of the Everest
Gaming platform. It includes a new sports betting product called
EverestBets.com. The new site offers wagers on a variety of sports
including horse racing and soccer, and is available in multiple
languages, 24 hours a day.
Victor Chandler’s land based operation was founded in 1946. The
firm’s sports betting business takes over two million betting calls per
year from customers in over 160 countries, 24 hours a day. The group
does not accept bets from US-based customers, in compliance with
the US’ Unlawful Internet Gambling Enforcement Act of 2006.
Earls Court Prepares for IGE
m and above are Alfastreet, Casino Technology, Recreativos Franco,
Barcrest Group, XtalE, Merkur Gaming, Bally Technologies, Gold Club,
Games Warehouse, Inspired Gaming, Elektroncek, Gaming Partners
International and Unidesa-Cirsa Group. These are joined by a further
32 companies with 100sq. m-plus displays.
IGE also serves as a vital market place for small to medium
size enterprises (SME’s) which use the exhibition as a platform to
launch their innovations to an international audience of buyers.
Many of the SME’s are amongst the 72 organisations that will be
making their debut appearance at the London show. Drawn from
a total of 27 countries, the debutantes bring a fresh approach
and perspective on the gaming industry, helping to sustain the
exhibition’s reputation for being a dynamic and commercial market
place to source new products of which an estimated 2,000 are
launched each year at show.
The list of IGE first-timers includes renowned industry names, as
well as those looking to make a big impression with their maiden
appearance by taking significant stands. Those with 50sqm [538sq.
ft] or more include Alsart (Russia), Cryptologic (Canada), Intervision
Marketing (Cyprus), WorldMatch (Malta), Synot (Czech Republic),
Hydako (Korea), Intel Corporation (USA), Ivobank (UK) and Shock
Machine México.
Adding to the pre-existing casino (ICE) and remote gaming (ICEi)
components, the introduction of soft gaming, lottery, betting and
other gambling and wagering disciplines has formed the umbrella
‘International Gaming Expo’ which weighs in at a colossal 20,000 sq.
m of net floor space.
For up to date exhibitor lists, floor plans, the latest show news,
travel and accommodation and FREE entry badge registration, visit
www.ige-exhibition.com.
Big Players at ICEi
Earls Court Exhibition Centre
The International Gaming Expo (IGE) will take place January
27th–29th at the Earls Court Exhibition Centre in London, with more
than 300 companies from 48 nations showcasing their products and
services to the industry.
The biggest stand at the show will belong to AGI’s Novomatic and
covers an impressive 1,115 square metres. The 2009 ‘big league’ of
exhibitors also includes IGT–Europe, Astra Games, TCS John Huxley,
WMS Gaming, Atronic International, Aristocrat Technologies, Amatic
Industries and APEX Gaming—all with stands in excess of 300 sq.
m. Also firmly on the radar of show visitors with stands of 200 sq.
Within the 2009 International Gaming Expo is ICEi, which focuses
on i-gaming companies. ICEi will feature more exhibitors (90) from
more jurisdictions (25) and occupy more stand space (2,750 square
metres) than at any time in the event’s history.
Labelled the fastest growing gaming exhibition in Europe, the
roll call of exhibitors reads like an industry power list comprising
remote gaming giants including Playtech, Cryptologic, Microgaming,
Boss Media, WorldMatch, A Bet A, Ongame Network, Synot, Net
Entertainment, Chartwell Games, Cyberarts Licensing, Partouche
Interactive, Continent 8, Medialivecasino, Orbis Technology and
Ivobank—all demonstrating a wide selection of new and innovative
products and services on substantial showcases.
ICEi’s reputation for providing visitors with a rich variety of the
latest products and services for the remote gaming sector is due in
no small part to the number of new exhibitors which are attracted to
the event each year. The 2009 edition will feature 35 ICEi debutantes,
39% of the exhibitor base.
This year’s newcomers comprise AliQuantum, Antigua &
Barbuda Directorate of Gaming, Connected Table, Cryptologic, CSB
Group, Enetpulse, Esanda Recruitment, Global Betting Exchange,
Global Collect, GoResponse, Hyperion Online, Imobgaming, Inside
Poker Business, Ivobank, Lucky 8, Meridian Gaming, Mfuse, Mirada,
NET4Uonline, Netrefer, Noble Gaming, Openlot Systems, Optimal
Payments, Player2Players, Play’n GO, QAS, Reed Personnel Services
Malta, SC Dollarobet, Search Focus, Synot, Technical Systems Testing,
Teckpro, Visionary iGaming, Vodafone Malta and WorldMatch.
47
Events Calendar
Events Calendar
A more comprehensive events listing is available on our website, www.asgam.com.
26, January 2009
4 -5, March 2009
Millennium Gloucester Hotel, London, UK
Viena, Austria
Gaming Awards 2009
Organizer: Contact: Tel: Email: Website:
Empire Events
Lisa Barrett
+44 (0)1543 57 86 89
lisa@gaming-awards.com
http://www.gaming-awards.com
27-29, January 2009
The International Gaming Expo
Earls Court, London, UK
Organizer: Contact: Tel: Email: Website:
Clarion Gaming
Emma Green
+44 (0)20 7370 8585
emma.green@clariongaming.com
http://www.ige-exhibition.com
24 - 26, February 2009
AIG Asian i-Gaming Congress & Expo
The Venetian Macao, Macau, P.R. China
Contact: Tel: Website:
Organizer: Jennifer Poon
+852 2219 0111
http://www.aigcongress.com
Beacon Events Ltd
30- 31, March 2009
Casino Affiliate Conference
NH Grand Krasnapolsky, Amsterdam
Contact: Tel: Email: Website:
Organizer: Marc Lesnick
+ 1 212-722-1744 ext 72
info-16@cac2008.com
www.cac2009.com
Ticonderoga Ventures, Inc.
01-02, April 2009
New Zealand Gaming Expo
Christchurch Convention Centre, NZ
Contact: Tel: Email: Website:
Organizer: Ross Ferrar
+61 2 8216 0931
info@gamingta.com
http://www.nzgamingexpo.com/
Gaming Technologies Association
01-03, April 2009
Bet Markets
Contact:
Email: Website: Organizer:
Joya Schneider
joya.schneider@clariongaming.com
www.bet-markets.com
Clarion Gaming
7 - 9, May 2009
GTI Asia Taipei Expo 2009
Taipei World Trade Center (TWTC), Taipei, Taiwan
Tel: Fax: Email: Website: Organizer:
+886-2-27607407
+886-2-27623873
gametime@taiwanslot.com.tw
www.gtiexpo.com.tw
Game Time International
19 - 21, May 2009
Gaming Technology Summit 2009
Green Valley Ranch, Las Vegas, NV, US
Contact:
Email: Website: Organizer:
Lesley Grashow
grashowl@bnpmedia.com
www.gametechsummit.com
BNP Media & Whitesand Consulting
25-29, May 2009
14th International Conference on Gambling
and Risk Taking
Harrah’s Lake Tahoe, Nevada, US
Contact: Email: Tel: Website:
Organizer: Danielle Crowther
dcrowthe@unr.edu
+1 (775) 784-1442, +1 (775) 784-1057
http://www.unr.edu/gaming/index.asp
University of Nevada
3-4, June 2009
G2E Asia
Venetian Macao, Macau, P.R. China
Contact: Tel: Fax: Email: Website:
Organizer: Wendy Fong
+ 852 2965 1633
+ 852 2824 0246
wendy.fong@reedexpo.com.hk
www.g2easia.com
Reed Exhibitions
Asia’s Gem
SMX Convention Center, Manila, Philippines
Email: Tel: Tel: Website:
Organizer: agem@asiangemphil.com
+ (632) 812 2161; 750 1369
+(632) 893 4097
http://www.asiangemphil.com
PAGCOR & Asian Gem and Tourism Foundation Inc
denotes events where Inside Asian Gaming will be available.
To list your event here and on our website, email matt@asgam.com.
49

The Supplier Awards - Inside Asian Gaming

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