More seats at the table as operators turn to electronics

Published in: Latest Intelligence  

Macau has 5,749 gaming tables and more than 27,100 dealers to man them. But that’s not enough to meet demand so operators are turning to technology to raise the number of gamblers their dealers and tables serve

“Definitely, any of [the operators] would want more tables,” says one financial analyst. Despite expectations growth would be moderate this year, monthly gross gaming revenue reached a new record of 31.3 billion patacas ($4 billion) in March and May’s haul matched the second-highest ever at 29.6 billion patacas.

The problem is that the government has capped further table growth at 3 percent a year, allocated on application. Even when casinos can add tables, they also have to find more dealers, a task complicated by rules reserving the occupation for the city’s permanent residents while most other casino resort jobs can be filled with imported labor. Average earnings for dealers rose 8.8 percent during the October-December quarter from a year earlier, according to government data.

“Tables are scarce, the demand is there,” said Hubert Wang, chief financial officer at MGM China Holdings Ltd., at last month’s G2E Asia conference. As a result, minimum table bets, especially during weekends and holidays, rise to HK$500 ($64) or HK$1,000 and HK$100 are now a rarity. “Macau has priced out some consumers, particularly at the low end,” Wang said. 

To hold onto those customers, Macau casinos are increasingly turning to hybrid tables that use video screens and other electronics to enable live dealers to serve more than a standard baccarat table’s worth of players at a time to use greater volumes to balance off smaller bets.  

Sands China Ltd. for example introduced “fast action baccarat” tables at the Venetian Macao in December. The tables, which it developed in house, seat 28 people with the minimum bet  often set at HK$100. 

Losing bets are automatically collected via trap doors built into the table and the large scale means players cannot engage in the usual “squeeze”, or peeling back, to turn over cards, the mini-drama that eats up time - and cards - at normal baccarat tables. As a result, dealers can deal three times as many hands in an hour as with regular baccarat. 

In-house development helps Macau’s casino operators navigate tricky local intellectual property rights. Local LT Game Ltd. has so far successfully defended a patent that it argues gives it exclusive rights to sell hybrid table games in the city, going so far as to call in Macau customs officers to stop SHFL entertainment Inc., the US-based company that is among the largest global gaming machine producers, from showing its competing products at the G2E Asia show last year. This year, Slovenia’s Alfastreet backed out of participation in the show to avoid potential trouble with LT Game, a subsidiary of Hong Kong-listed Paradise Entertainment Ltd.

The stakes are highest for so-called stadium-style games which have been installed in the major Cotai resort casinos. Here players sit at terminals lined up in banks and rows while large overhead screens show the actions of different live dealers, mostly dealing baccarat with a sprinkling of roulette and the “big-small” dice game sic bo. Players can also track the results of recent hands with the system, something many used to do with pencil and paper, supplied by the casinos, out of belief it would inform their betting, while the system automatically calculates and credits payouts. The fast pace and ability to play multiple games on the terminals mean some players bet in the hundreds of thousands of Hong Kong dollars at the same time others enjoy the otherwise unavailable opportunity in Macau to bet HK$50 or even HK$10 on a live baccarat hand.

Macau allows up to 60 terminals per live dealer, so by linking multiple dealer tables, the stadium sections can accommodate hundreds of gamblers at the same time, with each connected table counting singly against the casino operator’s quota. 

LT Game this month installed a 150-seat stadium-style system at the Galaxy Macau casino. In a circular sent to shareholders last month, it said its revenues from sharing in the gaming win from its systems in Macau and from machine sales reached HK$140 million in 2011, up from HK$89 million a year earlier, as they began marketing the system widely to the city’s casino operators.

According to a report last week by Goldman Sachs, Sands China now has 750 electronic table game seats across its four casinos and Melco Crown Entertainment Ltd. has up to 430 seats at the City of Dreams casino so far this year. Sands told the investment bank that the hybrid tables can generate two to three times the win of regular ones.

Those numbers are pushing SHFL to fight a multi-pronged court battle in Macau to break LT Game’s monopoly to get a piece of the market while defending itself against accusations of patent infringement there and in Nevada. Paradise meanwhile this week completed a HK$740 million deal with Jay Chun, its chairman and managing director, to buy five US patents and six others that are pending which it said would clear the way for LT Game to market its hybrid system in the US, where it says SHFL is the only competitor. (The acquisition, paid for mostly with shares, raises Chun’s stake in Paradise to 68.7 percent from 9.2 percent; LT Game acquired its Macau patents from Chun in 2010.)

The lack of competition in Macau has made operators more cautious than they might be otherwise about trying the systems. “We can only use the one producer, so that doesn’t allow us to be as competitive as we want to be,” said one industry executive.

Another hurdle is the large fixed costs involved with installing them on the casino floor. “It’s harder to change once you put that capital into an area,” the executive said. “It’s not like tables that you can just move” around between VIP and mass areas.

Electronic table games without live dealers using, for example, video animated dealers or physical dice rolled by machine facing five to 10 seats, have not caught on that much in Macau, as compared with Singapore or Malaysia, though operators like them since they do not count against table quotas.  

“The [electronic] evolution is occurring but it’s occurring at a much more normal rate than all the analysts are trying to promote or provoke,” says Lindsay Stewart, vice president of electronic gaming at SJM Holdings Ltd., which has been conservative about venturing into stadium-style gambling. “[The evolution] is not going at the breakneck pace that the media would have us believe.”