The Market in Macau

High-priced watches are a tough sell in this Chinese enclave these days, but flashbulbs are flying off the shelves. While much of the chatter at the G2E Asia exhibition and conference in early June centered on the slowdown of growth in the world’s biggest gambling market, there’s no need to get out those feel-sorry-for-Macau violins just yet.

A walk through The Grand Canal Shoppes at The Venetian, however, made a guy wonder how many spendy watches a shop has to sell in a given week to stay in business. Can you keep the doors open selling one per day? Or if you’re talking about the even-quieter Shoppes at the Four Seasons next door, one per week? And what about all those other watch shops on virtually every major street in Macau? How many watches does one really need?

Flashbulbs, on the other hand, are lighting up Macau. The point is that while overall business is off from its record run of a year ago—and big gambling business means those watch shops can keep Rolex headquarters happy—Macau remains the center of the gambling world in Asia. That was abundantly clear during an American Gaming Association-hosted press briefing the day before the exhibition floor opened, and then again when the show presented The Man—Dr. Stanley Ho—with its 2009 G2E Asia Visionary Award. No less than 30 still photographers— flashbulbs firing—and a dozen video cameras captured the chaos as stern security guys hovered nearby. Every Ho had his or her own security detail—Stanley, of course, but also Macau Chief Executive Edmund Ho, Stanley’s news-making daughter Pansy, and son Lawrence, fresh off of opening his U.S. $2 billion City of Dreams a couple of nights before. Ho, Ho, Ho—’tis the season for gambling’s royal family in Macau to light up G2E Asia.

Those flashbulbs distinguish this show from others on the gaming tradeshow circuit around the world. True buyers of gaming equipment in Asia number in the dozens, not the hundreds, and so what this show lacks in huge volume roaming the exhibition floor, it makes up with buzz in the form of media attention and attendance from Wall Street types, architects, financiers, regulators, speculators, and other movers and shakers who don’t want to miss out on the most exciting gambling boomtown in the history of our industry.

I started coming to Macau in 2001, and have been agog every year over the pace of what explodes out of the ground. When they said they wanted to replicate the Las Vegas Strip in a matter of years, not decades, they weren’t kidding. It’s amazing what can happen when you combine tens of thousands of Chinese workers with bamboo scaffolding and a modern crane here and there. For those who read the news from the U.S., you’d think construction has all but stopped here, and yet in the 12 months since the last G2E Asia show, City of Dreams was completed and a handful of other high-rise towers emerged from the reclaimed land of the South China Sea that has become the Cotai Strip.

Now, clearly the visa restrictions imposed by the Chinese government, the capital crisis affecting Las Vegas Sands, and the economic slowdown that has impacted spending by China’s middle class have combined to slow down the pace of business and construction in Macau. Some say applying some brakes to the market is what is needed to keep the growth from overwhelming every aspect of a city that has struggled to deal with its newfound status as the biggest gambling location in the world.

Despite this slowdown, the Macau market and other areas of Asia—notably Singapore, the Philippines and Korea—remain hotbeds of business activity. As executive director of the Association of Gaming Equipment Manufacturers (AGEM), the largest trade organization of global gaming suppliers, it’s satisfying to see a region that is as vibrant as Asia is for AGEM’s member companies. In Macau alone, there are 4,500 table games and 13,200 slot machines. Setting aside the opening numbers from City of Dreams, the number of slots is actually down from a year ago by roughly 1,300 units. And yet, just like good floor management in more mature markets, the win per day has increased as casinos removed machines to “rightsize” the market. In calendar 2008, slot revenues in Macau totaled U.S. $710 million, and with fewer machines, revenues are on pace to do approximately $800 million in 2009—still less than 10 percent of the total gambling revenues, as tables collectively continue to be the powerhouse force that drives this market. The opening of City of Dreams with a showcase of approximately 1,350 of the best new games and machines shows the commitment to slots, but ultimately it will be many years before slots challenge tables for supremacy in Macau.

Unlike Las Vegas and other U.S. gaming markets that now rely more on non-gaming revenue for overall success, Macau’s prosperity remains contingent on hardcore gambling at the baccarat tables. Forget the Cirque du Soleil show “Zaia,” which was quite good, but played in a theater that was approximately 30 percent full on a Thursday night. And forget those poor saps trying to sell one high-end watch per day. As long as those tables remain full, which they generally are in the world’s largest casino, it would be inaccurate to describe business in Macau as truly slow.

The current AGEM membership roster, 76 strong, is a who’s who of the supplier segment of the global gaming industry.
AGEM Gold Members: 
Aristocrat Technologies, Aruze Gaming America, Austrian Gaming Industries, Bally Technologies, GTECH/ATRONIC/SPIELO, International Game Technology (IGT), Konami Gaming and WMS Gaming.
AGEM Silver Members: 
AC Coin & Slot, Action Gaming, Casino Technology, Interblock USA, JCM Global, MEI, Multimedia Games, Octavian International, Shuffle Master, Suzo-Happ Group, TCSJOHNHUXLEY and Wells-Gardner Electronics.
AGEM Bronze Members: 
Ainsworth Game Technology, Astro Corp., Cadillac Jack, CashCode, Diamond Game, Digital Display Group, Elixir Gaming Technologies, Euro Games Technology (EGT), GameTech International, Gaming Support, Incredible Technologies, Jumbo Technology, KGM Gaming, Las Vegas Gaming Inc. (LVGI), MCA Processing, Modern Gaming, Rocket Gaming Systems and Summit Gaming.
AGEM Associate Members:
The Bright Group, CMYK Creative, Cybertec, DynaGraphic Printing, Elite Casino Products, Esterline Advanced Input Systems, FutureLogic, Gaming Partners International, Gary Platt Manufacturing, Global Cash Access, Global Gaming Group (G3), Grand Products, Greenberg Traurig, Howard & Howard, IDX, Intel, IPS, James Industries, Kreller Group, KSK, Lewis & Roca, Masterpiece Advertising, MC2, Mikohn Signs & Graphics, Money Controls, Nanoptix, Proforma GPS, Regulatory Management Counselors, Sanmina-SCI, Strategy9, Tgraphics/Outpost Productions, 3M Touch Systems,  TMX, Tournament One, TransAct Technologies, Veridocs, Wrex Products and Young Electric Sign Company (YESCO).

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