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December 2011 • MOP 30 • ISSN 2070-7681 Shine On Michael Mecca on how Galaxy Macau keeps pulling the crowds—beyond the new opening honeymoon In Focus: Myanmar Uncle Passion Play Aruze’s rapid rise is no accident Standing Tall: Shuffle Master | From Cage to the Wild: GPI Asian Gaming 101 – Part 2 | Transact: Central to the Business CONTENTS December 2011 Shine On 6 Shining On 14 Standing Tall 18 Passion Play 26 From Cage to the Wild 30 Myanmar Uncle 34 Asian Gaming 101 — Part 2 42 Central to the Business 44 Regional Briefs 46 International Briefs 48 Events Calendar 26 18 Editorial Field of Dreamers Publisher Kareem Jalal The recent announcement that SJM—the casino operating company founded by Dr Stanley Ho—would in Director future create more three-star rooms in João Costeira Varela its Macau casinos is welcome. But it is also an acceptance of market realities. Editor Around 75% of Macau’s gaming revenues Michael Grimes come from VIP baccarat. And gambling as a whole accounts for about 95% of Operations Manager all tourism revenue. But on most nights of the week you could fit all the VIP Sarih Leng gamblers in Macau into just one of the fancy new hotels that have been built Contributors since the start of the boom in 2004—with rooms to spare. Desmond Lam, Steve Karoul China’s reforming leader Deng Xiaoping—who ultimately is the one who really got things I. Nelson Rose, Richard Marcus rolling for the Western casino operators in Macau—once reportedly said of his economic changes: James Rutherford, Sudhir Kale “Do not care if the cat is black or white, what matters is it catches mice”. It might be argued that Macau’s casino-hotel operators have focused rather too much on the colour of their cat—in the James J. Hodl, Jack Regan attempt to catch high-spending ‘MICE’. William R. Eadington It’s claimed in figures collated by Macau’s Statistics and Census Service that five-star hotels had an occupancy rate of 78.7% in September. Frankly, we don’t believe that. We think some Graphic Designer of Macau’s five-star hotels sell more fudge than an English country tearoom when it comes Brenda Chao to claims on occupancy rates. Naturally, the fact these five-star hotels are nearly all in casino resorts and that most of the operators are heavily leveraged to pay for their infrastructure is Photography merely coincidental. And as long as gaming is booming so much, who cares if Macau room rates are over the top for the market? Ike, Alice Kok, James Leong, There are all sorts of ways for hotels to cook their occupancy statistics, but one is specific to Wong Kei Cheong Macau. This is to count rooms assigned to junkets and junket players as ‘occupied’—even though in reality the room itself may not even be inhabited and certainly won’t be independently generating any revenue beyond the operator’s netted share of the rolling done by the high roller. And if you’re basically giving your rooms away—whether to junkets or to low-spending (if relatively well-heeled) Inside Asian Gaming package visitors, you’re not generating the sort of revenue per available room that does justice to is published by your headline occupancy rates. Must Read Publications Ltd The proof of the ‘Macau is a world-class general tourism destination’ thesis is in the tasting. 8J Ed. Comercial Si Toi When the average length of visitor stay sticks stubbornly at 1.5 nights after a six-year building boom for luxury hotels, that looks like the market telling us something. Our feeling is this has come 619 Avenida da Praia Grande about partly because of a wilful failure of casino resort operators to acknowledge the current Macau wealth distribution realities of the mainland Chinese market—possibly due to their eagerness to Tel: (853) 2832 9980 please their investors and calm their bankers. Casino operators can quote China’s GDP growth figures until they are blue in the face. For subscription enquiries, But when 128 million Chinese people are living at or below the World Bank’s definition of the please email poverty line (US$1.25 per day based on purchasing parity rates), that should tell us something [email protected] about the priorities and outlook of the remaining 1.17 billion. For most, the priority is not to rejoin the 128 million ‘have nots’, thank you very much. And yet in September, a whopping 65% of Macau’s 21,837 available hotel rooms were five-star standard. A further 20% were four-star; For advertising enquiries, 11% were three-star, and only 4% were two-star. The occupancy rates for the four- and three- please email star properties (where the casinos are either small or non-existent) have all been consistently [email protected] higher over the last 12 months than for the five-star venues. or call: (853) 6680 9419 The average nightly rate for an entry-level five-star hotel room in Macau in the second quarter of the year was MOP1,800 (US$225). A basic five-star London hotel room cost on average £212 www.asgam.com (US$331) per night in the first half of 2011, according to the tourism guide Lonely Planet. The average annual wage in the United Kingdom in 2010 was £25,543. The average annual wage in Guangdong—from where the majority of Macau’s mainland visitors are currently said to Inside Asian Gaming hail—was Rmb36,355 in 2010, according to China’s State Statistics Bureau. That’s just 14% of the average annual wage in the UK. And yet, a Macau five-star hotel room currently costs only 32% is an official media partner of: less than one in London. No doubt the Macau casino resorts will say their pricing is a function of supply and demand. But if their figures for demand are being cooked in the first place, that makes a nonsense of the whole pricing strategy. Build it in Macau at that price and they might come—for one night. Then again, they might not. Michael Grimes http://www.gamingstandards.com We crave your feedback. Please email your comments to [email protected] 2 INSIDE ASIAN GAMING | December 2011 Cover Story Shining On Seven months on from its opening, Galaxy Macau’s new property honeymoon period is over, but its popularity seems undiminished. Inside Asian Gaming spoke to Galaxy Entertainment Group President and COO Michael Mecca about how the erstwhile VIP-focused casino operator is slowly building its mass-market business with its Cotai resort ollowing the mid-May opening pitted against international market stalwarts sector continues to outpace that of its mass of its new flagship property—the such as Las Vegas Sands Corp, Wynn Resorts market. Galaxy Macau’s stock of VIP rooms Fexpansive HK$16.5 billion (US$2.1 and MGM. increased from seven at opening to ten by billion) Galaxy Macau resort on Cotai— GEG’s market share surge was primarily the third quarter of 2011. Galaxy Entertainment Group (GEG) soared the result of its soaring VIP baccarat revenue, In absolute terms, the mass market still from near the bottom of the revenue share driven by the significant expansion of its VIP only makes a paltry contribution to GEG’s league table of Macau’s six casino operators capacity as Galaxy Macau came online. The total revenue—with the company’s main to second place. Only the city’s previous property’s swanky VIP gaming rooms (but not gaming floor table revenue (excluding monopoly casino operator, SJM, did better. its main casino floor) were designed by world- slots) constituting just 14.4% of its total GEG maintained that second place ranking renowned casino architect Paul Steelman, table revenue in October. In relative terms, into October (the most recent available and easily drew in junket operators and their however, GEG’s mass-market revenue has official figures). That’s no small feat for a high-rolling customers. GEG has continued been exploding (growing at a much faster company that has only seven years’ operating to expand the VIP facilities at Galaxy Macau rate in percentage terms than its VIP revenue) experience in the casino industry, and is as the growth of Macau’s overall VIP baccarat since Galaxy Macau provided the company 6 INSIDE ASIAN GAMING | December 2011 Cover Story its first real hook to lure mass crowds. Mecca points out, “StarWorld has always GEG’s previous flagship since 2006, been one of the most prominent VIP casinos StarWorld Hotel & Casino on the Macau anywhere in the world, and our responsibility peninsula, had a very limited main gaming at Galaxy Macau was to ensure we gave that floor owing to the property’s tiny plot size, same focus to customer service in our mass and by necessity, catered primarily to VIP business and premium direct business. And baccarat players. The unveiling last year we had to make sure that all of our team of a refurbished, Paul Steelman-designed members were geared toward that. main casino floor at StarWorld did little to “We wanted our mass players and boost that property’s mass-market appeal, premium direct players at Galaxy Macau suggesting size does matter when it comes to enjoy that same level of welcome and to creating a crowd-pulling mass-market memorable experience as our VIPs have gaming venue. always enjoyed with us [at StarWorld]. Every The expansive Galaxy Macau— guest on our mass floor is important to us.” occupying a land area of 550,000 square Galaxy Macau still has a way to go in metres—has sufficient scale to house developing its mass-market business.