December 2007 • MOP 30
Firm Positioning
David Friedman tells us where Macao Studio City stands
Calm Before the Roar Inspired Approach High-Tech Poker Threats Tequila’s Shot
In Focus: Poker in Asia — THE NEW DEAL PLUS Regional Gaming Roundup — HARE AND TORTOISE RACE
CONTENTS December 2007
Firm Positioning 9
Firm Positioning
14 The New Deal 20 Calm Before the Roar 26 Inspired Approach 31 Hare and Tortoise Race 36 Tequila’s Shot 38 High-Tech Poker Threats
9
40 ICE Packed! 42 Regional Briefs
20
44 International Briefs 47 TV or not TV?
14
36
2 INSIDE ASIAN GAMING | Dec 2007
Dec 2007 | INSIDE ASIAN GAMING
3
EDITORIAL One Pill Doesn’t Cure All
M
Editor and Publisher Kareem Jalal Director João Costeira Varela Business Development Manager Matt Phillips Operations Manager José Abecasis Contributors Mike Grimes, Octo Chang, Richard Marcus, Photography Ike Graphic Designer Brenda Chao
Inside Asian Gaming is published by Must Read Publications Ltd Suite 1907, AIA Tower, 215A-301 Av. Comercial de Macau Macau Tel: (853) 6646 0795 For subscription enquiries, please email subs@asgam.com For advertising enquiries, please email ads@asgam.com or call: (853) 6646 0795 www.asgam.com
Printed by Icicle Print Management (Macau) Ltd Tel: (853) 2871 2818 Fax: (853) 2871 2898 www.icicleprint.com
4 INSIDE ASIAN GAMING | Dec 2007
acau’s casino boom has led to a raft of inequalities. It has raised wages and rents, leaving small- and medium-sized enterprises (SMEs) struggling to compete for resources with the powerful casinos. Macau is now essentially at full employment, with a mere 9,600 workers—equivalent to 3% of the labour force—currently without jobs. Most of the remaining unemployed are so lacking in skills as to be virtually unemployable. Given the acute labour shortage, the government ban on casinos employing non-residents as dealers has led to dealer salaries skyrocketing. A teenage high school dropout can earn a starting salary of MOP15,000 (US$1,875) as a dealer, while a long-suffering middle-aged factory worker can only expect a median salary of less than MOP4,500. As a response to the social problems caused by the casino boom, Macau Chief Executive Edmund Ho’s November policy address included a proposal to raise the qualification age for entry to Macau casinos from 18 to 21. The move could go ahead as early as the summer of 2008. Even before the new policy gets on the statute books, however, it has been criticised as window dressing and a political gesture of little practical benefit. Some have even called for the entry age to be raised to 25, to create an incentive for Macau’s school leavers to go on to university instead of grabbing well-paid jobs with poor long-term prospects. When the city’s first gaming law took effect in the 1960s, the minimum age limit for entry was 25. Unless locals improve their skills and qualifications, the top jobs in Macau’s new gaming and tourism industry will continue to go to western expatriates, Hong Kong residents or overseas Chinese. Stanley Ho, Macau’s former monopoly casino operator, has publicly supported raising the qualification age, observing that some young employees are unable to add up properly.
Triple relief
Raising the age to 21 is in theory designed to relieve three social policy headaches. The first––and from the viewpoint of the small business community and many long-term Macau residents most pressing––is the shortage of young people to work in shops, restaurants and other modest scale enterprises. The lack of young local workers, aggravated by reduced quotas for imported workers, has, as one local commentator put it, “sucked the oxygen out of Macau’s SMEs.” The second headache the policy is supposed to address is the high dropout rate from local universities. Academics complain that many school leavers with confirmed offers of places aren’t even bothering to take them up, preferring to take their chances in Macau’s heated job market. Thirdly, raising the age limit is meant to head off criticism that Macau’s young are coming too much under the thrall of a ‘get rich quick’ culture. A recent study by the University of Macau suggested primary school children were starting to engage in cash betting on playground games among their peer group. If the policy is seriously meant to help SMEs, however, it has two major flaws. According to the government Statistics and Census Service, between the third quarter of 2006 and the third quarter of 2007, a mere 4,600 first time job seekers came onto the market– –only enough people to work a single shift at The Venetian Macao. The government has indicated that the under-21s already employed in casinos will be allowed to stay in their posts, meaning the net addition of under 21s to the job market will only kick in from next summer at the earliest. That probably means a potential net gain of less than 5,000 workers a year to the SME labour pool for the next three years at a time when the size of the adult population is growing over 6% a year and demand for non-casino services is soaring. Also, the more the initiative succeeds in encouraging school leavers to pursue tertiary education, the less the gain to the SME labour pool. One pill cannot relieve three headaches. Raising the qualification age to 21 would appear most likely to relieve the second headache, encouraging Macau’s youth to take up their university seats and improve their skills. That would unequivocally benefit the city in the long-run. The cure to the first headache comes from the recognition that its cause is closed borders and impediments to the free movement of labour into Macau, rather than an unsustainable pace of casino development. Part of that solution will be a headache in itself for the government, as it goes up against the city’s increasingly militant labour groups to let a much needed lifeline of imported workers into the city. What happens in Macau’s primary school playgrounds, meanwhile, is on the heads of the parents. Kareem Jalal We crave your feedback. Please send your comments to kareem@asgam.com
6 INSIDE ASIAN GAMING | Dec 2007
Dec 2007 | INSIDE ASIAN GAMING
7
8 INSIDE ASIAN GAMING | Dec 2007
Cover Story
Firm Positioning Macao Studio City Co-Chairman and Co-CEO David Friedman believes Macau’s revolutionary transformation is built on a solid foundation
“N
o one had a blueprint in the 1950s about where Las Vegas was going to be in 2008. No one knew,” says Macao Studio City Co-Chairman and Co-CEO David Friedman. By contrast, the experience of Las Vegas over the last half century offers clears indications of where Macau is headed, yet naysayers are loath to learn from hindsight. “I recall when we went out and did the original financing for The Venetian in Las Vegas, bankers asking us ‘Is Las Vegas overbuilt?’,” says Mr Friedman, who played a key role in the opening of The Venetian, as well as leading Las Vegas Sands Corp’s successful bid to secure a Macau gaming license. Overcapacity is apparently an enduring concern, as “I remember being shown a magazine cover from the 1950s, and the cover story was, ‘Is Las Vegas Overbuilt?’” The short answer to that question over the last fifty years was no. The graph below shows that while Las Vegas’ stock of hotel rooms grew rapidly over the last three decades—from just over 20,000 in 1970 to around 130,000 now—the rising occupancy rate has proved persistent concerns of overcapacity ultimately unfounded.
Dec 2007 2007 || INSIDE INSIDEASIAN ASIANGAMING GAMING Dec
99
Cover Story
Las Vegas Sands Corp’s Sands Macao, which became the first foreign-operated casino to open in Macau following the end of Stanley Ho’s 42-year casino monopoly, recouped its initial US$265 million cost in less than a year. In doing so, it created expectations of unrealistically rapid returns on invesent for future projects in the city. The US$2.4 billion Venetian Macao-Resort-Hotel opened in August this year and, due to the unprecedented scope and scale of the property in tiny Macau, is experiencing inevitable teething troubles. Mr Friedman points out, however, that “The Venetian didn’t open well in Vegas. It took time for it to hit its stride. And look at it today. It’s hard to find a much more successful project than that anywhere in the world. Those are short term issues. You have to look at the bigger picture, and what happens over the first few months to me is irrelevant. It’s what happens over the next few years that’s important.”
Divergent paths
Macau granted its first casino license in 1937—just six years after Vegas did—but the monopoly which lasted in Macau until 2002 has stymied Macau’s diversification from hardcore gambling until now. The recent evolution of Vegas was “primarily the result of several people who saw some things in Vegas that other people didn’t,” claims Mr Friedman. “One was Steve Wynn, who saw an opportunity to create a destination resort environment in Las Vegas that went way beyond gaming—creating interesting things for people to do and see, and interesting forms of entertainment that at that time no one had ever attempted to incorporate into a gaming environment. Steve did that with great success.” Then came Las Vegas Sands Corp Chairman Sheldon Adelson, who was “similar in many respects. He came to Vegas and saw it as an ideal convention destination. Shel10 INSIDE ASIAN GAMING | Dec 2007
don was in the convention business before gaming, and was probably the most successful convention operator in the world. When I met Sheldon he had just sold Comdex for US$860 million. He brought that unique understanding of the convention business to the gaming business. “What evolved was the Venetian model, which was a convention hotel with rooms that were larger, built more for business travellers, but also served very well on the weekends as casino rooms. “What people found out from the Venetian was that the convention visitor, who was always treated by the big casino operators in Vegas as an undesirable customer, was actually a very desirable customer. Because even if they didn’t spend that much time in the casino gambling, they spent relatively more money on other things—food and beverage, entertainment, retail, etc. The facilities to service that customer didn’t exist until Sheldon came along.”
Following the end of Macau’s casino monopoly and the arrival of Messrs Adelson and Wynn in the market, Macau has embarked on
a revolutionary transformation set to bring it towards the Vegas-model on an accelerated timeframe.
Cover Story
“The market is changing,” observes Mr Friedman. “When I first started coming to Macau eight years ago, it was like Vegas when it was still just a gaming destination. The vast majority of visitors were male. Now it’s about 40% female. Doesn’t that tell you a lot about where retail is going, where entertainment is going? And that’s with a small amount of development.” Of course, the changing demographic of visitor to Macau “changes the types of offerings you need to be successful. It changes everything,” says Mr Friedman. “Most of the visitors from the mainland to Hong Kong are spending four days in Hong Kong and one day in Macau. What if they stayed two days in Macau? The numbers become astronomical, and the impact on the demand for retail will be astronomical. And the impact on entertainment, we believe, will be astronomical. As Macau changes and
develops, and there are better places to stay, nicer hotels, more interesting properties to stay in, and the retail component is added, why wouldn’t people stay longer?”
The MSC revolution
Mr Friedman has accumulated a great deal of experience developing a variety of major casino, hotel and retail projects in the US, and has both been directly involved in and witnessed at close hand various aspects of the transformation of Vegas into a diversified tourist destination. The Macao Studio City (MSC) project presented “an opportunity to take everything I’ve done in the past and everything I’ve learned in the past, and do it better.” MSC is being built on a 32.3-acre plot adjacent to The Venetian along the burgeoning Cotai Strip. The site is located right next to the new Lotus Bridge immigration check-
point, linking the complex directly to Zhuhai’s Hengqin Island, and allowing MSC to claim it is “Where Cotai Begins™”. The property is slated to open in mid-2009 at a cost of US$2 billion, and is billed as Asia’s first leisure resort property combining theatre, television and film production facilities and retail, with gaming, entertainment and world-class hotels. MSC will feature 1,902 luxurious hotel rooms and suites, a 2,300-seat theatre, a 4,000-seat multi-purpose arena, a 40,000 sq. ft Playboy Mansion and a 500,000 sq. ft casino operating under the license of Melco PBL Entertainment (Macau) Ltd. MSC will also boast a 1.4 million sq. ft Studio Retail™ complex, created in partnership with Taubman Centers, Inc, with live production pods scattered throughout the upscale unique-concept mall. “We’ve brought in some of the greatest Dec 2007 | INSIDE ASIAN GAMING
11
Cover Story
brands from around the world, and put them all under one roof in an integrated facility in a very unique way, including Ritz Carlton, Marriott, and David Tang building the first ever Tang boutique hotel. There really is nothing else like that anywhere else in the world. It’s the kind of thing that will get written about in travel magazines, and people from all over the world will want to come and see it. We’ll also have the only Playboy Mansion in Asia. All these things will attract a lot of people who have not otherwise thought about coming here.” Mr Friedman has a clear vision of where MSC will fit in the new Macau. “We’re trying to create something that is complimentary to what the Venetian is doing on the convention side by becoming what we believe will be the centre of entertainment and excitement in Macau,” he explains, adding “the things we are doing with Macao Studio City are revolutionary in their own way. Things I think will help reposition Macau. Things that will help people see Macau differently.”
Dream team
MSC is being developed by a dream team of partners, including New Cotai LLC, Hong Kong-based eSun Holdings and Singapore’s CapitaLand. “There’s no group like ours anywhere,” says Mr Friedman. New Cotai owns 40% of the venture, and is a consortium of investors including Mr Friedman and “two of the most successful hedge funds in the world,” Silver Point Capital and Oaktree Capital Management, which represent a combined US$60 billion in assets. “They have a tremendous amount of financial strength, but also tremendous experience in the gaming and entertainment industries around the world.” eSun Holdings, one of Asia’s leading media and entertainment companies, also holds a 40% stake in the project. eSun has an 80% share of Hong Kong’s live concert market, and is one of Asia’s leading producers of films and managers of live entertainment. According to Mr Friedman, eSun offers “a very unique perspective on what we think our audience is going to like and want to go and see.” eSun is an associate company of Lai Sun Development, a leading Hong Konglisted hotel and property developer. While the Venetian will offer “more western-style entertainment,” Mr Friedman feels MSC will feature more Asian-style offerings, and will “weave entertainment through all the experiences” at the property. CapitaLand, Asia’s largest property developer, owns the remaining 20%. The retail portion of MSC will be developed by Taubman Asia, “one of the most successful retail mall developers in the world for luxury retail, 12 INSIDE ASIAN GAMING | Dec 2007
which we think is going to be very important in Macau to bring it to the next level,” adds Mr Friedman. Mr Friedman sees potential for retail in particular to grow dramatically in Macau over the coming years. “Look at level of success of retail in Hong Kong. Probably 40% of the mainland China visitors to Hong Kong are also visitors to Macau. They’re also the largest spending visitors per capita of all visitors to Hong Kong. Why would any of those people suddenly change when they get on the ferry to go to Macau from Hong Kong. Do they suddenly not have any interest in retail? I don’t think so. I think it’s a lack of opportunity.”
Good timing
Although Mr Friedman agrees that Macau’s infrastructure and labour bottlenecks could hinder growth in the short term, he believes they are being addressed by the government, and by the time MSC opens in mid-2009, will have largely been resolved. “The Venetian is breaking a lot of ice for the properties that will follow,” he explains, and “by 2009 things will be a lot better, and even if not 100% complete, better than they are now.”
The new ferry terminal serving Cotai that has just been opened, the government’s recent decision to grant more taxi licenses, and expansion of the currently under-utilized airport will all help, he explains.“I think the light rail system that’s been announced will also be very helpful,” he says, pointing out that MSC sits “adjacent to one of the designated light rail stations,” scheduled for completion by 2011. “In terms of labour, it’s not that different either. When you have this much growth in this short a period of time, there’s bound to be a lot of displacement of resources, whether it’s labour or anything else. Over time that will all work itself out. That’s just the nature of change. In many places around the world change happens at such a slow pace that it really is pretty much unnoticeable. In Macau it’s not that way. Everything is happening turbo-charged,” explains Mr Friedman. “We feel 2009 is a fantastic time to open a property, when a lot of the infrastructure projects will have been completed and The Venetian will have brought new customers to Macau. There will be a lot of maturity of market and a lot of growth of the mass market. That’s what we’re targeting.”
Dec 2007 | INSIDE ASIAN GAMING
13
IN FOCUS
The New Deal Poker, driven by strong online marketing, has arrived in Macau
W
hen James Bond played a literally heart-stopping poker match in the recent film Casino Royale the studio producers were wittingly or unwittingly providing a huge marketing boost for the game across Asia. Poker in its various forms—including Texas Hold ‘em, Draw and Stud—is increasingly being seen as ‘cool’ by a new generation of fashion and label-conscious consumers in the region. If card games were clothing labels then poker would be Prada— aspirational and loved by celebrities—while Macau’s current number one game, baccarat, would probably be H&M—offering satisfaction and solid performance for middle income and rich alike. The poker wave is now spreading beyond its traditional Asian footholds in the Philippines and South Korea, where generations of locally based American GIs helped to popularise it. Macau held its first international poker
14 INSIDE ASIAN GAMING | Dec 2007
tournament organised by the Asia Pacific Poker Tour (APPT) in November, with the support of Grand Waldo Casino, which runs under the license of Galaxy Entertainment Group. Galaxy had previously installed Pokertek automated tables in its StarWorld resort in downtown Macau—making StarWorld the first casino in Macau to offer poker. No one is expecting Macau to become a Texas Hold ’em town overnight. Baccarat in its VIP form with minimum bets counted in thousands of Hong Kong dollars and the mass market version with HK$100 minimums (although many popular venues only offer HK$300 minimums), accounted for 85.3% of the territory’s total revenues from games of fortune last year according to statistics from Macau’s Gaming Inspection and Coordination Bureau (DICJ). It’s a measure of the relative immaturity of the poker market in Asia and the lack of any regulatory precedents that the organisers of the Macau tournament needed special
permission from the DICJ just to hold the contest in the first place. It’s also an indication of the potential of the game that the APPT had to hastily apply for an extension to the 270-player event because of popular demand. Originally, APPT had only planned and obtained approval for 27 ten-player tables, but that was extended to 35 tables only days before the event. The tour had to borrow poker tables from other casinos’ training rooms to seat all the participants.
Poker joins the Macau mix
It all adds up to the fact that Macau’s product pack is getting a re-shuffle. Only days after the pioneering APPT event at the Grand Waldo casino, which eventually attracted 352 players from across the region, the PokerDome Group, an Australian company from Sydney, announced it had reached an agreement with the SJM-licensed Diamond Casino at the Holiday Inn Macau for the territory’s first dedicated poker room.
In Focus
PokerDome said in a statement it planned to open with eight tables but hoped to increase the capacity to 25 or 30 tables as soon as another floor of the casino is renovated and operational. The DICJ, however, has said that permission for this room to open had not been granted at the time of the PokerDome announcement, and whether that permission will now be granted at all remains to be seen. SJM also plans to have a Texas Hold ‘em room in its flagship Grand Lisboa casino. Compared to SJM’s traditional core product, VIP baccarat, the business model of poker is very different, with players buying in to the game to create a ‘pot’ and the house taking a ‘rake’ from the pot to cover expenses. At the Grand Lisboa, the house rake for Texas Hold ‘em is expected to be 5%, so an interesting question is how the revenue will be split at the PokerDome Group-operated room at the Diamond Casino, if it receives the go-ahead. Under SJM’s traditional 40:40:20 revenue-sharing model with casino partners (the partners provide the venue while SJM provides the license) the taxman gets 40% of revenue, the owner of the venue (such as the Diamond Casino) gets 40% and the casino licensee (namely SJM) gets 20%, but has to provide dealers and gaming staff. With labour costs soaring in Macau, SJM is in the process of changing all its agreements to a new 40:55:5 model, whereby the taxman gets the constant 40%, and SJM now only receives 5%, but no longer has to provide gaming staff. The venue owners, meanwhile, get 55% and have to bear all labour costs, but may prefer the new arrangement because it gives them more flexibility and control in staffing their casinos. Over half of SJM’s casino partners have already signed up for the new arrangement. The casino licensee, venue owner and room operator (such as PokerDome) will have to decide how they split the rake. The government will likely simply tax the rake at the same rate as other casino gaming revenue (with 35% going to direct tax, and 4-5% as mandatory social and welfare contributions). A less likely scenario, however, could see the government tax poker players’ winnings, as happens in the US (in addition to the tax on the casinos’ rake revenues).
momentum we have created. There will definitely be more poker coming to Macau. We’re hoping to have the best events here year after year to grow it into something where thousands of players can participate in a major event at least once a year.” In the west, poker has been considered ‘cool’ ever since Frank Sinatra sat down at the table with his Rat Pack chums in Las Vegas in the 1950s and 60s. More recently, Hollywood actors Ben Affleck and Matt Damon have joined the bandwagon and there are celebrity poker games on television. When the singer Justin Timberlake toured Australia in November his management contacted the Crown Casino in Melbourne and asked if they could arrange a game against Joe Hachem, the 2005 World Series of Poker champion. Mr Hachem duly obliged. A few days later Mr Hachem was on a plane travelling to the Macau tournament. In Asia though, the real engine of pok-
After obliging Justin Timberlake’s request for a game in Australia, Joe Hachem hopped a flight to the Macau APPT
The pot builds quickly
Whatever the final regulatory and business model structure of poker rooms in Macau, Jeffrey Haas, President of the APPT, thinks the more poker the merrier for all. He says: “The door opened when we asked permission for our event. Now the door has fallen off its hinges thanks to the
APPT Macau 2007 Main Event winner Dinh Le Dec 2007 | INSIDE ASIAN GAMING
15
In Focus
er’s growth seems to have been not so much endorsement from Hollywood celebrities but more the development of online play-for-fun sites offering free lessons and a chance to move up the skills ladder to real stakes games.
Jeffrey Haas presents APPT Macau 2007 High Roller Event winner Eric Assadourian his trophy
Online feeders
The leading poker tours visiting landbased casinos work in tandem with online operators to feed players through the ranks. In APPT’s case, its partner is PokerStars.net Mr Haas says: “They’ll either start playing at home with their friends, or online. Once they’re comfortable with that they start to move toward real money games, and eventually they’ll be able to play in cash games here in Macau. It’s entirely a skill-based game, and about moving up the skills graph. Our APPT tour becomes aspirational for them. We’re trying to position our tour as the highest quality, high-calibre professional tour in the market. There will inevitably be additional poker tours coming to Asia and a few standalone tournaments here in Macau, and I believe that anything that grows the market benefits us all.” Tom Hall, Global Business Development Director for Playtech, the world’s largest provider of online gaming software, says there’s a fundamental explanation for online poker’s popularity in Asia: “On some Chinese language sites poker is being marketed as ‘Fair Poker’. This is because it’s a lot harder to cheat online with poker than it is with other games such as mahjong, or games where you throw cards away that could be of benefit to an accomplice who is also online.” Land-based casinos still attract all the headlines, especially when a new one opens. But with mainland citizens’ access to Macau still restricted by the central government, the influence and growth of online gaming shouldn’t be underestimated. Although North America and Europe are by far the biggest creators and consumers of online gaming products, reflecting the high penetration of the Internet in those regions, the Asian market is growing steadily—espe16 INSIDE ASIAN GAMING | Dec 2007
In Focus
cially on the consumption side. UK-based Global Betting and Gaming Consultants (GBGC) estimates that between 2006 and 2007, online gambling by location of player rose 11% in Asia and the Middle East (from 9% of the world total in 2006 to 10% of the total in 2007). GBGC thinks the gross revenue of the global online gaming market in 2007 will reach US$15.2 billion, a 4.1% increase on 2006 when revenue was estimated at US$14.6 billion. Although the universe for all online gaming is expanding, consumers currently face a dizzying array of options, with scores of platforms and hundreds of content providers all jockeying for attention in cyberspace. This applies just as much to online poker as it does to other games. Playtech’s Tom Hall says there are four big players in terms of poker platforms, including his own company’s network, iPoker. Mr Hall says: “After the big four, the share of revenues drops away pretty sharply. I think that as the market matures we will definitely see consolidation in the online poker market and online gaming in general.”
Strong skill factor
An economic commentator recently joked that the world’s biggest casino is the Shanghai stock market, but picking good stocks is down to skill as well as luck. The same can be said for making the most of a poker hand. Celina Lin, a Melbourne resident of Chinese ethnic origin, is ranked 12th in Australia
by a poker player community website called PocketFives.com. She graduated to the APPT Macau tournament after starting to play poker three years ago. A modest Ms Lin claims “I had no idea how it worked, but after half an hour I was up about A$500. “It was really interesting and I enjoyed the experience, so I began studying and playing online poker. I love how much maths goes into it. There are a lot of things to consider. Lots of people say they would rather have luck over skill in this game, but over the long run, definitely skill is going to prevail,” she says. The skill factor in poker also potentially takes it beyond the realm of gambling and into the world of sport. From New South Wales in Australia to the Russian Federation, jurisdictions have ruled that for tax purposes at least, winnings from poker should be treated as sport earnings rather than as gambling. This could have a major impact on the business model for the activity in Asian casinos. Unlike baccarat, where in Macau 40% of gross revenues go straight to the government, in the APPT Macau poker tournament, the organiser’s ‘rake’ to cover overheads was just 6%. So with 352 players each paying US$2,500 to buy in to the event, the US$880,000 pot had only US$52,800 deducted, allowing the players to share the remainder—US$827,200—as prize money. That does not leave much left over for the tournament organiser. As Inside Asian Gaming went to press, Mr Haas was still negoti-
ating with television companies for rights to show the video production he recorded at the Macau event as a way of creating a supporting revenue stream. In online poker, the house rake is often considerably less than 6%. Online operators are usually domiciled in tax-free locations remote from the player markets. The exception is the Philippines, which has gone as far as re-inventing itself as Asia’s de facto headquarters for online gaming, issuing government licences for an annual fee in an effort to create administrative jobs and gain a competitive advantage from its relatively well-educated and English-speaking workforce. PAGCOR, the country’s monopoly government-run casino operator-cumregulator, has also licensed poker play in its land-based casinos. Not all bricks and mortar casino jurisdictions have been as accommodating to poker as Macau and the Philippines. Singapore has been responding to inquiries from poker tournament organisers by asking for 25% of the prize pool—a figure Mr Haas regards as “untenable”. He says: “For me to have an event in Singapore right now, which I definitely want to do, the players would have to sacrifice 25% of the prize pool to the Singapore government. They categorize poker tournaments like sports betting or lotteries and require the standard betting duty rate of 25% of the amount of total bets to be paid as tax. Mr Haas explains that “after I add the 6% tournament fee players will lose 31% of the prize pool before their prize money gets paid out. Poker players do their expected value calculations. They want to know what the prize pool is, what they’re buying into. These are very sophisticated players who do all the mathematics on the value of attending a tournament. If I have to take a 31% cut out of that, that’s offering players a negative expected value. They won’t want to come— it’s not marketable.”
A sophisticated set
Poker players—particularly tournament players—tend to have a much more sophisticated understanding of the business model of their game than the average casino player. When was the last time you heard the average baccarat player in Macau discussing the house win percentage? Baccarat is not so much about skill as about group solidarity, as players grapple with fate and battle the house. In poker, players try to outthink and outplay each other, and the typically western value of robust individualism comes to the fore. This could be why poker seems to be particularly popular among a younger generation of Asian playDec 2007 | INSIDE ASIAN GAMING
17
In Focus
ers brought up on a diet of free market capitalism rather than the groupthink of Confucianism and Chairman Mao. Mr Haas says:“In baccarat, it’s you against the house. You are putting faith in the Gods of Gambling to make sure you make the right decision. It’s interesting, dynamic and the life force of Macau. People come here to play that and have a great time. Poker’s focus is completely different. While there is an element of chance with poker—it’s essentially a mixed game of skill and chance—the fact is if you know your mathematics and you understand probability and you can do all of your calculations on whether you really have the best hand and you’re good at observation and psychology, that still does make a difference in poker.” He insists though that in a brick and mortar casino market such as Macau, poker will complement, rather than compete with baccarat. “Baccarat is great fun. One of first things I did when I came here was to learn how to play it. I learned how to curl the cards, and even to rip them and throw them. I enjoyed that. I appreciate the games that are here in Macau, and I’m flexible in my attitude toward them—but there’s such an international demand for poker I really thought there would be a great opportunity if we could have an event here.”
Poker draws a different demographic
Mr Haas suggests the introduction of poker could help develop Macau into a longstay market. He explains: “Poker serves a different market. It’s not day-trippers. Poker in its tournament form is for people who are coming
to stay here for a week. It’s an international competition that attracts tourists here, which is what Macau is trying to do. By diversifying the market and adding this additional product of Texas Hold ‘em Poker we’re bringing in 352 players, plus friends and family. In total that’s more than a thousand people coming to Macau and they spend hundreds of thousands of Hong Kong dollars, if not millions while they’re here. Everybody wins. Our event sold out the Grand Waldo hotel and two neighbouring hotels. We sold more than 2,600 room nights! The benefits for food and beverage revenue and other gaming are also tremendous. Men still make up the majority of our players, so their wives and girlfriends split their time between watching games and other activities such as playing at the baccarat tables or the slots. I can tell you that as a result of our tour event in the Philippines the gaming drop at the venue increased 62% over four days.” At APPT’s Macau event, many of the players were western expatriates—some of them based in China. There were also local players—nine from Macau and thirty-seven from Hong Kong. “We also see a few players from mainland China who either have had western influences or have picked up the game within the community. In Hong Kong we are starting to see development of poker leagues. In Japan, they have the Japan Poker League. The proponents of poker in Asia tend to be the Type A social networkers who are putting together games of their own,” says Mr Haas.
Media coverage is key
Mr Haas thinks television will be a strong
The gaudy Grand Waldo hosted Macau’s first international poker tournament
18 INSIDE ASIAN GAMING | Dec 2007
ally in the growth of the game in the region. “If nobody plays poker here how do they get interested in playing it? They may see it in the movies, like with James Bond, but the primary way people will find out about poker is if they start seeing it on television. If they see it on television on a US- or European-based show without any Asian players though, it looks like a foreign show and they’re not that interested. But if they can see local games, ideally with local players, and even better, with local champions, they start to think ‘Wow, I could do that myself. I wonder how I can learn how to play poker?’” One problem with this approach is that in China—the largest potential market for poker in Asia—it’s unlikely poker will be shown on television unless tournaments are conducted on a ‘play for fun’ basis or the Chinese authorities agree to declare it a game of skill and of sport—as jurisdictions in Australia and Russia have done—rather than one of chance. That means word of mouth and the Internet, with its estimated 150 million Chinese users, will be key elements in the spread of poker in Asia. Word of mouth will certainly come into play among mainland visitors as the visibility of poker rises in Macau, but the significant numbers are more likely to come from online poker. APPT’s sponsor partner for the Macau event—PokerStars.net—is a play for fun website where beginners can mingle with more advanced players to gain experience of the game before playing in tournaments. As part of its cross-marketing effort, PokerStars.net ran a contest allowing players to pre-qualify for the Macau event in ‘freeroll’ poker tournaments with no entry fees. A few skilled winners had their US$2,500 buy-in, six nights’ hotel accommodation and spending money paid for (a US$4,500 value). “You can’t be in gaming today in Asia if you’re not in Macau,” says Mr Haas. “It was very important to us.” Mr Haas continues: “The introduction of poker to Macau doesn’t mean Macau is turning into Las Vegas. Macau is distinct, it’s different. It’s a mix of old Portuguese and old Chinese culture brought together in a new fusion with other additional elements. The gaming here is completely different— that’s why people come to Macau. You can’t compare Las Vegas—where people go for a weekend of reckless abandon and gaming—with Macau where people come for mostly day trips. It’s a different clientele, a different culture and a different gaming environment.”
IN FOCUS
Bigger Versus Better
Dec 2007 | INSIDE ASIAN GAMING
19
Property Preview
Calm Before the Roar The opening of MGM Grand Macau on December 18 will mark the final property debut by one of Macau’s five new casino concessionaires, and provide a clear view of the personality and positioning of the MGM Grand Paradise Ltd joint venture
G
iven the background of the partners behind the MGM Grand Paradise Ltd joint venture, MGM Grand Macau could well offer the coolest gaming venue in town. The JV is a powerful amalgamation of international and local experience and resources, and is a 50/50 partnership between Las Vegas-based hotel and entertainment giant MGM MIRAGE and Pansy Ho—Managing Director of Shun Tak (a Hong Kong-listed conglomerate which boasts extensive shipping, property and hospitality interests in Macau), and daughter of Macau casino mogul Stanley Ho. Until three years ago, for 42-years, Stanley Ho held a casino monopoly in Macau, and his landmark Casino Lisboa reigned supreme. With most of the action conducted in
20 INSIDE ASIAN GAMING | Dec 2007
private VIP gaming rooms and given the lack of competing venues, there was no pressure to offer better services or more inviting surroundings, with the main floor in particular left to decay. Now, with the explosion of choice available to customers, operators are scrambling to differentiate themselves within the market and offer superior hardware and software.
Segmentation arrives
The new era arrived when Las Vegas Sands Corp (LVS) unveiled the stadiumstyle Sands Macao in May 2004. Despite the opening of LVS’ mammoth follow up, Venetian Macao, in August this year, Sands retains its thriving mass-market atmosphere, providing a dynamic people-watching space in which to wander and place bets
among heaving crowds. LVS’ main goal when opening Sands Macao was to bring attention back to the long-neglected mass market in Macau, and as such, the property was designed with all the elements to remain an enduring crowd-puller. The next big opening came over two years later in September 2006, with Wynn Macau making a welcome upscale addition to the market after a lengthy gap in new casino openings. Wynn Macau’s emphasis is on luxury, and the property does particularly well among the older well-heeled demographic (the high-end shopping mall at Wynn Macau is notably one of the highestgrossing malls per sq. ft in the world). The unveiling of Galaxy Entertainment Group’s flagship StarWorld Hotel & Casino in October 2006 may have lost some of its im-
Junket Operations MGM Grand Macau
pact by coming so hard on the heels of the Wynn opening, but StarWorld has proven a strong performer, and the property fills an important niche along the now thriving strip along Avenida de Amizade (Friendship Avenue) on the Macau peninsula. Galaxy’s aim is to provide “affordable luxury” and make locals feel comfortable. StarWorld offers a wide array of fine Asian cuisine, and while Sands Macao famously scaled back its high-end dining facilities, StarWorld’s Chinese restaurants are credited with helping to drive its VIP gaming business. In February this year, Stanley Ho’s SJM opened its new flagship Grand Lisboa, adjacent to the ageing Lisboa along Av de Amizade. The Grand Lisboa’s huge eggshaped podium—which doubles as the world’s largest LED display—and its towering lotus flower-shaped hotel tower do have a certain iconic appeal, but the interior has been criticised for resembling that of the Sands, although it is neither as large nor as impressive. Melco PBL Entertainment trumpeted the Crown Macau, located on Taipa Island, as the city’s first six-star property. Several hitches at the May opening event, however, and the usual teething troubles, undermined that lofty claim. While Crown Macau does have some of the most impressive VIP gaming rooms anywhere, it appears the property has suffered because of its location away from the main peninsula strip, and its uninspiring main floor design (not helped by the small plot size). The Venetian Macao became the anchor property of the Cotai Strip when it opened in August. Cotai is expected to become Macau’s hub for entertainment, conventions, exhibitions and retail, and see the evolution of a new multi-night stay market in a city that has until now been dominated by day-trippers coming to gamble, and not much else. Venetian will create an entirely new market segment in Macau, but owing to its unprecedented scale and scope in the city, will need more time to find its stride.
Where the lion stands
MGM Grand Macau is located a few minutes walk from Wynn Macau and StarWorld, and will enter a market where operators are increasingly making clear their philosophies and positioning. The opening will no doubt be characterized by throngs of curiosity seekers, but as the new property appeal wears off, it will continue to draw the customers who feel more comfortable inside its walls than at Macau’s other properties. Inside Asian Gaming recently caught up with MGM Grand Paradise Ltd VP Casino Operations Gabe Hunterton, who commented
MGM Grand Paradise Ltd is a 50/50 venture owned and jointly operated by MGM MIRAGE and Ms Pansy Ho Chiu-king. MGM Grand Paradise was formed to develop, build and operate casino resorts in Macau under a sub-concession agreement approved by the Macau government. The joint venture’s first project, MGM Grand Macau, is located on a premier site on the Macau peninsula and consists of 600 rooms, suites and villas, several restaurants and entertainment facilities and a casino complex consisting of 385 table games and 890 slot machines. The total cost of the project is approximately US$1.25 billion. MGM Grand Paradise is currently working with the Macau government on a second development site in Cotai. Dec 2007 | INSIDE ASIAN GAMING
21
Property Preview
on the flood of casino choice now available in a city so long characterized by drought: “If someone had never seen a luxury car, and you put them in a room with a Rolls Royce, a Bentley and a Maserati and asked them which one they liked, they would have no idea. But they’d know they liked the room they were in.” As they took each one for a test drive, however, they would likely settle on a favorite. Although it is still speculation at this point, MGM Grand Macau is likely to appeal to a sophisticated and wealthy crowd, but one that is perhaps slightly hipper and younger than at Wynn Macau, especially as the swanky nightclubs come online. Luxury will be evident throughout the property, as expected at any glitzy new Macau casino resort, but MGM Grand Macau will probably feature noticeably more contemporary design touches than its peers. On announcing the December 18 opening, MGM MIRAGE Chairman and CEO Terry Lanni commented it would “mark the beginning of a new era in Macau,” adding, “We have long anticipated our Macau debut and, most importantly, the opportunity to demonstrate the combined capabilities of our partnership. Many dedicated and talented individuals have spent months in preparation for this one moment. We look forward to opening the doors and letting Macau and the rest
22 INSIDE ASIAN GAMING | Dec 2007
of the world see what we have created.” Pansy Ho commented: “The opening of MGM GRAND Macau is a banner day for Macau, its economy and its residents. The unparalleled international reputation of MGM GRAND will further propel the new prosperity enjoyed by the city, attracting additional tourist visits for longer stays and creating many new jobs. We are excited to play an important part of the continued growth of Macau. This resort represents the first of many projects our partnership looks forward to creating to further Macau’s growth.” The MGM buzz began building from October, when the 10-metre, 63-tonne signature golden lion statue was unveiled outside the MGM Grand Macau. The building itself gets our vote for most attractive new casino hotel, and features three sections of varying shades of gold—the structure’s shape evokes the swell of the ocean surf, while its mirrored façade reflects the hues of the South China Sea. The 35-storey MGM Grand Macau will feature 600 rooms, suites and villas. The casino will offer 385 gaming tables, 890 slot machines and 16 private gaming salons for preferred customers. The expansive signature Grande Praça conservatory—which will be two and a half times larger than the conservatory at the Bellagio in Las Vegas—will showcase Portuguese-inspired
Pansy Ho Chiu-king
architecture, dramatic landscapes and a glass ceiling rising 25 metres above the floor of the hotel resort. A resort’s personality is largely determined by its staff, and MGM Grand Paradise Ltd runs its own dedicated training facility to ensure MGM Grand Macau’s 6,000 employees are equipped to provide the highest standards of service. Pansy Ho also revealed that the MGM Grand Macau opening will be directed by one of the principal organisers of the opening and closing ceremonies of the 2008 Beijing Olympics, whose credentials include staging the 2004 Olympics closing ceremony in Athens and the opening and closing ceremony of the 1998 FIFA World Cup in France.
Dec 2007 | INSIDE ASIAN GAMING
23
24
25
Vendor Profile
Inspired Approach Inspired Gaming International offers a vision of Asia’s leisurely gaming future, when choice will reign supreme
A
sians, and Chinese in particular, are widely regarded as the most hardcore gamblers in the world. Scenes at crowded Macau casinos in recent years certainly supported that view, with players jostling three-deep around tables, placing main floor bets of values often seen only in VIP areas in the west. Inside Asian Gaming foresees a less hardcore future for gaming in Asia, however. It’s not that we expect Asians to become less passionate about gaming or serious gamblers to bet smaller sums, but rather, we believe the region’s casinos will begin attracting a new demographic of player—those seeking leisurely forms of low-denomination gambling as entertainment, rather than just those betting big at the tables in pursuit of a life-changing win. Macau’s casino capacity has exploded in recent years with the opening of several new large casinos, and the crowds at each venue have thinned significantly, even as visitation and casino revenue continue soaring. These days, it’s hard to find a casino with players crowded more than one-deep around the tables, even on weekends. The other striking change is that the once-idle banks of slot machines at the city’s casinos are finally seeing some action. Not only have Chinese gamblers finally started warming to the “hungry tigers”, as slots are known in the local Cantonese dialect, but Macau is also now drawing a new breed of visitor—those coming to see the city’s new and expanding non-gaming attractions. The mammoth 3,000-suite Venetian Macao kicked off its pipeline of major conventions and exhibitions after it opened on August 28, and has already hosted several prominent sporting and entertainment spectacles, including big-name tennis and basketball matches and concerts by Beyoncé and the Black Eyed Peas. After attending their meetings or shows, the new breed of business and leisure visitor descending on Macau may be keen to try their luck at one of the casinos, but are put off by the US$12.5 minimum bets at the blackjack tables or US$37.5 minimums at most baccarat tables. This will feed the already surging demand for slot machines in the city.
Leisure appeal
If the goal is to attract leisure gamblers, then Inspired Gaming
E-Banquette
26 INSIDE ASIAN GAMING | Dec 2007
International, part of UK-based Inspired Gaming Group plc, appears to be on the right track with its unique terminal designs, incorporating monitors in coffee tables (the E-Banquette) and sleek bar tops (the E-Bar). Baccarat is often a solo battle with the house in Asia, but slots may be best enjoyed over a cocktail or cup of coffee with a friend/ colleague/significant other. Inspired may boast some of the funkiest terminals in the industry, but its core product is its Open Server-Based Gaming (Open SBG™) platform.
While gamblers in Asia have traditionally demanded baccarat and not much else, the new breed of gamblers playing slots respond well to a dynamic offering of choice, which is facilitated by Inspired’s Open SBG™ system. “Server-based gaming gives you the power to change your offering to your customer in real time,” says Inspired’s managing director, Anne de Kerckhove. The operator is able to remotely change the type and configuration of games, including the stake and prize, according to the time of year, week or day. For example, “more fun skill-based games could be offered during the day, and more hardcore games at night,” and specific games brought in during special periods such as Chinese New Year. The operative word in the Open SBG™ platform is “open”, and the source code is published on the internet, allowing independent developers to produce games for the Inspired system. Having an open source code “is shocking for traditional manufacturers” in an industry where patents proliferate, claims Ms de Kerckhove, adding “because we didn’t come from a casino background, we were not restricted by conventional wisdom.” Some 25 separate companies produce games for the platform, including the UK division of the world’s largest slot machine manufacturer—and one of the world’s most prolific filers of patents—IGT.
All about choice
Inspired is also happy for its casino customers to run its platform on terminals provided by other manufacturers. For example, UK gaming giant Gala Coral uses the Inspired system on Atronic’s e-motion™ cabinets—widely hailed by insiders as the most ergonomically-advanced cabinets in the industry. Ms de Kerckhove, stresses “we’re a software company, not a game or hardware company. We do some games but it’s not our specialty. And we do some hardware but it’s not our specialty.” Rather, she prefers casino operators pick the games and terminals that suit them best. With the provision of greater choice as its guiding principle, Inspired has come up with several novel approaches to electronic gaming. Observing that “people like playing together”, the company saw “a big need to introduce social gaming” says Ms de Kerckhove. And so the E-Bar and E-Banquette were born, “allowing people to learn how to play games together and share in the fun.” Inspired’s
Vendor Profile
E-Bar
products cater to a variety of needs that conventionally-minded operators seem not to have even considered. From the observation that men and women generally prefer different games came “a love seat arrangement with two screens,” allowing couples to maintain intimate contact while enjoying separate games. Ms de Kerckhove also believes that electronic gaming is a “less intimidating” way to introduce players to casino games. For example, “Asians are not traditionally roulette players, and they may prefer to play on their own and make mistakes before playing at a big table and celebrating their wins with other people.”
Operator benefits
By allowing casino operators to remotely manage the content on their terminals, Inspired’s Open SBG™ platform reduces labour costs, increases revenue by providing a more responsive selection of games to customers, and extends the economic
life of machines by up to five years. The system also enables casinos to remotely monitor incomes, fault and play data in real-time. Notably, Ms de Kerckhove states “we fix 50% of our faults around the world remotely. We have a call centre in Wales in the UK, and they manage every one of our estates,” including machines in the UK, Czech Republic, Ireland, the US, Germany and soon France, Vietnam and Cambodia. Asia holds much promise for Inspired. Earlier this year, the company secured a US$1 million deal for the deployment of its Open SBG™ software platform in Asia and is also investing a further US$5.5 million in Open SBG™ terminals and other casino gaming terminals into the region. The investment is to supply and install its latest multi-content gaming terminal and slot machines on a revenue share basis with Silver Heritage Limited (SHL)—one of the leading operators of terminals to licensed gaming premises in the Asia-Pacific region—and local casino operators. Inspired first expanded into Asia earlier this year with the sale of 50 server-based gaming licenses and related multi-content terminals to SHL in April 2007. Additional orders have now brought the number of Inspired terminals sold to Asia on the Open SBG™ platform to over 500. Each multi-content terminal offers players the choice of a variety of casino games, including Electronic Roulette, Virtual Sports, Electronic Card Games and Slots. Following the latest order, Anne de Kerckhove commented: “This announcement is further testament to the appeal and demand for our Open SBG™ platform. Inspired is leading the way in the transformation of the Asian casino market through the supply of our technology and this is a significant step in our strategy for international expansion.” SHL Managing Director Tim Shepherd added: “We were very impressed with the performance of the multi-content terminals and Open SBG™ platform and this new agreement will allow us to run fully digital floors in a number of casinos, enabling us to monitor and fix machines remotely, update content at our discretion and change stakes and prizes to produce the best revenues.”
Dec 2007 | INSIDE ASIAN GAMING
27
28 INSIDE ASIAN GAMING | Dec 2007
Dec 2007 | INSIDE ASIAN GAMING
29
30 INSIDE ASIAN GAMING | Dec 2007
Regional Roundup
Hare and Tortoise Race Countries tipped for casino liberalisation have fallen by the wayside in 2007
C
ambodia might seem a surprising prediction as the next hot destination for casino investment and market growth. Bad press about the country being a hopelessly rackety financial jurisdiction with an extremely bloody past have tended to push it firmly into the financial shadows. A lot can happen in a year though, and in a region with booming economies and a huge amount of liquidity looking for investment opportunities, it doesn’t pay to dwell on the past, however dark and imperfect it may have been. There’s a lot at stake. Gross gaming revenue from legal casinos across Asia was roughly US$13bn in 2006, a year on year rise of 20% according to Las Vegas-based market research firm Globalysis. Despite the high stakes, during 2007 three Asia Pacific countries widely considered much safer bets for developing casino industries worthy of international investment dropped out of the race due to internal political turmoil.
Mice and men
When former British prime minister Harold Macmillan was asked years ago by a journalist what was most likely to upset his government’s plans, he replied: “Events, dear boy, events.” Events have conspired against Thailand, Japan and Taiwan—all previously tipped to legalise casinos before 2010 possibly with help from foreign investors. A military coup in Thailand in late 2006, three prime ministers in quick succession in Japan and a near impeachment of a president in Taiwan have all combined to push three supposedly strong and stable countries towards uncertainty and introspection. They are now focusing on domestic political issues rather than looking outward at the more exotic elements of foreign direct investment such as gaming.
Blessing or curse
Events could also conspire against Macau in the medium to long term. The territory is arguably becoming a victim of its own success, with the explosion in gaming capacity combined with high taxes and wage inflation getting too far ahead of even China’s booming economy and the spending power of its citizens. The cost rises and increased
Rendering of the planned Ho Tram Strip resort in Vietnam
competition are putting a squeeze on margins and on player incentives particularly in the low- to mid-VIP market. By contrast, junket operators in Cambodia have a much lower tax burden, giving them greater freedom to create attractive packages for VIPs. Just like Macau, Cambodia has no shortage of potential visitors. Three billion people live within a five hour plane ride of the capital Phnom Penh, and hotel and entertainment costs are much lower than in Macau. Just as important from an international investor’s point of view, the most forward looking Cambodian casino operator, NagaCorp, a Hong Kong-listed company with a franchise monopoly covering a 200-kilometer radius around Phnom Penh, has no restrictions on its future expansion in terms of locations, number of tables or size of premises. Macau is limited in terms of available land and each new gaming venue needs government permission. Macau is also getting expensive for developers. Las Vegas Sands Corp said in February that construction costs at The Venetian Macao were up to a third higher than originally estimated
because of rising commodity, plant and labour charges.
Pricing
Critically, Macau’s point-of-sale costs for consumers are also rising, which is particularly an issue for price sensitive middleincome visitors from mainland China wishing to graduate from the day-trip market to overnight stays. Inside Asian Gaming found that a room midweek at a run-of-themill three-star hotel in Macau will cost you HK$800 (US$100) per night. Even in Guangdong, which has the highest GDP of any Chinese province and accounts for around 80% of Macau’s mainland visitors, the minimum wage in metropolitan areas is only Rmb850 (US$115) per month. By contrast, a night at the five-star (if slightly run down) Cambodiana Hotel in Phnom Penh was available in the week before Christmas for only HK$732 (US$94) when booked online, and many decent three-star hotels are available in the kingdom’s capital for US$50 or less. Even these prices represent a significant premium though set against local earning power. The average wage of a Dec 2007 | INSIDE ASIAN GAMING
31
Regional Roundup
Cambodian civil servant in 2007 was only US$968 for the entire year according to estimates by the International Monetary Fund (IMF). By that reckoning, US$94 per night for a hotel room in Phnom Penh doesn’t look like such a bargain. The IMF identified the increasing wealth gap spurred by Cambodia’s growing tourism industry as a cause for concern in a report on the country following a fact finding tour in June, though this is a phenomenon that has also affected Macau.
Success story
Cambodia—for so long the scrawny alley cat of the Asian Tiger economies and repeatedly the focus of negative news reporting focusing on its Killing Fields past and track record of administrative corruption— has though quietly been getting on with stabilising its society, building its economy and tourism industry, and trying to raise its governance to acceptable international standards. Part of that modernisation process has been the creation of a contemporary gaming industry. Deutsche Bank’s recent report, Asian gaming: Big is better, lists Cambodia’s gaming market as having 14 casinos with capacity of around 700 tables and 1,500 slots. Many of these casinos are small operations located in border towns and tourist destinations such as Poipet, Bavet, Sihanoukville and Koh Kong. They mainly serve visitors from casino-less Thailand and from Vietnam, which has casinos but bans its own citizens from visiting them.
Resort style
A world away in terms of product quality from most of the Cambodian border casinos is NagaWorld in the capital Phnom Penh. The site is undergoing extensive redevelopment which when completed in early 2008 will include just over 500 hotel rooms, 176 gaming tables, 211 slots and an entertainment venue. It’s a project recognisably in the style of Macau’s integrated resorts, albeit on a more modest scale and at a price tag of
Phnom Penh, INSIDE ASIANin GAMING | Dec 2007 Cambodia 32NagaWorld
only US$100 million—just one tenth the average cost of the IR properties developed by American, Australian, Chinese and Malaysian operators in Macau and Singapore. NagaWorld’s operator NagaCorp, is a Hong Kong-listed company which in 1995 was granted a 70-year licence for Cambodia including a 40-year monopoly on casino operations within a 200 kilometre radius of Phnom Penh. After a modest start as the operator of a floating casino, the company really began to take off after listing on the Hong Kong stock market in October 2006—the first Cambodian company to be listed on any financial market. Listing enabled the company to raise equity via an initial public offering for its first casino hotel in Phnom Penh. The due diligence required by the Hong Kong Securities and Exchange Commission as a condition of listing may also have gone some way to reassure international investors that Cambodia is no longer persona non grata to world financial institutions. As we explain later though, the kingdom still has a long way to go to meet international best practice on safeguards against money laundering and fraud.
Right ingredients
Cambodia’s soaring tourism revenues and low operating costs (starting salaries for casino dealers in the kingdom are about US$80 per month compared with as much as US$2,000 in Macau) could be strong incentives for more foreign direct investment. NagaCorp also owns rather than leases the NagaWorld site unlike its counterparts in Macau. Climbing land prices have seen the site valuation appreciate by 2,000% to US$21 million since the plot was purchased several years ago. Cambodia also has a low tax burden. In 2007, NagaCorp paid an annual gaming licence fee equivalent to about 5% of casino revenues, compared to the 35% direct tax and the 4-5% mandatory social and welfare contributions paid in Macau. The Cambodian government recently an-
nounced a change in the gaming tax regime, with a shift to a product-based monthly tax levied on operators and linked to the number of tables and machines. It’s not clear at this stage whether in practice this will increase operators’ tax burdens, reduce them or merely standardise them and make them more transparent. At any rate it is unlikely to have a significant impact on the ability of NagaCorp and other Cambodian operators to offer incentives to junkets. NagaWorld’s average win per junket table per day rose from US$2,959 in 2003 to US$6,550 in 2006, while Macau’s average win per VIP table has steadily declined as capacity explodes. ‘Special Tour Groups’ as NagaCorp calls its junket trade, accounted for 61.6% (US$52.6 million) of its US$84 million gaming revenue in 2006, up from US$21.6 million in 2003. Revenue from NagaWorld’s public gaming rooms has been stable but static, probably due to capacity limitations. About a quarter of the casino’s mass market visitors are from Korea.
Market share
In 2006, Malaysian VIPs at NagaWorld kept their traditional top spot, accounting for 5,258 visitors (40%). Chinese VIPs were in second place by head count with 3,343 visitors (25%), but provided a higher checkin value, accounting for US$91.9 million worth of chips. Visits from Chinese VIPs were down from a peak of 5,238 in 2004, possibly because of a crackdown on cross-border gambling by Beijing, but those that are still coming are buying more chips pro rata. Singapore high rollers were the third largest component providing 2,884 customers (22%) on a check in value of US$53.7 million, though it’s possible this trade will be dented when The Marina Bay Sands, the first of Singapore’s own IR resorts, opens in 2009. Vietnam (9%) and Thailand (4%) VIPs accounted for the remainder of NagaWorld’s total, with Thai visitation more than doubling in 2006 compared to 2005. Many tourists come to Cambodia to see the temples of Angkor Wat and the natural
The future Marina Bay Sands, Singapore
splendour or the Mekong River rather than to gamble. The growth in the size of the visitor market and the improvement in its demographic beyond the more adventurous backpacking fraternity will, however, undoubtedly help to support the gaming sector, even if it’s only via a coach trip to visit NagaWorld’s mass market hall.
Tourism boom
Revenue from tourism has certainly been one of Cambodia’s economic success stories. Cambodia’s Ministry of Tourism says in the third quarter of 2007, the country received 1,407,164 international visitors—an 18.9% increase compared to the same period of 2006. Siem Reap/Angkor recorded 803,788 visitors—a market share of 57.3% and a 38.1% increase on the same period in 2006. Phnom Penh and other destinations brought in a total of 599,876 visitors and a share of 42.7%. According to the ministry, in just six years annual gross revenues from tourism have risen 301%. In 2001, the annual take was US$349 million per annum but annual revenue at the end of 2006 had swelled to US$1.4 billion. Tourism spending was projected to reach more than US$2 billion in 2007 as Cambodia continued to consolidate its place on the mainstream holiday map, though it is still less than a third of the US$7.81 billion revenues produced by gaming and tourism in Macau in 2006.
contribution. As a consequence, poverty remains high in rural areas and progress will have to be accelerated if Cambodia is to meet its Millennium Development Goals.”
One to watch
David Green, Director of PricewaterhouseCoopers’s Macau Gaming Practice, says: “Cambodia’s economy is growing very quickly. I think Naga’s an interesting one to watch and see how it develops because it’s somewhere between a border-type casino and a full resort-type property. “Cambodia is also committed to raising its game on the regulatory side. They now have a proper gaming tax regime. They’ve gone to a product based tax that imposes a monthly levy on tables and machines.”
Old habits
There are hints though of the old Cambodia in that the tax rate isn’t fixed and it arguably also lacks transparency because it isn’t revenue based. This patchy regulatory framework sums up the continuing shortcomings of Cambodia as an FDI destination
for foreign casino operators. As far as money laundering–the great shibboleth of gaming regulators and western governments—is concerned, Cambodia’s laws are still not compliant with international standards, says the Asia/Pacific Group (APG) which advises the region’s emerging economies on ways of combating financial fraud. The fact that the HKSEC was able to sign off NagaCorp’s listing in Hong Kong is due to the fact the company gave specific assurances regarding internal audit controls of its cash flow that go beyond the current requirements of Cambodian national law. Whether such corporate extra-national assurances would satisfy a regulatory body such as the Nevada Gaming Commission were a US casino company to seek investment in Cambodia is an interesting question.
Legal reform
This summer, the APG conducted its first assessment of the country’s safeguards, known as an APG Mutual Evaluation. While the checks are designed to encourage im-
Thumbs up
The IMF report notes in the executive summary: “Strong macroeconomic policies have enabled Cambodia to achieve impressive growth and make inroads into poverty. Supported by prudent fiscal and monetary policies that have strengthened the economy’s resilience to shocks, growth has averaged over 9% since 2000 and was 10.75% in 2006. Anchored in part by extraordinarily high dollarization, inflation has remained low and confidence increased.” The report adds: “Growth has been driven by the garment and tourism sectors, with agriculture only recently making a sustained
Genting’s planned Resorts World at Sentosa, Singapore Dec 2007 | INSIDE ASIAN GAMING
33
Regional Roundup
provements rather than to browbeat countries for poor performance, the results show just how far Cambodia still has to go to meet even Macau’s standards, let alone Nevada’s. The report found Cambodia was noncompliant in no less than 38 policy areas relating to crime and fraud prevention. Basic flaws included a lack of a reporting procedure for unusual transactions, absence of a legal basis for extraditing those suspected of money laundering or terrorism financing, the lack of a specialist financial intelligence unit, lack of effective internal audit controls on businesses and financial institutions and the lack of effective powers to seize and investigate the source of cash carried over Cambodia’s international borders. David Green says: “The unknown for me is when they’re going to have mandatory transaction reporting. They don’t have it now
34 INSIDE ASIAN GAMING | Dec 2007
and I’m really not sure what their timetable is going to be.”
The Rest
Of the other Asian countries considering gaming reform or new projects, Singapore is widely expected to set the gold standard in terms of regulation, but it remains to be seen how robust its ROI will be, given that as a condition of the licences the city’s government has engaged in some social engineering and shifted the IR focus to general entertainment and tourism and away from gaming. Mr Green thinks that in neighbouring Malaysia, Genting Highlands may well suffer from the opening of the Singapore market, despite the recent praise heaped upon the resort by Deutsche Bank because of its current profitability levels. Genting operator Genting Berhad does however have
its position hedged as the lead partner in Singapore’s second IR resort, Resorts World Sentosa, due to open in 2010.
Strip poker
Of proposed projects in the emerging economies, Vietnam is the most promising in terms of scale of project and potential international appeal. The Ho Tram Strip, a US$4.5 billion scheme planned for Vung Tau province, a coastal area outside Ho Chi Minh City, has recognised international partners in the shape of US-based Fontainebleau Resorts and Turnberry Associates as part of a Canadian consortium called Asian Coast Development Ltd. If the project goes ahead as planned, building could start in 2009, says Deutsche Bank. Plans for phase one include 1,200 hotel rooms, 77,000 square feet of gaming space
Regional Roundup
It’s in a fairly politically sensitive area of the world and it’s not really on the main route for people in South Asia and East Asia. Japanese visitors will probably keep going until something else comes along.”
Japanese junkets
Kangwon Land
in five Vegas-themed casinos (125 tables and 500 slots), 10 restaurants, and a 200-acre country club. Project capex on phase one is estimated at US$500 million, and the scheme could be completed by 2017. Although the track record of the announced partners is not in doubt, commentators have raised some questions about the ability of the Vietnamese government to deliver such an international standard resort, given the levels of administrative corruption reportedly prevailing in the country.
Under threat
South Korea has a perpetual sword of Damocles hanging over its casino industry, given that by law most of its product (16 out of 17 casinos) is restricted to foreign nationals—overwhelmingly Japanese visitors. If Japan ever gets its casino liberalisation act together, then Korea’s revenues could be badly hit, unless the government allows more venues to open to its own citizens. Only one resort—Kangwon Land—is currently allowed to do so. This integrated casino resort started operations in October 2003 and currently features 132 tables and 960 slot machines. It plans to expand its capacity to 200 tables and 1,140 by the end of the first quarter of 2008. The resort has hotels, an amusement park and golf course as additional revenue streams to support the casino business. Deutsche Bank gaming analyst Younroe Kim said recently that Kangwon Land should capture a 20% plus market share in Korea within the next two to three years. DB expects the company to maintain its monopoly position as gaming supplier to Korean residents until at least 2015. Of the casinos open to foreigners, Grand Korea Leisure, a subsidiary of the Korea Tourism Organization, opened three new casinos under the Seven Luck brand in the first half of 2006—two in Seoul and one in Pusan. David Green says: “Korea hasn’t gone forwards in my view. It’s pretty stagnant.
That “something else” mentioned by Mr Green may already be here, despite the failure of the Japanese government to grasp the nettle of casino liberalisation. An increasing number of Japanese junkets are reportedly coming to Macau, attracted by the superior quality of its product when compared to the Korean offer. There are also direct business links between the Japanese leisure industry and one of the Macau operators, as the Japanese gaming machine maker Aruze Corp—manufacturer of Japan’s highly popular pachinko machines—is a shareholder in Wynn Resorts. Aruze founder Kazuo Okada has been on the Wynn Resorts board as vice chairman since 2002. Aruze has also been working with Wynn to lobby for casino legalisation within Japan. At present in Japan, the only truly legal gaming is betting on sports such as horse racing and cycling and playing the national lottery, which taken together generates US$60 billion in tax revenues per year according to Deutsche Bank. This number is excluding revenues from Pachinko, the pinball-type game played by an estimated 17 million Japanese, which in regulatory terms falls in to a grey area but which nevertheless generated total estimated revenues of US$248 billion in 2005.
Not just yet
Over the medium- to long- term, Japan is expected to lift its ban on gambling to boost its domestic tax take and perhaps help the tourism industry. The whole scheme has fallen by the wayside recently though, thanks to a combination of events. Firstly, the government bill expected to legalise casinos was delayed until 2007 because of changes in the parliamentary timetable. Then political crisis gripped the country’s governing Liberal Democratic Party, with prime ministers arriving and departing in quick succession, in a reminder of the revolving door politics and ‘grey man’ leadership that have marked much of Japan’s post-war government. It has been a sharp contrast to the charismatic and dynamic leadership of the elegantly coiffured Junichiro Koizumi who led the country for a record five-and-a-half years. It has left gaming industry analysts wondering whom among Mr Koizumi’s successors will have the political authority to shake the country again from its administrative torpor and deliver legal gaming as part of a wider economic reform package.
Deutsche Bank says operators consider Tokyo as the prime location for the first casino, specifically the Odaiba waterfront district. Other potential sites include Osaka (near Universal Studios) and the resort areas of Hokkaido and Okinawa.
Stop go
In Taiwan, lotteries are currently the only legal form of gaming. Despite the fact that the government has been making noises for several years about liberalisation, analysts familiar with the issues say they will believe when they actually see it happen. Taiwan’s famously robust parliamentary politics frequently involve fist fights among MPs, who are also noted for their opacity and passivity when it comes to actually passing legislation. President Chen Shui-bian has been hobbled by controversy over official policy toward China and allegations of corruption against his family. His vice president, Annette Lu, is thought to be pro-gaming—though as the old political joke goes, when it comes to elections, Ms Lu is probably on the side of Annette Lu. Although it’s possible the political log jam over gaming could be broken after the presidential election scheduled for March next year, investors shouldn’t hold their breath. The best medium-term bet is the outlying Penghu Islands, where the locals have voted in favour of casinos as a way of boosting the local economy.
Unanswered questions
In the Philippines, the Philippine Amusement and Gaming Corporation (PAGCOR), the country’s monopoly casino operator-cumregulator, recently put out a tender document for a casino resort development at Manila Bay, but David Green says there are still a number of question marks over terms and conditions that need clarification before potential investors can crunch the numbers and consider a workable business model. As far as Thailand is concerned, David Green thinks that despite the recent promise of parliamentary elections by the military leadership that seized power in a bloodless coup in September 2006, the casino liberalisation issue is on hold indefinitely.
Ruled out
He says: “Thailand is certainly not going to happen now. I think with Thaksin going, it has put the whole programme further back. He was susceptible to suggestions about it. Before Thaksin was removed, there was supposed to be some sort of referendum on casinos, which of course didn’t happen once he was evicted. I don’t see Thailand happening any time soon if at all.” Dec 2007 | INSIDE ASIAN GAMING
35
Online Gaming
Tequila’s Shot Tila Tequila, “the Queen of MySpace” and star of hit MTV reality show “A Shot At Love With Tila Tequila”, continues her bid for online domination with TilaCasino.com
“G
rowing up in a Vietnamese household [in the US], I thought everybody celebrated Christmas by gambling,” Tila Tequila told Inside Asian Gaming during a recent visit to Macau. Ms Tequila—dubbed “the Queen of MySpace” after accumulating more than two million friends on the social networking site and featured as a Time magazine Person of the Year for 2006—parlayed her celebrity status and business savvy to enter the world
36 INSIDE ASIAN GAMING | Dec 2007
of online gaming with her site www.TilaCasino.com, which offers a full range of casino games and poker. The site recently received a revamp and now offers a slicker look and enhanced navigation, faster loading time, sexier playing features and a direct link to Tila’s News and Blogs. The games on Tila’s site are live and so are the dealers—they hand out chips and cards through live streaming video. The casino hosts tournaments with large jackpots
and poker players can compete at whatever level they prefer. Tila teamed up with Emphasis Services Limited (ESL), a leading Asian online gaming management, marketing and consultancy groups, to launch TilaCasino.com. According to ESL Marketing Director Jeff Mann, “Tila has been totally hands on with the site’s new design and we all think it looks pretty damn good as well: It has Tila’s magic touch—she really is quite the business woman and cer-
tainly knows what she wants.” TilaCasino.com is hosted in Alderney, the third largest of the British Channel Islands. Alderney has one of the most stringent licensing requirements of any online gaming jurisdiction in the world.
Tila’s rise
Before joining MySpace, Ms Tequila had actually built large followings on other social networking sites, including Friendster, but the sites kept limiting the number of friends she could have because they were not technically equipped to handle the amount of traffic she was able to generate. “So they kept kicking me off,” she says. Then, “MySpace owner Tom Anderson saw I was a hot commodity so he emailed me personally and asked me to join MySpace. “There was nobody there when I joined. So I had an email list of 40,000 people from my modelling website and stuff, so I mass emailed them and told them to join MySpace on the friends list because I was angry at Friendster after they maxed me out at 500 friends. If they’d let me keep going, Friendster would’ve been MySpace.” She adds: “People think MySpace made me, but I was already in Playboy and doing a lot of modelling before MySpace.” Although Ms Tequila is now a celebrity and doesn’t have time to personally reply to the thousands of “friends” who join her MySpace site every day, she points out “there’s always the sense that I’m the girl down the street. So I can connect to a lot of people. A lot of people can relate to me.” Interestingly, she believes people who resent her fame and success can be more ardent followers of her progress than her fans. “Either they really love me or they re-
ally hate me. There’s no in between. My number one fans are the haters. Those are the ones who buy my music videos so they can talk shit about them. The haters know everything about me. They know my high school records. They knew about my sister. They’re obsessed, the haters. I say ‘wow you must have done a lot of research.’ You wouldn’t be as successful if you didn’t have people hating on you. Then your fans come and stand up for you.”
Sign of the times
Ms Tequila is now more popular than ever since the October launch of her own reality TV show, “A Shot At Love With Tila Tequila”, which has become the second most popular show on MTV. The show has 16 guys and 16 girls compete to win Tila’s heart as our bisexual heroine gradually whittles down the field of contestants until she chooses the one for her. The show has proved a big hit with MTV’s 18 to 34 target demographic, ranking number 1 in its time slot. The last episode garnered 4.2 million viewers. The show has already created a stir in the mainstream media, with news channels such as CNN debating whether the show is too risqué, under headlines such as “Too Raunchy or Just Entertainment?” In early December, the “haters” were at it again, accusing Ms Tequila of not really being bisexual. It is perhaps an encouraging sign of the times that a celebrity would take offence at being labelled a “closet straight”. Ms Tequila responded angrily that the claim was absurd.
Dec 2007 | INSIDE ASIAN GAMING
37
Casino Scams
High-Tech Poker Threats As poker takes off in Asia and the sums involved grow, cheaters will employ increasingly ingenious methods to make off with players’ money. Infamous casino scammer turned anti-cheating expert Richard Marcus warns of the potential high-tech security scams to be aware of in brick and mortar cardrooms
For several years now, we’ve been hearing about high-tech scams in online poker games. First came collusion-type cheating engineered by players using multi-PCs and multi-IP accounts. Then came poker “bots” whose software programs are now believed capable of incorporating artificial intelligence into strategy decisions. And recently, we’ve heard reports of hacked security codes and high-tech money laundering involving criminals washing their illicit earnings while playing poker online. But what about good old-fashioned lowtech or non-tech poker rooms? Are they safe from crafty cheaters using high-tech wizardry to earn ill-gotten gains? Well, until two years ago it appeared that they were. Besides some weak and rather unprofessional attempts to use hidden computers to track played cards (especially in stud games) and calculate playing and betting strategies with that knowledge, nothing much about sophisticated technology was heard through the real-world poker-cheating grapevine.
Something up her sleeve
That changed in 2005. In September of that year, a woman playing three-card poker at the Mint casino in London, England, aroused suspicion while winning at an exorbitant rate—34 of 44 hands, which is highly unlikely at that game. The same woman had been noted winning at similar rates in other London casinos offering three-card poker. Another thing Mint security personnel noticed was that a white van was parked in the proximity of the Mint’s front entrance—as also observed during her previous wins at the other casinos. An immediate on-site investigation was launched, and it was discovered that beneath her sleeve, the woman was wearing a harness on her arm that housed a tiny digital micro-camera. Sitting in the back of the van outside, security staff found a computer techie hunched over two computer screens. One was for the live camera feed, the other to play the recordings of what the woman’s 38 INSIDE ASIAN GAMING | Dec 2007
hidden micro-camera was filming inside the casino: the cards coming off the dealer’s pack as he dealt them facedown to the players and himself. By positioning her arm on a downward slope from the dealer’s hands as he dealt, the woman’s camera was able to film the cards’ faces. Back in the van, the techie slowed down the digital images on the screen and perfectly read the cards. He then relayed the info back to the woman and another man—also an accomplice—at the table, through the hidden earpieces they wore. The two cheating players were thus able to play their hands with an enormous edge on the casino. True, three-card poker is not poker, but it is a step closer to it than say blackjack or roulette. It is certainly a poker derivative game. But if this incident was not enough to make you wary about possible goingson in brick and mortar cardrooms, in July this year, we learned of another frighteningly high-tech scam that did involve poker in a brick and mortar room, just not a public cardroom. Of course I am referring to the highstakes private-game scam in the Borgata hotel in Atlantic City, recounted in my article “The Walls Have Eyes” in the August issue of Inside Asian Gaming, which took place just before the start of Atlantic City’s preeminent poker tournament, the Borgata Open. For those of you unfamiliar with the details, the scam took place in a luxury Borgata hotel suite that was rigged with digital cameras in the walls. These cameras filmed players’ hole cards while they peeked at them rather than the cards coming off the dealer’s deck. In place of the van used in London’s three-card poker scam was the hotel room next door to the suite, where two techies viewed the camera images on laptop screens and relayed the info to the earpieces of their cohorts playing in the high-stakes game. It was very similar to the London scam inasmuch as digital video and radio equipment were used to spy on cards that were supposed to be unseen and transmit the information back to the table.
Borgata bust cover-up?
Rumors circulated and still persist that there was more to the Borgata scam than was revealed by the New Jersey Casino Control Commission and therefore the press. This scam was not made public until early July, a month after it allegedly got busted. Why? Early reports claimed that the scam was directly connected to the Borgata Open and took place at the same time as the tournament was being held. The natural supposition was that the big tournament players’ hole cards were being secretly videoed and the information given to a syndicate of tournament cheaters lined up against them at the tables. Whether this is true and a cover-up is in place to protect the integrity of big-time tournament play doesn’t really matter. The fact is that high-tech cheating has arrived in brick and mortar poker, and you need to be aware of it, because in the future it will grow. To date, here is what I am aware of concerning actual high-tech cheating in brick and mortar ring games. There are perhaps half a dozen professional teams working with micro-cameras across the world, but that number is about to increase. They operate in a similar fashion to the London threecard poker team. Videoing players’ hole cards in a public cardroom scenario is generally too difficult to pull off. The problem is that in spite of the availability of sophisticated miniature digital camera equipment, cheaters still have to get the right angle and viewpoint of players’ hole cards to video them. Most poker players are already wary enough of this. They naturally protect their hole cards while peeking at them, in most cases keeping them adequately hidden from any eyes—either human or man-made and fitted into optic lenses—lurking behind. Unless cheaters have some kind of tiny periscope hidden somewhere in the cushion of every playerspot on the table, effective videoing of hole cards would not be viable. But videoing the faces of the cards coming off the deck during the deal—that’s a different story. This can be done with a master’s
proficiency. Just like the London trio filmed the cards coming off the deck at the threecard poker table, a cheating team can very accurately gauge the angles necessary to accomplish the same feat at the Texas hold’em and seven-card-stud tables. Of course, particular dealers would either inadvertently aid or hinder the efficiency of the cheaters, but there are many dealers out there who, from the right angles, consistently expose enough of the downward spiralling cards’ faces to the tiny lenses up someone’s sleeve or hidden in a woman’s open handbag.
What to watch for
It’s very difficult to see even if you’re watching out for it, but you never know, you just might see something to clue you in. Here’s the scenario to be aware of. Ideally, the high-tech team will have two people with hidden micro-cameras on the table. This is not always possible due to playing conditions at any given moment, but if the team is patient they will not only get their cameramen to the game, but also into the positions best suited for their covert operation. With most dealers, those positions are the 2 and 3 seats to the dealers’ left and the 8 and 9 seats to their right. These positions supply the cameras with the best angles and the optimum fields of vision determined by the distances that the cards travel from the top of the deck on their way to the felt in front of the players. The cameras will nearly always miss several cards, especially those dealt to the players in the 1 and 10 seats because of the shorter distance, but in all cases they will pick up more than enough cards to give the cheaters a monster edge in the game. As demonstrated by the three-card poker scam, the images will be slowed down by a computer program and read clearly on monitors, then relayed back to players at the table wearing invisible audio devices in their ears. In most cases, the two players filming the cards will be the only team members in the game, as there is no inherent advantage in having a third player, unless, of course, the team wanted to get into added collusion play (they’re already playing in collusion) with another hand to participate in the whipsawing that sucks more money into pots. Still, the third player really is not necessary and would probably reduce the overall profit because in a ten-handed game they would have three dead seats (their own money) instead of two.
River card risk
If you think this type of cheating would completely run over a hold’em game, you’re right. But think what it would do to a stud
game! How many hands are decided on that river card dealt facedown? And dealers tend to be more deliberate in their delivery of that last card to each remaining player, which only gives the cameras a bigger window in which to catch its image. If you’re wondering about tournaments, the threat of high-tech cheating is decidedly less, regardless of what may have happened at the Borgata Open. Firstly, and especially in no-limit events, players often risk getting knocked out in a single hand. This would nullify whatever chips they had won up to that point as there would of course be none left, and only the loss of entrance and re-buy fees would stand. Secondly, tournaments are much more scrutinized by cardroom personnel, and many of them are already filled with cameras that are supposed to be there. Imagine the scandal that would brew if the network cameras discovered the illicit ones! And thirdly, as there are always highstakes cash games going on during all the major tournaments, it is much more profitable for the high-tech cheaters to join their low-tech counterparts in these games. So, in short, don’t worry much about high-tech tournament cheating—unless someone is using isotope imaging to mark the cards. Isotope imaging… what did I say?! Is that another high-tech cheating formula coming to brick and mortar poker? Not exactly, but there are high-tech card-marking schemes in the works. Can you guess what they entail? Well, if there’s one technology that’s on the cutting edge of just about everything, naturally it would be that same technology that takes poker cheating to new heights in the coming years. Of course, I’m talking about laser technology.
Laser-sharp scams
We’ve already heard about laser scanners in cell phones being used to predict where roulette balls will land. Several of these scams have proliferated, the most famous of which was the 2004 Ritz Roulette Scam, where another trio of two men and a woman beat a bunch of London casinos out of US$3 million. The next step in laser cheating technology is going to revolutionize marking cards at poker tables. Forget all that invisible and disappearing daub that is the avant-garde method of today’s advanced card-markers.
Within a few years we will see—or at least suffer unknowingly—the effects of tiny laser pens that card-markers will use to shoot beams onto the backs of their hole cards, which will result in tiny discolorations that can only be seen with special lenses and at certain angles. Laser-engraving technology is already used for marking everything from retail bar codes to paper, wood and plastic products, and the transition to using that technology to covertly mark the backs of playing cards is just over the horizon. And these laser guns will be made to resemble the normal assortment of objects players routinely surround themselves and their chips with at poker tables. Are there any other nefarious hightech gadgets in the works to cheat you out of your money at brick and mortar poker games? You bet. The only problem is that I don’t yet know what they are. But as soon as I do, I will let you know. I can tell you one thing now, however. The high-tech cheaters out there are more determined than ever. They will go to great lengths to develop products and strategies to part you from your money. Don’t panic though. Just remain vigilant. Like in any poker game, if you get the feeling that something not kosher is going on, just get up and go find another game. Don’t hang around trying to figure out if someone at the table is videoing the deals or “beaming” the cards. It will probably be too difficult. Richard Marcus, a former baccarat dealer and recognized authority on numerous aspects of Asian gambling and cheating, now offers detailed training and seminars to casino staff, including dealers, floor personnel and surveillance. His engaging and authoritative insights have been featured at The World Game Protection Conference, the Asian Casino Executives Summit, the Peru Gaming Show as well as many international TV segments about casino surveillance and the armies of cheaters who battle against it. http://www.richardmarcusbooks.com/ protection.htm Dec 2007 | INSIDE ASIAN GAMING
39
ICE Preview
ICE Packed! The size and scale of the 2008 International Casino Exhibitionwill outstrip all previous shows by some considerable measure, offering visitors a wider selection of new products and ideas thanever before, as the London Show continues to break all records
O
pening its Earls Court doors to the international industry on 22/23/24 January, ICE—together with its remote gaming ICEi contingent—will feature at least 266 exhibiting companies over 16,000 square metres (172,160sq.ft) of floor space. “These figures represent just the confirmed list of exhibitors at the start of December, and the final tallies could well be higher,” explained Clarion Gaming sales manager, Emma Green. “Put into context, the final numbers for the 2007 show were 209 exhibitors and just over 14,000sqm, so visitors can expect to see around 27% more in January, in terms of different suppliers, and an additional 15% of products and systems.”
High profile debutants
With 79 first-time exhibitors, there’ll be plenty of new names to take in on the Earls Court floor, but standing out amongst the ‘newbie’ crowd with maiden displays over 50 sq. m will be Odrex (Ukraine), Cashpoint Sportwetten (Austria), Sleic (Spain), G Planet (Slovenia), Gamesystem (Poland), Astro Corp (Taiwan), Global Zitro (Spain) and DLV (Latvia).
Enhanced presence
Expansion has been achieved across two fronts: firstly, no fewer than 79 companies are scheduled to exhibit on the ICE floor for the first time, bringing with them a plethora of new products, services, systems and ideas not previously seen at the London Show; secondly, of the 187 returning exhibitors, just over half (99) have opted to increase their floor space – allowing further opportunities to showcase new formulae from proven and successful brands.
With around 100 exhibitors aiming to make bigger waves with larger stands at ICE 2008, a number really stand out as pushing the boundaries in more ways than one. None more so than WMS Gaming, which is growing by 112% to 456 sq. m. Gold Club is also doubling up to 240 sq. m while fellow Slovenians Carat Technology are increasing their pitch year-on-year by 212% to 156 sq. m. Fair Play, TCS John Huxley, JCM American, Konami Gaming, Apex Gaming Technology, IGT Europe, Tranchant Gaming Technology, ICIT, BetStone, A Bet A Technology and Royce & Bach complete the line-up of heavyweight growers adding to their already burgeoning displays.
Big brands
Global flavour
Bi-fold growth
There’s no denying the quality of the ICE offering, with every major global supplier of slots, table games, systems and ancillary products vying for custom. Going on the size of their pitch alone, this year’s ‘big league’ comprises a top ten of Novomatic-Austrian Gaming Industries, IGT-Europe, WMS Gaming, TCS John Huxley, Atronic International, Aristocrat Technologies Europe, Fair Play, Informatica Franco, Amatic Industries/Genesis Games and Apex Gaming Technology. Also demanding high levels of attention with stands in excess of 150 sq. m (1,614 sq. ft) are Tranchant Gaming Technology, Gold Club, Alfastreet-Pockaj, Progressive Gaming International, Elektroncek, Gaming Partners International, Unidesa Gaming & Systems, Abbiati Casino Equipment, Bally Technologies, Ainsworth Game Technology, Konami Gaming and Carat Technology. These are joined by a further 19 companies with 100 sq. m-plus displays.
A strong international mix awaits all visitors to ICE 2008, with exhibitors drawn from over 40 countries bringing with them products and games suitable for every jurisdiction and gaming discipline. In addition to a third of the exhibitor roster based in the UK, strong representations come from the USA (21 exhibitors), Slovenia (13), Austria and Spain (10 each), Taiwan (9), Canada, Germany, Italy and Malta (8 each), Netherlands (7), Sweden (6) and France (5).
Networking opportunities
At show, bars dedicated to the international casino and remote gaming sectors and a hi-tech business lounge will provide locations for operators to mix business, pleasure and compare notes on the latest developments across worldwide jurisdictions. Out of hours, there’ll be the popular ICEi Party, ‘Breaking the ICE’ (Tuesday 23rd January), the inaugural ICE Party, ‘After Dark’ (Wednesday 23rd) and the British Casino Association’s Casino Ball (Thursday 24th). Summarising the attraction of ICE, Clarion Gaming’s head of exhibitions, Karen Cooke said: “Thanks to the continued support and bold strides made by our exhibitors, old and new, ICE continues to go from strength to strength. As a result, ICE 2008 will stage the most dazzling display of new equipment, presenting operators everywhere with new opportunities for growth. We look forward to welcoming the many thousands of visitors from over 100 nations in January.” • ICE – Earls Court, London, UK – 22/23/24 January 2008 • Free entry registration and further information: www.ice-exhibition.com
Dec 2007 | INSIDE ASIAN GAMING
41
Briefs
Regional Briefs LVS Launches New HK-Macau Ferry Service
Las Vegas Sands Corp (LVS) announced on November 30 that it had initiated a high-speed ferry service between Hong Kong’s Macau Ferry Terminal at Shun Tak Centre and Macau’s newly opened Taipa Temporary Ferry Terminal on Macao’s Taipa Island. The launch of the new CotaiJet service gives a vital boost to the transportation capacity between Hong Kong and Macau. “As Hong Kong, Macau, and the wider Pearl River Delta enjoy increasing levels of visitation from throughout Asia and around the world, investments in transportation infrastructure will be vital to the continuing development of the region as a leading leisure and convention destination,” said Mr. William Weidner, president of LVS. “This new service will offer visitors to the region, and residents of Hong Kong, Macau and southern China, important additional transportation options on the increasingly utilized Hong Kong-Macau route. In addition, visitors to Macao will have the opportunity to arrive directly on Taipa Island in close proximity to The Venetian Macao and the Cotai Strip.” The Grand Canal Shoppes vessel is one of three 47.5 meter hitech passenger catamarans providing LVS’ CotaiJet service. The CotaiJet service features 20 sailings per day, 10 each from Hong Kong and Macao, with service beginning at 7 a.m. each day. An additional seven boats, bringing the fleet of CotaiJets to 10, are expected to be placed into service throughout 2008.
PacificNet to Present at China Conference
PacificNet, a leading provider of gaming and lottery technology, e-commerce, and Customer Relationship Management (CRM) systems in China, announced on November 29 that its Chairman and CEO, Mr. Tony Tong, along with the senior officials of its subsidiary companies, including Take1 Technologies (Take1), PacificNet Games (PactGames) and Guangdong Poly, will present at the 4th Annual International Conference on Gaming Industry and Public Welfare in Shanghai and Macau, to be held on December 1-3, 2007. PacificNet’s latest gaming products such as video lottery terminals (VLTs), mobile gaming devices, bingo and keno gaming machines will also be showcased at the 2nd Annual Gaming Technology & Machine Expo, which accompanies the conference. 42 INSIDE ASIAN GAMING | Dec 2007
The International Conference on Gaming Industry and Public Welfare and the Gaming Technology & Machine Expo are jointly organized by the China Center for Lottery Studies (CCLS) at Peking University, Macao Polytechnic Institute, and Macau’s Institute for Tourism Studies and Tourism and Casino Career Center. “We are honored to be invited to present our products and services to China’s lottery gaming industry, leading gaming research authorities and government regulators including the Ministry of Finance of the Welfare and Sports Lottery Center,” said Mr. Tong. “This is an excellent opportunity for us to showcase our latest gaming and lottery products and technology, as well as our successes in other legal gaming jurisdictions. We are delighted to share PacificNet’s successful experience with China’s leading gaming and lottery experts, researchers, and government policy makers on gaming technologies for social welfare and the promotion of legal gaming.” PacificNet’s recent investment in Guangdong Poly, a leading legal welfare lottery operator in China, is expected to enable PacificNet to participate in China’s rapidly growing state-sponsored legalized gaming and electronic lottery operations. Guangdong Poly is a leading operator approved by China’s Welfare Lottery Center to develop and operate real-time electronic paperless lottery services in China, in accordance with the rules and regulations set by China’s Welfare Lottery Center. China’s lottery market surpassed US$10 billion in 2006 and is expected to continue growing according to the Chinese Ministry of Finance, which oversees all of China’s lottery sales. Of the US$10 billion spent on lotteries in China, over US$6 billion was generated via the China Welfare Lottery (CWL) system, representing a 20% increase over 2005.
PBL Demerger Clears Final Hurdle
Crown Casino, Melbourne
Australia’s Publishing and Broadcasting (PBL) said it has cleared the final hurdle to a demerger of its gaming and media assets, after having won approval from Australia’s Federal Court in November, according to an AFP report. Under the scheme, PBL’s gaming assets will be held by Crown, with the media assets held by Consolidated Media Holdings (CMH), both of which will be separately listed on the Australian Stock Exchange. Shareholders in PBL, the company of the late Kerry Packer, overwhelmingly approved the plan.
Briefs
“The court orders approving the PBL scheme and the demerger scheme will be lodged with the Australian Securities and Investments Commission on Friday, 30 November, 2007,” the company said in a statement. The scheme and demerger took effect November 30, according to PBL. The first scheme allows Crown Ltd to buy all shares of PBL and the second allows Crown to spin off PBL’s media assets into a separate company. Crown’s investments will include casinos in Australia, Macau, Britain and the United States, with an ongoing acquisition of Gateway Casinos in Canada in partnership with Australia’s Macquarie Bank. PBL’s media operations will go to CMH, with assets including 25% of television network Foxtel, 50% of Fox Sports, 27% of job search website Seek and 25% of PBL Media.
A-Max Secures Funds for VIP Move
According to a Finance Asia report, Hong Kong-listed A-Max Holdings has completed the HK$2 billion (US$257 million) fund raising exercise that will mark the starting point for its move into the VIP segment of Macau’s fast-growing gaming sector. A-Max is currently a passive investor in the Greek Mythology casino, sharing in revenue from some of the property’s gaming tables. With its new funds, however, it will become the single largest junket operator in Macau with a 46% share of the VIP market. The actual junket operations will be carried out by an independent company called AMA, but A-Max will gain access to 80% of the revenues generated by this entity through a profit transfer agreement. Finance Asia cites industry observers as estimating A-Max will collect a margin of at least 1.4% from this business, which should make it very profitable. The deal could also be highly lucrative for Melco PBL Entertainment (Macau), whose Crown Macau casino will be at the receiving end of A-Max and AMA’s new business. A-Max had originally sought to raise HK$3 billion, but the initially lukewarm response let to CLSA re-launching the placement at a smaller size of HK$2 billion. The lukewarm response to the original transaction was perhaps because it came too close to year-end in jittery markets and perhaps because of its sheer size—the CLSAled placement will more than double A-Max’s current market cap of about US$200 million. Citing a source connected to the deal, the Finance Asia report postulates that “what may have won some investors over after the deal was downsized was the increased commitment by Melco PBL, which was clear evidence of the value it hopes to extract from the new business. Essentially, the Crown Macau will now pay AMA’s junket operators who bring VIP clients to its casino on a daily basis rather than once a month. This will reduce AMA’s need for working capital by about HK$1 billion and make sure that the business won’t be hampered by the fact that the fund raising turned out to be smaller than originally planned.”
Stanley Ho Launching Long-Delayed IPO
Macau casino tycoon and erstwhile monopoly operator Stanley Ho is launching the long-delayed initial public offering (IPO) of his company, Sociedade de Jogos de Macau (SJM). SJM retains the largest share of Macau’s casino revenue, but is facing increasingly intense completion from new operators since the end of Stanley Ho’s monopoly in 2002. SJM will apply to the Hong Kong stock exchange for approval to raise at least US$1 billion, according to people familiar with the matter, reports the Financial Times. The IPO, expected in January, is being arranged by Deutsche Bank, BNP Paribas and CLSA.
The end of Macau’s 40-year casino monopoly in 2002 has brought a wave of investment from some of the world’s largest gaming operators, led by Sheldon Adelson’s Las Vegas Sands Corp (LVS) and Steve Wynn’s Wynn Resorts. Mr Adelson now operates the world’s two largest casinos—the Venetian Macao and the Sands Macao—in Macau. Other new casino operators in Macau include Galaxy Entertainment Group, controlled by Hong Kong property tycoon Lui Che-woo. Melco PBL Entertainment (a joint venture between Australia’s Publishing and Broadcasting Ltd and Hong Kong-listed Melco, headed by Stanley Ho’s son Lawrence), and another JV between Mr Ho’s daughter Pansy and US casino and entertainment giant MGM Mirage. The first Macau casino owned by Pansy Ho and MGM-Mirage is set to open on December 18. Bringing SJM to market has been complicated by a complex shareholding structure at its parent company, Sociedade de Turismo e Diversões de Macau (STDM). Mr Ho has been locked for years in a bitter STDM share dispute with his estranged sister, Winnie. It is not clear how many of the 18 casinos SJM operates will be included in the listing vehicle.
Lawrence Ho Concedes Crown’s Early Mistakes
Lawrence Ho, son of Macau casino tycoon Stanley Ho, admitted that the joint venture between his Melco International Development and James Packer’s PBL, made some early mistakes with its first casino project, Crown Macau. “Melco PBL didn’t get off to a good start,” he said. “We went away from my original vision--which was a high-roller, six-star, VIP property--and tried to squeeze in too many slot machines”, in order to boost profit margins. “We chased that foolishly,” Mr Ho said. His comments were part of an interview with Forbes Asia magazine, in which he also talked about his desire to expand outside Macau and what had attracted him to the Packer partnership. “Investors don’t pay us to learn,” Mr Ho, 30, said. “The important thing is how quickly we react to these things and how we will do it next time.” Melco had responded by repositioning Crown Macau’s mass gaming market to “target the premium segment”. Melco’s next project is the US$2.1 billion City of Dreams integrated casino resort.“From day one my philosophy for City of Dreams has been to be complementary to the Venetian (across the street),” Mr Ho told the magazine. “You don’t always have to go head-on. In Las Vegas, people didn’t go head-on. They said: ‘Let’s adapt’. “If the Venetian wants to focus on retail conventions, we want to focus on entertainment.” Melco’s casino ambitions don’t stop at Macau. Thailand and Japan are also in the frame. “We know mainland China and the politics involved,” he said. In the rest of Asia, having PBL involved is going to take us a long way.” Commenting on the Packer partnership, Mr Ho said he had joined forces with the then Publishing and Broadcasting Ltd in part because it wasn’t a US company. “Ultimately, since it (PBL) had a well-defined Asia database and offices all over Asia, it understood what we were trying to do much better, especially on the VIP end,” said Mr Ho. “The US players hadn’t really gotten their heads around Macau yet. “Culturally, they didn’t understand Chinese people.” That understanding brought Mr Ho and Mr Packer together in 2004, when they formed the Melco PBL joint venture. Following the PBL demerger, its gaming business will be held by Crown Ltd. Crown holds a 41.4% interest in Melco PBL. Dec 2007 | INSIDE ASIAN GAMING
43
Briefs
International Briefs Genting Takes Rank Stake
According to a Reuters report, Malaysian gaming giant Genting has taken 9.4% stake in the firm casino and bingo firm Rank Group, with the announcement made on December 3. Genting bought into the British casino market in 2006 when it acquired its biggest player, Stanley Leisure, for 640 million pounds (US$1.32 billion). Combining the business with Rank’s 45 casinos would see Genting become the clear leader in the UK with 91 venues in total. However, analysts say Genting would face a difficult task gaining regulatory approval for such a deal. Rank, which owns the Grosvenor Casino chain, has been tipped as a takeover target since a recent profit warning hit its shares. A ban on smoking and the forced removal of lucrative slot machines has sparked a sharp decline in Rank’s bingo business while a surprise hike in taxes earlier in the year also hit casino profits hard. Media reports say Rank also rejected an offer from Harrah’s to effectively swap the US gaming giant’s UK casinos for a 28% stake in Rank, while Ladbrokes and Singapore’s BIL have been cited as other potential suitors.
Tropicana Could Get One Year To Clean Up Its Act
The New Jersey Division of Gaming Enforcement has recommended that the Tropicana Casino and Resort be issued a one year license. That will give the casino one year to try and prove that it is once again running a high class operation. The casino has been under scrutiny over the past year for what former workers consider to be an understaffed and dirty casino. The casino has laid off nearly 900 employees. The casino only had 3,600 employees, meaning the cuts equalled one quarter of all employees. After Columbia Sussex took over the casino on January 3 this year, it slashed the payroll and left the casino in shambles, claims the casino’s main workers union. The Division of Gaming Enforcement has recommended to the state’s Casino Control Commission that the Tropicana only receive a one year license. Most licenses are good for five years, but given the circumstances, Tropicana could get a one year license. The one year deal would 44 INSIDE ASIAN GAMING | Dec 2007
allow the casino to improve its conditions before a decision is made whether to allow it to continue operating. Executives for the casino claim that the union is the cause of the problems. They also claim that the Tropicana’s problems are behind it, and that it is once again operating at a first class level.
Developers Plan Spain’s Version of Vegas
According to a report in the Daily Telegraph: “Europe is set to get its own version of Las Vegas in a desert region of eastern Spain where developers plan to build 32 hotel-casinos, two theme parks, a racecourse and stadium over the next decade.” The project, approved in late November by the regional government of Aragon, also calls for the construction of residential areas, an equestrian centre and a golf course on just over 2,000 hectares of land in the Los Monegros desert. Tentatively called “Gran Escala”, which means large-scale, the development has a 17-billion-euro price tag that will be footed by International Leisure Development, a London-based consortium of investors. The location—half-way between Madrid and Barcelona, Spain’s second city—was selected over two other possible sites in Europe because it has good transportation links, favourable tax laws and relatively low land prices.
Tourism Minister Pushes for Israel Casino
As reported by the Jerusalem Post: “Casino tycoon Sheldon Adelson, who recently launched the world’s biggest gambling complex, may have given up on hopes of establishing a casino in Israel, but Tourism Minister Yitzhak Aharonovitch said he plans to push hard for a legal gambling house in the southern city of Eilat.” Mr Aharonovitch made the announcement at a meeting of the Knesset Economics Committee where he presented the ministry’s work plan for 2008. According to the report: “When Adelson, the world’s richest Jew, launched the Venetian Macau in August, he said after years of trying to open a casino here he had given up due to politics and an exhausting bureaucracy.” According to Mr Aharonovitch, establishing a casino in Eilat must be done together with the building of a special police force that would be active in the casino surroundings and which would work to close down underground gambling institutions. Mr Aharonovitch is not alone in his desire for a casino in Eilat. Eilat’s Mayor Meir Yitzhak HaLevy, Chairman of Mifal Hapayis (the Is-
Eilat, Israel
Briefs
rael National Lottery) Shimon Katzenelson and Chairman of the Israel Hotels Association Eli Gonen recently reached an agreement on the exact form a casino in Eilat should take. They agreed that the casino would be part of an entertainment and convention complex, but that hotel facilities would be provided separately outside the complex.
Maria Holdings Sold to Unibet
Malta-based online gambling group Maria Holdings has been sold to Internet gambling firm Unibet for US$109 million. Maria Holdings is known for popular gambling domains such as MariaBingo.com, MariaCasino.com, CarlosPoker.com, CarlosPlace. com and Bingo.se. Unibet stated that taking over the firm was part of a strategy to broaden its demographic coverage, especially in the Nordic countries. Chief Executive Officer for Unibet, Petter Nylander, said,“With this acquisition we will strengthen our position in the Nordic region as well as within the fast growing online bingo market.” He added: “Unibet is today the leading private gaming company among men and with this acquisition we will also be leading among women.” Maria Holdings’ marketing strategy and product innovations have proved successful and given the company a leading Nordic position in the lucrative female customer segment for gaming. Unibet is known as one of the largest privately owned gambling operators in Europe. The company provides its services in over 20 languages and is listed on Stockholm’s OMX Nordic Exchange.
fraud. Collaborating with other companies to fight fraud is right for our business and our customers.” Ethoca is the only service that allows companies to benefit from the fraud experiences of other companies—accepting more of the “right” types of transactions increases revenue, and declining the “wrong” ones reduces losses and non-payment. Ethoca recently also added betting and gaming companies bwin, 888 and Stan James to its community and expects other significant announcements in the months ahead. From online retail to electronic payments to online charities to gaming, global leaders see Ethoca’s collaborative fraud management service as a way to inform their decisions and enhance their profitability on thousands of transactions every day. “With 30% of the top betting and gaming companies as Ethoca members, the movement towards collaborative fraud management in that industry is now in full force,” said Andre Edelbrock, Ethoca President and CEO. “William Hill benefits from the shared experiences of the fraud fighting community and community members gain from the experiences of William Hill. Everybody wins.”
MGM Mirage, Dubai World complete transaction
Trump Scouts Massachusetts Location
Donald Trump is scouring waterfronts, depressed mill towns, and vacant rural tracts across Massachusetts, searching for locations suitable for a lavish resort casino that he could develop under Governor Deval Patrick’s proposal to legalize casino gambling, says a report in the Boston Globe. His list of as many as a dozen sites includes undisclosed locations in the Boston area, the region that an industry source said he most desires, as well as the Holyoke Mall and a harness racing track in Plainville. Executives from Trump’s resort development arm, Trump Entertainment, have toured sites in Fall River, New Bedford, and Warren, and they met recently with the mayors of Chicopee and Holyoke, according to local officials, land owners, and an industry source. They also have had extensive discussions with Gary Piontkowski, the owner of the Plainridge Racetrack in Plainville, but no agreement was reached, said the industry source. Several of the locations are in communities looking for an economic boost that have already expressed a strong interest in hosting a casino, making it more likely local voters would approve a casino if the political and economic stars line up.
William Hill Joins Anti-Fraud Effort
Ethoca, the leader in collaborative fraud management, announced in late November that William Hill Plc, one of the world’s leading betting and gaming companies, is the latest major company to join in a collaborative effort to fight fraud. Founded in 1934, William Hill is a market leader in all major betting channels in the UK with an established international presence through its online business. “Our e-commerce and fraud management system is already one of the best—and it just got better,” said Steven Reid, Group Director, Interactive Businesses, William Hill. “By using Ethoca’s service we can securely and effectively co-operate with other companies to beat
CityCenter
MGM Mirage and Dubai World announced that they have completed their previously announced 50/50 joint venture transaction in the landmark CityCenter development in Las Vegas. MGM Mirage contributed the CityCenter assets which the parties had mutually valued at US$5.4 billion, and received 50% of the equity in CityCenter. Pursuant to the terms of the joint venture agreement, Dubai World contributed approximately US$2.96 billion for 50% of the equity in CityCenter. Following the close of the joint venture transaction, MGM Mirage received a cash distribution from the joint venture of approximately US$2.47 billion. The joint venture retained approximately US$490 million to fund near-term construction costs. The joint venture will obtain project specific financing to fund remaining project costs. Targeted for completion in late 2009, CityCenter is a luxury urban metropolis defined by its dazzling vertical architecture rising from the Las Vegas Strip. CityCenter’s design team includes many of the world’s foremost architects such as Daniel Libeskind, Lord Norman Foster, and Rafael Vinoly. The self-contained city-within-a-city will include a dramatic Cesar Pelli-designed 4,000-room resort and casino, approximately 470,000 square-feet of retail and entertainment space, 2,650 luxury condominiums and condo-hotel units in multiple towers, and two 400-room boutique hotels, one of which will be managed by luxury hotelier Mandarin Oriental. Dec 2007 | INSIDE ASIAN GAMING
45
Casino Scams
46 INSIDE ASIAN GAMING | Dec 2007
ICE Feature
TV or not TV? …that is the question
Aspers were first to act with their TV ad campaign
I
n a 2006 ICE Media Partner Feature, Mark Griffiths, Professor of Gambling at Nottingham Trent University suggested that, in order to dilute problem gambling and gamblers: “what the casino industry needs to do is take the three percent of the British public who are currently patrons, increase that total to somewhere closer to 25% and get each patron to spend a little less.” A scenario where casinos and gaming occupy a more central, more acceptable, role in Britain’s leisure consciousness took a step closer in September this year when the 2005 Gambling Act was implemented. The act included a relaxation of regulations governing casinos’ advertising, giving, for the first time, the industry the freedom to communicate their wares. In this ICE Feature we analyse whether the casino industry can, or indeed should, attempt to attract a wider audience and what role television will play in the industry’s marketing mix.
New communication platform
On September 1, new TV advertising opportunities gave the UK casino industry a new platform to begin communicating their unique leisure proposition in a way never before permitted. Newcastle casino operator Aspers was the quickest to react with its post 9 p.m. watershed TV advert. Asper’s offering, which aired on the evening of September 1, featured a tentative roulette player who watches as a silver ball dances around the wheel. A camera spins around a casino showing a panorama of slot machines, live entertainment, TV screens, bars and restaurants. The core message, that gambling is only one part of a very diverse casino mix, is one the industry has been bursting to convey to the public for a very long time.
Chairman and Chief Executive of Aspers Group, Damien Aspinall, asserts: “Aspers is about having a fun night out. Our worldclass leisure, entertainment and gaming complexes give customers everything they need to have a fabulous time. We want viewers to be aware of the full range of facilities that we offer and are glad that we can now compete on a level playing field with the offshore online gaming businesses that have been advertising in the UK for years.” Rank, the operator of the Grosvenor, G-Casino and Hard Rock Casino brands, adds: “We believe that this [new legislation] presents us with a major opportunity both to stimulate interest in our casinos from potential customers and to help demystify the wider public perception of the nature of casinos and casino gaming. In September we launched our first major advertising campaign for casinos, focusing on local and regional press and radio, to heighten awareness and to stimulate growth in new members.” The online community has been similarly proactive, communicating their plethora of new services. In late October, CasinoChoice.co.uk launched its new TV ad. Operations Director Graham Edmond noted: “We help new users choose a safe, trusted and fair online casino or poker room in the same way that comparison engines have been helping people find better insurance deals over the past few years. Online gambling should be conducted in a responsible manner and when done so provides a great form of entertainment. We’re here to ensure it remains so and help ensure new players do not make common mistakes such as playing at unlicensed or unfair casinos where they may or may not get paid”. Dec 2007 | INSIDE ASIAN GAMING
47
ICE Feature
Tread Carefully
Before UK operators—online and land-based—jump aboard a gravy train which may lack destination, they would do well to look to the US for experience and advice. Raving Consulting is a casino marketing company that works, in the main, across North America but with a growing presence in other developing casino territories. President and Chief Strategist Dennis Conrad warns that the UK casino industry should tread carefully before blowing big budgets on attracting new players. Conrad noted: “There is some advertising value in creating awareness of a new property, building a brand identity or highlighting a new casino amenity, offering or promotion. However, like most other businesses, the Pareto Principle applies to casinos and more than 20% of customers will generally account for 80% of revenues, so that group’s satisfaction and met desires are very important.” Conrad suggests that casino operators would do well not to lose focus on their existing client-base when attempting to convince newcomers. He added: “It is our view that the most valuable marketing for a casino should be based on gaining information from, and communicating directly with, known gamers of known worth. This group should be segmented by their frequen-
Dennis Conrad thinks casino marketers must look after existing customers
cy of visits and monetary spend. This would therefore suggest that a strong players club (with high perceived value from loyal customers), casino host function, effective direct mail marketing and some amount of traffic driving casino promotions should be at the core of the best casino marketing route.”
Ad buyer beware
Case study: Casinò di Venezia’s revolutionary idea
Head start? Golden Palace shun media buying for media events
48 INSIDE ASIAN GAMING | Dec 2007
Whether casinos opt for attracting new players or old, they’d do well to consider the media minefield that is television advertising. Costs incurred from sound, light, studios, actors, buying airtime, a media consultant, scriptwriter, creatives, etc., make the initiative available to only the very wealthy or very reckless. With so many outlets open to location-based casino advertisers including mainstream press, radio, internet, direct marketing and the growing specialist casino magazines, particularly in the Poker field, there’s a suggestion that TV advertising is as much a display of corporate muscle as an attempt to grow player base. And that more creative forms of advertising, such as the Casinò di Venezia luggage carousel at Venice Airport, is a more cost-effective route. Whatever casinos decide, let’s hope they don’t go to the same extremes as Utah woman Karolyne Smith and Golden Palace. The online gaming site paid Smith a seemingly paltry US$15,000 to permanently tattoo the name of its site across her forehead. The casino industry may do well to use their heads before chasing new players at the expense of ignoring their loyal, existing base. This feature was developed in partnership with ICE. For more information, log on to www.ice-exhibition.com.
Psychological Warfare
Dec 2007 | INSIDE ASIAN GAMING
49