Harvesting value from Macau’s rising slot sector depends on player sign ups
Slot machines’ share of Macau gross gaming revenue slipped back in the first half of 2010 compared to the first half of 2009. But that probably says more about the explosive growth in table play this year than it does about slots’ ongoing appeal.
In the first half of 2010, 4.6% of Macau’s gaming gross came from slots (3.98 billion patacas out of 85.9 billion patacas for all games of fortune) according to figures released at the beginning of August by the Gaming Inspection and Coordination Bureau, Macau’s gaming regulator. In the first six months of 2009, slots’ overall contribution was nearly 6% (3.1 billion patacas out of 51.4 billion patacas).
In cash terms, however, the slot take for the first half of 2010 was up 29.6% on the equivalent period in 2009. Yet during that period, the number of slot machines went up by only 8.5% (from 13,509 at the end of the second quarter of 2009 to 14,659 units at the end of the second quarter of 2010).
Some of that jump in the gross may be accounted for by a small number of VIP slot players who now drop the equivalent of a million US dollars or more in a single session. Five years ago, the managements would lay out the red carpet for a slot aficionado spending US$5,000 in one go.
Away from the headlines created by Macau’s small number of slot ‘whales’, much of the effort of slot managers is going into unlocking the full economic value of more modest players. That focuses initially on getting as many of them signed up for carded slot play as possible so that they can start earning benefits on their entertainment. Increasing carded play should also help create word of mouth publicity as people see what benefits and prizes their friends and neighbours have been able to get from their visits. Carded play also allows operators to market major events to players such as new jackpots. At the end of July, City of Dreams launched what it describes as ‘Macau’s Biggest Floorwide Jackpot’, with the top prize starting at HK$3 million (US$386,314).
The stereotype of Chinese slot players as relatively unsophisticated consumers shy of signing up for anything that might mark them down as a gambler lags well behind what’s actually happening on many gaming floors in Macau, say the experts.
At this year’s G2E Asia organised by Reed Exhibitions and the American Gaming Association, delegates had a chance to hear some of those senior slot executives give their take on this developing segment.
A Growing Game: Slot Operators’ Roundtable, was moderated by Marcus Prater, Executive Director of the industry’s leading trade body, the Association of Gaming Equipment Manufacturers. The speakers were: Darrin Carlson, Slot Manager–Operations, at Sands China’s The Plaza Macao; Matt Hurst, Vice President, Gaming Machines, at Melco Crown Entertainment’s City of Dreams; Peter Johns, Director of Slot Operations, MGM Macau (formerly MGM Grand Macau); and Lindsay Stewart, Vice President, Electronic Gaming, Sociedade de Jogos de Macau (SJM).
Marcus Prater: What’s happening with carded play in Macau?
Darrin Carlson: Generally speaking, the higher net worth individuals are going more towards cards and are extremely card loyal. The lower end mass has not picked that up quite as much.
Peter Johns: We’ve seen an amazing pick up on carded play. Most operators are used to 30% to 50% take up. We’re seeing a lot higher than that. Our players’ club [membership]; our rated play, is extremely high. We see a lot of people use them [cards]. Most people consider the Asian player an uneducated slot player. But we see the opposite. They’re quite a savvy player. They know they’re getting tracked and the reasons. They know we give them loyalty cards so that we can get information on them, so we can segment them in the market. We’re able to get some great information on our player profiles, which helps us in our product selection.
The players’ club works really well at MGM. Being able to segment players is vitally important in this market. I think more so than other jurisdictions. That’s because our player base is so diverse. Our customers understand the players’ club concept; they know how to use it. It may take them a little while to get savvy to it when they first come on board, but from what I see of the players we get they generally sign up within the first couple of hours of coming onto our property.
Lindsay Stewart: We’ve had some technology issues that have got in the way in the last few years. We haven’t been able to take advantage of our size—our critical mass—as a marketing component.
Not all our slots are systemised yet. Once that happens, we hope within 12 to 18 months we will have far more firepower in terms of being competitive with these big guys.
Once we have a critical mass of machines, we hope to introduce wide area jackpots and prizes to bring SJM to the forefront of the industry here. We need to put the groundwork in place before we can focus on those specific strategies.
We’re doing the normal stuff. Embracing the members we have, metering the visitors we get, trying to increase their stays and getting their friends and families in too.
MP: Tell us a story illustrating how slots have grown in prominence.
LS: From 0.8% of [Macau] casino GGR [gross gaming revenue] in 2003 to 5.4% of GGR in 2009 is a significant growth phase [for slots] when you consider the [overall] GGR has grown so exponentially—314% in fact. The players are out there, and we haven’t really seen the biggest proportion of take up yet either, I don’t think.
China is the fastest growing electronically literate country in the world, with 48% growth in Internet access year on year. That’s going to breed a new generation of players who are exposed to electronic games, like them, and are going to take that to the next step and play electronic games in casinos and slot clubs—the same way their parents and grandparents grew up playing one on one table games or mahjong and currently bring that experience to the casino in order to challenge the dealer.
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It’s very early in the evolutionary process, but I think that signs are there and that we will continue to build the market and make inroads into it. In our property specifically [Grand Lisboa], we have seen an increase of probably 50% since we opened three years ago.
We’re still struggling with rated play, providing the right incentives to players to help them understand there’s something in it for them if they embrace our marketing plans and strategies, and we’re still looking for better ways to present that and at how best to capture loyalty through that.
Matt Hurst: Back in 2004 [at Sands Macao], we had a couple of players who would come in and drop HK$40,000 and we were blown away. Those people were big players that we bent over backwards to take care of. Two years later, at Wynn, we had a guy drop a couple of thousand US [dollars] into a machine.
We called that ‘Big Wednesday’. It was a massive day. We were truly blown away. Now we have players in the Macau market who can drop over a million US [dollars] in a day. From HK$40,000—i.e. US$5,000—to a million US in five years is pretty remarkable growth.
PJ: We constantly get slots at around 20% now of the mass floor revenue. It has been as high as 30% in some months, depending on different factors.
Now that operators are starting to offer the returns on the high end machines, we’re getting the crossover of some table players who realise they can get a reasonably good return. They can spend HK$6,000 and win HK$6 million. If you want to win HK$6 million at a table, you’ll generally have to put up six million. So we are getting table players who see the machines as a good gambling device.
DC: When Sands opened I believe they started with 450 slot machines. Now there are over 13,000 in the Macau market. And their share of revenue continues to grow and grow.
The [age] 40 to 60 crowd of gamblers grew up on movies like The God of Gamblers. If you talk to any Chinese person out there, they know that movie. Now we’re talking about the Wii generation.
Slots will progress just like they did in Las Vegas. Slots used to be off to the side for the wives when their husbands came in to play blackjack. Now it’s 80% of the [gaming] revenue.
MP: How competitive is the supplier side of the market?
PJ: At my last count there were 23 vendors selling machines in Macau. Probably not all of them are fit for this market. Certainly most people [operators] stick to the top six [manufacturing] names. But there are some newcomers that bring some innovative products. And I think some of that innovative, different looking product is what is getting the new players in. Call them fads, call them gimmicks, whatever you want to call it—if they [the new products] have a different look and presence on the floor, then people will try them because they’re different. Even some of the older vendors have gone down that way and made more entertainment-type machines. And that is starting to drive players onto machines.
I still believe that what makes a good product is: a good game, good math and good return. It’s what keeps a game popular. The top five machines in Macau have been the same for the past four years and I’m guessing it’s the same for the other properties. There are some new ones that spike here and there, but the top ones are consistent.
There’s a good reason that 60% to 70% of machines in Macau have some kind of link on top. That’s because [as operators] we try to be competitive. The thing that differentiates us is how we structure those [prize pool] links on top of the machines.
DC: The new vendors when they come in they offer new products; they bring new, fresh ideas. Quite often with the more established vendors you’re going to get a lot of clones—the same game with a different wrapper or same math, different wrapper. The new and up and coming developers they push not only each other, but also the established suppliers to go forward. Two or three years ago, who would have thought we would see something like the Lava screens from WMS? Back then they [WMS] had maybe 5% market share. Now they’re growing. From my perspective as an operator, it [supplier diversity] is a wonderful thing because it gives more choice, more competition, better pricing models.
LS: There’s one manufacturer [Aristocrat] that still holds sway. However, the group behind is clustering and is significantly closer than it has been. And I’m really pleased to see that it’s happening, because it gives operators more choice, the player more choice and enables everybody to put pressure on everybody [else] to build a fair share of the market and a fair share of the floor. Players benefit from manufacturers constantly striving to provide better games and new concepts and benefits such as bonuses and new game attributes to increase excitement.
Certainly a game with the right maths model offering time [on machine], excitement and at the end of the day giving us as operators a yield, is the optimum. It’s what we all look for and what we would hope for from the manufacturer—that they continue to strive to find that balance.
At the end of the day we’re in the entertainment business. If a player comes in and gets stripped of their assets, then there’s no entertainment value and they’re not going to come back. I used to liken it to going to the movies. You go into the movie, you pay your dollars and you come out two hours later with a memory of the entertainment. Sometimes our business is the same. If we don’t provide that ‘memory,’ then people are not going to go to the movies any more.
