Macau’s minimum bet gamble pays off with Chinese punters

Mass market playing a greater role in driving revenues

Casino floor can be seen through the doors of the Venetian Casino's Great Hall, Macau

A Chinese man wearing a crumpled suit is playing baccarat at one of Macau’s oldest casinos. Crowds gather around and other players shriek “hao” – Chinese for “good” – as his pile of pink chips, each worth HK$10,000 ($1,300), approaches 100.

After a few more hands, including one where he casually loses $26,000, he slides his chips into a Valentino leather satchel, and walks away with about $250,000.

In spite of the lofty stakes, the man was playing in an area for regular punters, not the VIP rooms for highrollers, and the HK$1,000 minimum bet at his table has helped fuel the recent dramatic growth experienced by Macau’s casinos.

Over the past year, the minimum bet for baccarat, the favourite of Chinese gamblers, has increased 50 per cent, according to Aaron Fischer, head of consumer and gaming research at CLSA. The rise highlights the huge demand from mainland Chinese mass-market gamblers who, in spite of the slowing domestic economy, are chipping away at the VIP market.

“We always appreciated the level of appetite for gambling in China, but we never imagined a situation where the mass market would become so important,” says Mr Fischer.

Macau has grown at light speed since the former Portuguese territory in 2002 abandoned a monopoly system that gave one concession to the tycoon Stanley Ho.

Last year, gaming revenues from the six companies with casino licences – Sheldon Adelson’s Sands China; Wynn Macau; James Packer’s Melco Crown; Mr Ho’s SJM, Galaxy; and MGM China – reached $38bn, making Macau six times bigger than Las Vegas. CLSA expects that number to double to $77bn by 2017.

The rise in the minimum bet in Macau now means that punters have to wager at least twice as much – and often much more – than their peers in markets such as Las Vegas, Singapore and the Philippines.

“You can still find tables at HK$500, but increasingly HK$1,000 is the new minimum bet. You would not find a casino in the US with this level of minimum bet,” says Ciarán Carruthers, president of Asia Pacific Gaming, a Macau-based consultancy.

Ms Yang, a 25-year-old office worker from Sichuan province who was visiting Macau with her boyfriend during China’s “golden week” holiday this week, said she saw many people waving around large wads of cash.

“We noticed the minimum bet is not low. We saw many people gambling with at least 10 HK$1,000 bills,” says Ms Yang. “But we were not surprised by the high minimum bet, because other friends who had come here before had told us about it.”

Macau’s gambling industry has been propelled by an influx of Chinese tourists. China bans gambling on the mainland, but allows its citizens to visit Macau every three months under a special visa programme. Gamblers can also bypass visa restrictions by joining special tour groups.

According to the Macau government, the number of mainland Chinese tourists increased 45 per cent from 11.6m in 2008 to 17m last year.

You can still find tables at HK$500, but increasingly HK$1,000 is the new minimum bet. You would not find a casino in the US with this level of minimum bet

Ciarán Carruthers, president of Asia Pacific Gaming

Earlier this year, concerns were raised that the economic slowdown in China, which has seen annual growth fall to below 8 per cent, would hit Chinese tourism and hurt Macau, but analysts say the impact has been muted.

“We all had low expectations. However, it seems that the impact on Macau [of the slowing Chinese economy] at this point is not that high,” says Ricardo Siu, a professor and gaming expert at the University of Macau.

In the first six months of this year, about 9m mainland Chinese came to Macau, suggesting that the final figure will be significantly higher than last year.

CLSA says growth over the past two years has been driven by a 23 per cent annual rise in the number of tourists from provinces other than neighbouring Guangdong and Fujian.

Mr Siu says the growth in the mass market was also eating into the amount of revenues generated by the VIP market. He adds that the VIP market accounts for about 70 per cent of gaming revenues, but that would fall to about 60 per cent within two years.

The six gaming companies in Macau saw their most expansive growth in 2010, when revenues grew 58 per cent, and 2011, when they rose 51 per cent. That performance was due partly to Macau raising the cap on tables in the Chinese territory to 5,500.

But growth fell to 16 per cent last year because of capacity constraints that are expected to remain until the companies build a new slew of casinos in the Cotai area of Macau, which analysts believe will lead to another increase in the table cap.

While some people have bemoaned the retreat from the soaring growth rates, Mr Carruthers says the numbers need to be placed in perspective.

“[The growth] is adding another Las Vegas market to Macau every year,” he said.

Additional reporting by Julie Zhu

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