Gamblers Betting $1.6 Million a Visit Aid Macau Casinos

Gamblers Betting $1.6 Million a Visit Aid Macau Casinos

Sky 32, an elite oasis of luxury on the 32nd floor of the Galaxy Macau casino, offers commanding views, a waterfall, a bar with vintage single malt whiskeys — and six sumptuous rooms where players must commit to betting at least 10 million yuan ($1.6 million) per visit.

Just a few months ago, even over-the-top pampering like that available in Sky 32 wasn’t enough to attract big bettors from China, as many steered clear of Macau, the world’s top-grossing gambling hub.

Now, the high-rollers are coming back to Macau, which raked in $38 billion in revenue last year, more than six times that of the Las Vegas strip. After reining in spending for part of last year, so-called VIP players from China helped drive Macau casino revenue to a record $3.9 billion in March, according to data from the city’s gaming regulator.

“The VIP market is gaining momentum,” said Robert Drake, chief financial officer of Galaxy Entertainment Group Ltd (27) (27)., which owns Galaxy Macau. The industry’s April revenue “was second-highest in history. We are off to a great start for the year.”About two-thirds of Macau’s casino revenue comes from high rollers who gamble on credit due to restrictions on taking cash out of China. These people are often brought in by junket operators who arrange transportation, hotels and financing. At the Galaxy Macau, they usually end up at Sky 32 and a similar area called Sky 33, with nine rooms and a requirement that bettors wager at least 5 million yuan per visit.

Betting Big

Last year, the big bettors pulled back across the industry amid speculation that China’s new government might restrict junkets and curb cash flowing from the mainland into Macau, a special administrative region of China one hour from Hong Kong by ferry. Since Xi Jinping took over as China’s president in March, no significant restrictions have been announced.

“We have not seen any evidence of a crackdown, it’s purely noise,” said Union Gaming Group analyst Grant Govertsen. “VIP business is picking up nicely.”

Chinese gamblers have driven profits and boosted shares at Asian subsidiaries of Las Vegas casino operators. Wynn Macau (1128) Ltd.’s stock has jumped 12 percent this year, MGM China (MGM) Holdings Ltd. has surged 42 percent and Sands China (1928) Ltd. has rallied 18 percent. Hong-Kong-listed shares of Macau operator SJM Holdings Ltd (880) (880). have added 20 percent, Melco Crown Entertainment Ltd (MPEL). has climbed 43 percent and Galaxy is up 29 percent.

Playing Baccarat

VIP revenue in Macau tends to closely track sales of luxury goods, which slowed in the second half of last year, probably related to the government transition, said Praveen Choudhary, an analyst at Morgan Stanley.

“People just laid low, gambled less, bought less jewelry and watches,” Choudhary said. “Now the transition is completed, VIP business has come back to normalcy.”

Spending by big bettors on baccarat — a simple game popular with Chinese VIPs in which the player gets two or three cards and wagers whether their sum is higher than that of the dealer’s hand — declined sequentially in the first quarter of last year after climbing for 10 consecutive quarters, according to data from the regulator. It started to pick up again in the winter, and this year first-quarter VIP baccarat revenue rose almost 10 percent from 2012.

Galaxy reported a 29 percent increase in first-quarter earnings and said it is seeing signs of improved demand from high-stakes gamblers, who account for more than three-quarters of its revenue. At SJM, Asia’s biggest casino company, VIP gaming revenue rose 13 percent in the first quarter. Turnover at MGM China’s VIP-room tables rose about 15 percent in the quarter.

Chinese Families

“Everyone was speculating about some negative impact, but the leadership change wasn’t an impact at all,” MGM China CEO Grant Bowie said in an interview.

Some in the industry say China might still crack down on junket operators found to be corrupt. RBC Capital Markets analyst John Kempf said in an e-mail that growth in revenues from high rollers could be “choppy” for the rest of the year.

“There’s never any real, concrete indication or direction from the government,” Pansy Ho, co-chairman of MGM China and daughter of SJM founder Stanley Ho, told reporters at a Macau event in February.

To reduce their dependence on the wealthy, casinos have been adding glitzy shows and shopping malls to draw middle class families. Growth from such `mass-market’ customers is outpacing the VIP business, Kempf said.

That doesn’t mean the casinos will stop courting the highest rollers. Galaxy offers big spenders the 670 square-meter, split-level presidential suite on the 30th and 31st floors of the adjoining Banyan Tree hotel. There, gamblers can enjoy a private swimming pool, a Jacuzzi bath and massage bed as well as the services of a butler and masseuse — as long as they spend enough time gambling.

“VIP business will continue to be solid, although it may not be growing as fast as the mass market,” said MGM China CEO Bowie. “In absolute terms, the VIP business is huge.”

To contact the reporter on this story: Vinicy Chan in Hong Kong at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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