The comments below were taken from the WYNN stock message board. The
writer is a bond trader, visiting Macau for the first time. I
thought some people on this board would find it interesting, even
though he doesn't mention VP.
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I'm in Asia right now and have been here over the past 2 weeks
travelling around for work. We had a few days in Hong Kong and last
Saturday I went to Macau. We have a small investment in Galaxy
Entertainment Corp, so I set up a meeting with them for that morning
at 9:30am. In a nutshell, Macau sucks right now but there's no
denying its headed in the right direction.
We (me, a colleague, and a banker from UBS who set up the meeting)
took an 8am ferry out of Hong Kong to Macau. 1 USD equal
approximately 8 HKD. The ferry ride is about an hour and the ticket
only costs HKD150 for economy class (about $20) and HKD260 for "super
class". For the extra $10 the only real benefit is priority
boarding/departing. You also get a slightly bigger seat and a small
meal but for an hour boat ride who really cares. You can also take a
helicopter for just $200 USD which takes only 5 minutes but because
of the heavy winds the day we went they weren't flying. When we got
to Macau we grabbed a cab to the Galaxy offices and had to cut
through quite a bit of the city, it was honestly just ugly and all
under construction. The only hint of casinos I saw was the sign for
Sands and the Rio and Casino Lisboa.
We met with the Galaxy CFO and I have to say it was one of the most
interesting discussions I ever had in my life. It was my first time
seeing things from the gaming operators point of view and frankly it
was pretty scary as a gambler. Galaxy operates 2 small casinos right
now, called City Club casinos - the Waldo and the Rio. The way City
Clubs work is the casino operator doesn't own the building, they
simply operate the casino for a 3rd party and collect a commission.
The 3rd party is responsible for all the development. These things
are pretty tiny, probably similar to downtown casinos except these
are on several levels and have mostly high roller action. Galaxy is
building 3 mega casinos right now on the Cotai Strip, an area which
is quite a bit further from the center than I thought. Its about a 10-
15 minute car ride but its the area where everyone expects the real
future of Macau to be born. The Waldo has 63 tables (20 VIP) and the
Rio has 90 tables (16 VIP). While the VIP number looks small, it is
the main revenue driver at those casinos and also takes up most of
the gaming space.
I'll outline a few things that I found of interest from talking with
the CFO. We like to talk about the casinos sitting pretty in the
comfort of the Law of Large Numbers but these guys are extremely
worried about streaks and are susceptible to them even over a full
year period to a fairly wide margin. The blended theo on baccarat is
around 1.3% but their one year actual has varied from 0.8% to 2.2%.
The "mass market" tables throughout all of Macau typically have
minimums of HKD300 (around $40), but I saw a few HKD200 tables at the
Sands. Just like in Vegas, the mass-market provides the biggest
margins so they see marketing towards them as a trend that will
develop, primarily by the American operators who will have a harder
time getting the VIP players.
The VIP market there works in a pretty strange way. Its almost 100%
controlled by promoters who are independant of the casino. The
promoters actually "own" VIP rooms in the casinos, they design the
room, the chips, and they actually provide the players credit lines.
The casinos operate the games and the security and collect a
commission off of the total action provided. For those who read Whale
Hunt in the Desert, you may remember the thing about "rolling dead
chips". Well that is how all the high roller action works in Macau
right now. Players buy-in for dead chips, get paid winnings in real
chips, and get back a percentage of their total dead-chip action at
the end. I have about 6 pages of notes from this meeting so instead
of going through things, if anyone has questions just ask.
After the meeting the company took us out on a driving tour of their
upcoming developments. This is the first time I really saw the city
and frankly I was disappointed. There is nothing good looking, their
are several small casinos but they just look like shoddy buildings
from the outside. The only large casino is the Sands which looks
great for Macau but would suck nuts in Vegas. We drove past the mini
Wynn under construction as well as the Venetian, both of which will
add a lot to that city.
At the end of the driving tour we were taken on tours of their two
operating casinos. We first went to the Rio where we were met with
the casino manager who gave us a tour. Surprisingly, the place looked
quite nice even though it was tiny. The lobby was the only place they
let me photograph so I have a quick shot of it in the album. This
place had at least 4 or 5 floors. You go up one floor from the lobby
and its the "mass market" casino area. Here its mostly all baccarat,
blackjack, and a couple of Caribbean Stud tables. The lowest minimums
were HKD400 ($50). There were absolutely ZERO slots. They were
installing a video roulette table, which was made up a a regular
roulette wheel in the center surrounded by electronic betting
stations (different than rapid roulette). The main thing to get
adjusted to was the lack of traditional casino sounds because of the
lack of machines. We went up to each level above and each one was
just VIP rooms. These places were so weird I can't begin to describe
them with any justice. The rooms were actually very nicely appointed
with a lot of ornamentation. A typically room would be split into two
sides, each one with 1 or 2 baccarat tables. Each side of the room
was owned by a different promoter, in fact other than the dealers the
personnel working in each side wore different costumes as prescribed
by the promoter. In the center of the room is a little pit where the
room manager sits and behind him on the wall is a huge rack of
playing cards sealed in hard plastic cases. To save time, they
actually preshuffle cards and when they bring them to the table they
just do a quick shuffle. The promoters (or their henchman) that stood
around the tables were just scary looking as hell. Pointy shoes and
dark gangster style suits, no kidding. When we walked out we finally
saw some slots, they were in a small room off to one side near the
exit. I'd say maybe 30 or 40 of them and hardly anyone was in their
(just about every VIP room had players though). We went to the Waldo
and it was the same thing more or less, except they had the slots on
the main floor but just like Rio every level above was reserved for
VIP tables. We never saw any crazy action (this was early in the day)
the most we saw was a guy betting about HKD100,000 a hand, though we
didn't look at most players action. I don't recall the minimums but
it doesn't really matter, from the casino's perspective they just set
a max differential (the spread between bets for banker and player).
That is what the casino actually has at risk on each hand. The
differentials ranged from HKD800,000-HKD2,000,000.
To answer IluvetoTravel's question she wanted answered before I left,
the slots they've been installing in the Galaxy casinos aren't IGT
but from Aristocrat and some other company whose name I didn't catch,
but it wasn't US based. Here's an eye-popping nugget - the slots in
both casinos were set at paybacks between 80%-85% and they aren't
regulated by DICJ (the gaming commission). Slots are a bad bet in
Vegas, but in Macau they're just pure crap.
I don't know how to explain it but I just got a bad vibe from both of
those casinos. They had a lot of action, they were actually quite
nicely appointed (in the high roller areas), but they just sort of
felt like fancy versions of Vegas grind joints, except full of super
high limit players instead of super low limit players. Also, walking
around with the casino managers and hearing them laugh when they talk
about the slot percentages, or the increasing popularity of bad games
like Caribbean Stud just irked me. Its obviously good for business
but as a gambler I just didn't care for the attitude.
After about 4 or 5 hours dealing with the Galaxy guys, we went off on
our own. The UBS guy we were with took us to Sands. Now FINALLY, this
place felt like a casino I'm used to. It didn't have many machines,
but it was massive, loud, very "mega-resort" looking, and also had
familiar things like a Players Club. I tried taking a picture of the
inside but security quickly made me delete it. Above the casino floor
is a buffet (called "Vegas Style Buffet") that overlooks the casino,
I kept planning on going up there to sneak a quick picture but never
got around to it. We decided to gamble a little and then eat lunch. I
wasn't planning on really gambling in Macau but I bought $5000 with
me so I could get a little play in. However, I only ended up
converting $1000 of it and just playing with that. For $1000 I got
HKD7500. We went to a HKD300 blackjack table and all bought in for
HKD1500 to start. The blackjack rules are actually pretty good, BJ
pays 3:2, dealer stands on soft 17, surrender allowed, double on any
two cards. The only thing is you can't resplit aces and they play out
of a CSM. Another weird thing about Macau is there are no cocktail
waitresses! If you really want an alcoholic drink they can probably
bring you one, but they just don't even bother setting up the
facilities because no one drinks! All they have is a person pushing
around a cart with glasses of tea and thats what everyone drinks.
They really take their gambling seriously, it was so weird to gamble
without the whole CW scene. Anyway, we all just played low limit
blackjack for about 30 minutes, I won a little over $1000 USD. I went
to the bathroom and took a picture of the chips for the chip freaks
out there.
Sands was a pretty decent place. After we ate lunch and went back
downstairs to the casino it was jam packed. Imagine a casino floor
the size of the MGM Grand's full of almost nothing but baccarat
tables and every table being full. That is what was happening. I
played a little bit of the video roulette and a little video baccarat
too which was kind of funny. It was set up a like a sports
betting "pit" where you have a station in front of you and there is a
big screen against the wall with a virtual dealer who deals the
cards. I lost a few hundred honky dollars there.
Shamefully, I didn't check out the night scene there which is made up
of just a very sinful side. We left Macau in the late afternoon and
had a big rugby event in Hong Kong we were attending. I also had no
real desire to go back to Macau, it needs a few years I think to be
appealing to any Vegas lover. In fact, I think it will be a decade at
least before I would recommend anyone actually take a trip out there
just for Macau. In the battle of Macau vs. Vegas I call Vegas the
hands down winner in EVERY SINGLE RESPECT! However, if you want to
decide on which one to put your money into you'd be an idiot not
going into Macau.
Here are some pics, sorry they suck but I'm not a picture taker and I
couldn't take them inside the casinos anyway. Most of these are just
pictures I took while we were going around in the van: