turns the tables in Macau, by Glenda Korporaal
- 25th March 2008
James Packer's Crown Macau business
is enjoying a stunning turnaround, which has made
it the busiest casino in the world in terms of
betting volume, according to a leading gaming
Owned by Melco PBL Entertainment, James Packer's
first casino foray in the city had a rocky start
after its opening in May last year.
its fortunes have been given a major boost as
a result of a strategic deal late last year with
a Hong Kong-listed junkets operator, A-Max, and
the decision to refocus the casino entirely on
the VIP market.
aggressive deal with A-Max, which involves higher
than industry average total commissions of up
to 1.35 per cent, has helped bring VIP gamblers
to the upmarket casino, taking market share off
more experienced operators, such as Macau veteran
Stanley Ho and new players Galaxy and the Macau
to A-Max's junkets, Melco PBL's market share improved
substantially from 5.7 per cent in November to
18.1 per cent in February, making Crown Macau
the busiest casino in the world in terms of betting
volume," Credit Suisse's Hong Kong-based
gambling analyst, Gabriel Chan, says in a bullish
new report on the company.
we focus on market share in the high-roller segment
alone, the improvement was even more astonishing
with market share increasing from 6.6 per cent
in November to 24.8 per cent in February."
junkets generated about $US5.3 billion ($5.8 billion)
in rolling chip turnover in February, up about
5 per cent month on month," he said.
our view, there is room for further growth.
expect A-Max's junkets to generate on average
$US6.3 billion rolling chip turnover per month
in 2008." Packer's Crown now has a 37.9 per
cent stake in the company, which listed on the
US Nasdaq market in late 2006, alongside the Hong
Kong-based Melco, operated by Stanley Ho's son
observers say the aggressive deal struck with
A-Max has seen the junket operator bring in substantial
new volumes of high-rollers to Crown Macau, which
has been difficult for its rivals to match.
has been a dramatic shift in the market since
December," one Macau veteran said last week.
Ho's junket operators have been struggling. Galaxy
has been losing market share as well.
has not been easy for them to find the consolidators
who can bring in the same horsepower as A-Max."
the deal, A-Max, a consolidator of junket operators,
receives a total commission rate of between 1.2
per cent and 1.35 per cent from Crown.
in turn pays its junket operators up to 1.2 per
the past, Macau casino operators would only pay
around 1.1 or 1.2 per cent in total to junket
operators to bring in high-rolling gamblers to
say the financial viability of the Crown Macau
deal with A-Max, which involves a potentially
higher total commission structure, is dependent
on A-Max being able to deliver high volumes, which
has so far been the case.
gaming turnover continues to increase, with total
monthly revenues twice the level of the Las Vegas
strip in recent months.
last year, which saw a flood of new casino openings
in Macau, 2008 is not expected to see any substantial
new supply come on to the market, giving the existing
operators a chance to consolidate their positions.
past few months have also seen Crown enjoy an
increase in its "hold rate", or house
percentage retained, which has also helped the
success of its operations. "Crown's hold
rate was terrible," said one observer.
used to be around 2.2 per cent on baccarat, but
now it is 2.7 per cent."
success has put pressure on its rivals to increase
the commissions paid to junket operators. As Chan
notes in his report, the junket operators now
have more bargaining power in Macau than the casino
says that Galaxy's market share has dropped from
14.9 per cent in November to only 10.3 per cent
has extended credits to select junket operators
and raised its commission rate to 1.25 per cent,
even higher than the 1.2 per cent A-Max is paying
junket operators," he notes.
new competition from Crown has also prompted Sheldon
Adelson's massive Venetian, which opened in mid-2007,
to revise its commission structure, a move which
has helped to boost its market share by 2 percentage
points to 12 per cent in February. The Venetian's
commission rate is now 1.26 per cent.
predicts that Melco PBL's earnings before interest,
tax and depreciation could reach as high as $US280
million in 2008. "With a total construction
cost of about $US570 million, we estimate Crown's
payback period to be only about two years,"