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pacomartin
pacomartin
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December 6th, 2010 at 2:10:03 PM permalink
Back to the original intent of this blog.

Is there an upper limit here? Macau has been growing by a net of 34% per year since 2002. Can this keep up for another decade when the high speed trains are running?

Macau revenue is still far less than all of America. America in 2007 took in $34.4 billion from commercial casinos and $92.27 billion from all sources (cards, Indian casinos, state lotteries, and charity). The population of China is over four times that of the USA, although many are very poor.

Will the American companies be cut out? I see that Sands proposal for two more casinos on the Cotai strip have been rejected. Will the Chinese simply block the other American companies?

I think it is very possible that China sees no particular advantage to opening this market up to further encroachment by US companies. They have a representative share of the two most luxurious companies, so why should they invite Harrah's or MGM-Resorts to set up additional casinos?
rxwine
rxwine
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December 6th, 2010 at 3:47:06 PM permalink
Quote: pacomartin

Will the American companies be cut out? I see that Sands proposal for two more casinos on the Cotai strip have been rejected. Will the Chinese simply block the other American companies?

I think it is very possible that China sees no particular advantage to opening this market up to further encroachment by US companies. They have a representative share of the two most luxurious companies, so why should they invite Harrah's or MGM-Resorts to set up additional casinos?



Unlike, say the petroleum industry newly opening up in a country, it seems like the Chinese would catch on real fast to running gambling resorts and just do copycats if they have their own revenue source. Not much need for technical expertise, training and equipment. People ran private casnos out of their homes (maybe still do) --- it's not all that hard apparently.
prisoner of gravity
pacomartin
pacomartin
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December 6th, 2010 at 5:00:46 PM permalink
The Macau website lists 6 companies that own 33 casinos in Macau

20 Sociedade de Jogos de Macau (Stanley Ho's company founded in 1962)
5 Galaxy Casino, S.A.
3 Venetian Macau, S.A.
1 Wynn Resorts (Macau) S.A.
3 Melco Crown Jogos (Macau) S.A.
1 MGM Grand Paradise, S.A.
33 TOTAL


If the goal of the Chinese government was simply to break the monopoly of Stanley Ho, they may declare that the mission is accomplished and continue the expansion without Western companies.



In the year 2005 there were only three companies operating 17 casinos
15 Sociedade de Jogos de Macau (Stanley Ho's company founded in 1962)
1 Galaxy Casino, S.A.
1 Venetian Macau, S.A.
HKrandom
HKrandom
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January 2nd, 2011 at 1:07:35 PM permalink
While many companies share Macau's gambling market, MGM Grand Macau is co-owned by Stanley Ho's daughter and Melco Crown is also in partnership with Stanley Ho's son. One of the reasons why Macau's gambling revenues have grown so fast is because most of Macau's visitors are from Mainland China and they tend to spend most of their budget on gambling while most of Vegas's visitors spend less than half of theirs on gambling.

Comparison of Average Gambling Expenditures
of Visitors in 3 cities (2009)
City; Gaming Revenue ($bil.); Visitor Numbers (million); Average Gambling Expenditure
Macao 14.9; 22; $667
LV (Metro.) 8.8; 36; $243
Atlantic City 3.9; 30; $130
2009 US GDP per capita US$46381(0.5%), China:US$3678 (18%)

http://www.easg.org/media/file/vienna2010/presentations/Thursday/1600/P4/3_Zhonglu_Zeng.pdf
According to this research, somebody lost more than US$146.6 millions gambling in Macau! I believe this is more than anyone ever lost in Vegas.
pacomartin
pacomartin
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January 2nd, 2011 at 10:11:25 PM permalink
Quote: HKrandom


According to this research, somebody lost more than US$146.6 millions gambling in Macau! I believe this is more than anyone ever lost in Vegas.



Excellent research paper, thank you for providing the link. Hard numbers on 93 whales are seldom seen the light of day.

Clearly gambling is much more a motivation for Macao's 22 million tourists.

There is no absolutely reliable data on largest losses by an individual, only anecdotes. Obviously no one wants data like that to get out since the casinos don't want to humiliate their whales, nor do they want them poached.

But unofficially Terrance Watanabe's loss of nearly $127 million in the course of about a year is considered the record loss at Vegas.
Ayecarumba
Ayecarumba
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January 3rd, 2011 at 10:58:06 AM permalink
Quote: HKrandom

While many companies share Macau's gambling market, MGM Grand Macau is co-owned by Stanley Ho's daughter and Melco Crown is also in partnership with Stanley Ho's son. One of the reasons why Macau's gambling revenues have grown so fast is because most of Macau's visitors are from Mainland China and they tend to spend most of their budget on gambling while most of Vegas's visitors spend less than half of theirs on gambling.

Comparison of Average Gambling Expenditures
of Visitors in 3 cities (2009)
City; Gaming Revenue ($bil.); Visitor Numbers (million); Average Gambling Expenditure
Macao 14.9; 22; $667
LV (Metro.) 8.8; 36; $243
Atlantic City 3.9; 30; $130
2009 US GDP per capita US$46381(0.5%), China:US$3678 (18%)

http://www.easg.org/media/file/vienna2010/presentations/Thursday/1600/P4/3_Zhonglu_Zeng.pdf
According to this research, somebody lost more than US$146.6 millions gambling in Macau! I believe this is more than anyone ever lost in Vegas.



This was a very interesting report. I note that the revenue numbers are quite large, but the year to year trend is flattening out. $20B doesn't seem to be feasible in the near future, but with 1% of the gamblers generating more than 70% of the revenue, there may still be room for growth. Anecdotal reports from other threads report many empty tables, so capacity doesn't seem to be a problem. I assume the stricter restrictions on travel between the mainland and Macao have had a dampening effect on the growth among lower tier (i.e., non-whale) players.

It was also interesting that almost as many of the high roller reports were from individuals who were gambling with stolen public monies, as were private business owners putting it all on the line.

I wonder how much Harrah's is charging for a round at their golf course in Macau? I imagine it would be quite a bit if they hope to make back any of their, "late to the party", investment.

Edit: Once again demonstrating how little I know about the Macau gaming market, reports today indicate Macau gaming exceeded $23B USD in 2010.
America is all about speed. Hot, nasty, bad-ass speed. - Eleanor Roosevelt, 1936
pacomartin
pacomartin
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January 4th, 2011 at 11:27:27 AM permalink
The top 20 gaming markets in the USA came to $24.87 billion in 2009 (see list below) vs $23.4 billion for Macao in 2010.

1 Las Vegas Strip - $5.55
2 Atlantic City, N.J. - $3.94
3 Chicagoland, Ind./Ill. - $2.09
4 Connecticut - $1.45
5 Detroit - $1.34
6 St. Louis, Mo./Ill. - $1.05
7 Tunica/Lula, Miss. - $1.00
8 Biloxi, Miss. - $0.83
9 Shreveport, La. - $0.78
10 Boulder Strip, Nev. - $0.77
11 Kansas City, Mo. (includes St. Joseph) - $0.76
12 Reno/Sparks, Nev. - $0.72
13 Lawrenceburg/Rising Sun/Belterra, Ind. - $0.69
14 Lake Charles, La. - $0.66
15 New Orleans, La. - $0.65
16 Black Hawk/Central City, Colo. - $0.60
17 Yonkers, N.Y. - $0.54
18 Downtown Las Vegas, Nev. - $0.52
19 Laughlin, Nev. - $0.49
20 Council Bluffs, Iowa - $0.43


The remarkable thing is that Macao is doing that with only 22 million visitors. As the transportation infrastructure takes a drastic improvement in China in the next two years with several high speed train lines opening for operations who knows what their potential is? Macao should easily surpass the commercial casino revenue in the entire USA, and possibly by the end of the decade the commercial + indian casino + lotteries revenue.

Can the vacation island of Hainan or the tourist city of Hangzhou (near Shanghai) be far behind? What about Vietnam, Taiwan or South Korea?
Ayecarumba
Ayecarumba
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January 4th, 2011 at 12:28:13 PM permalink
For 30 casinos in Macau to generate these revenue numbers, one would expect the tables to be packed 24/7 with high rollers. Yet, the reports we have received on this discussion board indicate that many Macau casinos have large numbers of tables un/under used. 22M visitors works out to an average of 733k per casino (or 2k visitors each day, every day of the year). Granted, some of the casinos are huge, but others are small. Does this number seem large compared to a typical Las Vegas joint? There has to be a maximum capacity for bodies in the space available. Are they approaching the limit?

HKrandom cited a report that indicated 1% of the players were generating more than 70% of the revenue in Macau. That means 220,000 individuals are leaving $16.38B in those 30 casinos. This is an average loss of $74,454 USD. I guess when you look at it that way, it's not so bad on a per whale basis.

Someone has to be winning too, or I am sure the visitor numbers would drop quickly. Are there any reports of big winners? Variance works against the casinos too, and I recall a report that MGM's bottom line once took a hit from an Australian whale.
America is all about speed. Hot, nasty, bad-ass speed. - Eleanor Roosevelt, 1936
pacomartin
pacomartin
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January 4th, 2011 at 2:23:00 PM permalink
Quote: Ayecarumba

For 30 casinos in Macau to generate these revenue numbers, one would expect the tables to be packed 24/7 with high rollers. Yet, the reports we have received on this discussion board indicate that many Macau casinos have large numbers of tables un/under used. 22M visitors works out to an average of 733k per casino (or 2k visitors each day, every day of the year). Granted, some of the casinos are huge, but others are small. Does this number seem large compared to a typical Las Vegas joint? There has to be a maximum capacity for bodies in the space available. Are they approaching the limit?

HKrandom cited a report that indicated 1% of the players were generating more than 70% of the revenue in Macau. That means 220,000 individuals are leaving $16.38B in those 30 casinos. This is an average loss of $74,454 USD. I guess when you look at it that way, it's not so bad on a per whale basis.

Someone has to be winning too, or I am sure the visitor numbers would drop quickly. Are there any reports of big winners? Variance works against the casinos too, and I recall a report that MGM's bottom line once took a hit from an Australian whale.



A total of 71% is VIP baccarat, and another 19% is regular baccarat, with all other betting constituting the remaining 10%.
It is a reasonable assumption that the VIP baccarat players are only 1% of the total number of gamblers which leads to the number cited above. But it seems that many of these VIP players are playing with syndicated money and not their own cash.

There are now 33 casinos in Macau.
Even a small casino in Macau is banking pretty big money. S.J.M. is averaging over $363 million for each of their 20 casinos for 2010, and they have the oldest and smallest ones and the only ones that were constructed as early as 1970. The Wynn casino in Macau is taking in about $4 billion while the other twelve foreign casinos are averaging $1 billion apiece.

In contrast the 23 major casinos on the strip (which individually make over $72 million per year) are averaging $231 million apiece as of latest numbers.

Of course some players are winning big, but I doubt that you would see much accurate information on an open website.

Sociedade de Turismo e Diversões de Macao -20
Galaxy Casino, S.A.-5
Melco Crown Jogos (Macau) S.A. -3
Venetian Macau, S.A.-3
Wynn Resorts (Macau) S.A. -1
MGM Grand Paradise, S.A. -1
Ayecarumba
Ayecarumba
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January 4th, 2011 at 2:52:11 PM permalink
Thanks for the insight Paco.

There were casinos in Macau for many years before the Mega resorts opened, and I assume, a similar number of Asian whales. Why the huge numbers now? Is it mostly new money due to the Chinese economic boom, or are these big players who would come to Las Vegas, but now have a satisfactory local destination? Even syndicate backed players could have made the trip to L.V. before. Is it that they did not have the funds (economic) before, or was L.V. just too far/expensive (access)?

I guess the big question is, how can Las Vegas (as a destination) capture some of this action? It seems like there is plenty to go around, and anyone who can get a pass from the Mainland to Macao should be able to get a visa to the USA... or is it more difficult than that?
America is all about speed. Hot, nasty, bad-ass speed. - Eleanor Roosevelt, 1936

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