Let’s take a flight out of McCarran International in Las Vegas, NV and head for Macau, the only legal gambling venue in China. We have all heard about the dramatic growth of these gaming markets so we will ask our usual question: “How Big is Big?”
After a short hop to San Francisco, we settle down for the long flight to Tokyo, and then connect for the last leg to Macau. It’s good that Jeannie is paying for this journey in First Class! No expense is spared at G&L.
Macau
We are arriving in Macau in winter so the temperature is in the high fifties. According to the Public Security Police, 97.4% of the majority of visitors to Macau in January 2013 were from Asia with the majority, 60%, from mainland China and 25% from Hong Kong. Only 0.6% of visitors, around 14,000 a month, came from the USA with us.
Macau is a short-stay destination. 58% of those visitors from mainland China are “same-day” visitors, as are 70% of the visitors from Hong Kong. Even overnight visitors like us average only 1.9 days. Since G&L is picking up the tab, we have the choice to play at one of the 35 casinos in Macau, with 23 casinos located in the Macau peninsula and 12 casinos in the Taipa Island. The dominant operators are SJM, Venetian, Galaxy, Melco Crown, MGM, and Wynn. The “SJM” is the Sociedade de Jogos de Macau (“SJM”), which is a subsidiary of Sociedade de Turismo e Diversões de Macau (STDM).
You can see, in these names, the prevalent influence of Macau having been a Portuguese colony, and then territory, from 1570 to 1999. The Gaming Coordination and Inspection Bureau attributes the early growth of legal gaming in Macau to the desire of the Portuguese government to create a new revenue stream in 1847 because of the loss of shipping business to Hong Kong after it was ceded from China to the British in 1842. The “Monte Carlo of the Orient” has exploded since the Venetian and Galaxy opened casinos in 2004, followed by the Wynn in 2006, and MGM in 2007.
How Big is Big?
The currency in Macau is the Macau Pataca (MOP). In August 2013, Macau generated 30,737,000,000 MOP. This equates to approximately $3,854,419,800 US or 2,852,270,652 Euros. Yes, you read that correctly – $3.8BN US in the month of August. By comparison, Nevada reported $955M for August 2013 – 25% of Macau. Yes, Macau was four times bigger than the whole of Nevada and 6.5 times larger than the Strip at $589M US.
Why Compare Them?
At this point, you might ask why it is valid to compare the results for Macau and Las Vegas?
Well, it does help those of us in the North Courtesy of American gaming market to wrap our heads around the size of the market in Macau, by comparing familiar items. But we talk a lot in this column about geography and market demographics because the revenues of every casino depend on a healthy market. And it is fair to point out that Macau can draw on Hong Kong and mainland China, whereas Las Vegas is in the Mojave desert! So let’s continue to compare statistics for the two locations and see what emerges.
- Las Vegas, NV, has a population of around 600,000 in the city, and so does Macau.
- The Las Vegas Convention and Visitors Authority estimated 3.4M visitors in August 2013. For the same month, the Public Security Police reported 2.8M visitors.
So Macau had fewer visitors but drove 6.5 times more revenue? Most visitors to Las Vegas are tourists and casual gamblers whereas that high percentage of same day visitors to Macau is coming to play. But can that explain the ratio of 6.5 times more revenue? The dominant games in Macau are baccarat and VIP baccarat. In fact VIP baccarat accounted for 69.3 percent of total casino revenues in Macau for 2012 according to the Gaming Inspection and Coordination Bureau (GICB).
Based on the fact that 69.3% of revenue came from VIP baccarat, you will find articles on the Internet that state 66% of Macau revenue comes from high rollers. And you will also find some very interesting articles describing the behavior of these high rollers; the dependency on junket operators that bring gamblers from the mainland to Macau and act as middlemen and moneylenders; and the conjecture that Chinese officials bet and lose money that belongs to their official ventures.
Indeed, in February 2013, the Times of London reported “Beijing is planning a crackdown on Triad-linked junket operators who bring high rolling gamblers into Macau from across China and smooth a money-laundering route that processes billions of dollars every year.”
Based on this news, share prices fell for the gaming operators but nothing dramatic has happened and revenues have stayed strong throughout the year; September 2013 was 21% up on September 2012. Wouldn’t you like that growth rate year on year?
Operators continue to invest in new properties and Steve Wynn is building a 3rd location, called the Wynn Palace, to be opened before Chinese New Year in February 2016. Vegasinc.com reported, “Wynn Palace will be reminiscent of the Bellagio…an aerial tram transport system with gondolas resembling smoke breathing dragons will carry customers… Flower gardens in various shapes and themes, such as hot-air balloons, will be spread throughout the [51 acre] property.” You might want to plan a trip!
Jackie Parker, MBA, is President of Harvest Trends, offering casino hosts a Daily Action Plan based on their book of business. Jackie holds an MBA from Henley Management College, Oxfordshire, UK, and a Degree in Computer Science from Brunel University, London, UK. She welcomes comments at jparker@harvesttrends.com.