Paradise Entertainment has warned that it expects to report a loss in 2015 as a result of the slump in Macau’s gaming revenue, though its LT Game supplier unit sees no such gloom and predicts 2016 will be the year it makes significant headway in the U.S.
“In Macau, everyone is talking about a slowdown. But for our supplier business, it keeps growing and growing,” Betty Zhao, chief operating office of LT Game told AGBrief.
“As Macau is increasingly focused on mass market tourism and new properties have begun to come online in Cotai since mid-2015, the market environment is very favorable to gaming equipment manufacturers,” Zhao said.
Gross gambling revenue in Macau fell 34.3 percent to its lowest level in five years in 2015 as an ongoing crackdown on corruption in mainland China, coupled with a slowing economy, shrivelled the VIP market.
However, revenue from Live Multi Games (LMG), a sector of the electronic table game market, was remarkably resilient.
LMG’s took in MOP2.12 billion in 2015, according to figures from Macau’s market regulator.
That was down slightly from the MOP 2.25 billion reported in 2014, but shows exponential growth when compared with just MOP 153 million reported in 2010.
Paradise’s interim results last year indicated that LMGs contributed one fifth of its total revenue, but that proportion is expected to grow, said Zhao.
According to forecasts from Union Gaming Research, the number of ETGs in Macau is likely to rise from 5,500 last June to 9,000 once all the new Cotai properties open. The firm cites factors such as the government’s cap on live table numbers, which are restricted to 3 percent growth a year, as well as the cost and tightness of Macau’s labour market as helping growth in the sector.
Paradise has a total of about 3,800 LMG machines in the territory. It is expecting to add about 200 to 300 machines for each of the new properties opening up on Cotai. Analysts estimate it has by far the biggest share of the market in this sector among gaming equipment suppliers at about 64 percent.
Last October Paradise announced that it installed 63 LMG terminals at Casino Lan Kwai Fong. While, in February 2016, it added a further 70 LMGs at Casino Diamond.
LT says its terminals offer advantages to operators, especially in the current weak market, by lowering the average cost per player and broadening the customer reach of casino operators.
“While ETGs seek to reduce human errors, improve efficiency and productivity of a traditional table, our LMG’s margin is comparable to a traditional table,” Zhao said.
She said margins vary across casinos, but the industry average per LMG would be around MOP 1,500/ machine/ day, with a ratio of roughly 60 LMG terminals to 1 dealer. The games generate about MOP 90,000 in GGR per dealer which is close to the GGR yield on premium tables.
While the company dominates the Macau market, it’s seeking to gain a foothold overseas. In August 2014, it signed a distribution agreement with IGT, which was seen as instrumental in its efforts to expand.
In February last year, it converted 24 LMG terminals which were on trial at The Palazzo in Las Vegas, marking its first sale in the US gaming market and an important milestone for the group.
IGT has sent a dedicated team to Macau to help LT tailor its products and comply with U.S. market regulations. The team included salespeople, compliance experts and systems technicians, who have been working with the local staff on a day-to-day basis.
“With IGT’s help, we have installed some more trial LMG machines at a handful of different casinos in Las Vegas and expect to announce conversions after the trial period,” she said.
LT says it’s also close to gaining approval for machine deployment approval in California and Pennsylvania.
“There are a couple of casino operators waiting for the final green light from the local gaming commissioner to install our machine. Since we are bringing a brand new machine category to the jurisdiction, it took a longer period of time to explain and communicate with regulator. We are targeting to get CA and PENN approval in 1H2016 and installation by 2Q2016,” Zhao said.
Apart from the US market, we are deepening our relationship with IGT/GTECH in different areas, such as product development and Asia market development. We are hoping to conclude some arrangements within the coming few months and more information will be released from there, she adds.
According to Zhao, LT Game is currently developing a series of random number generator (RNG) based games, namely Power Dragon, which will be unveiled in the Australian market, where the culture is already more biased towards electronic gaming than in Macau, where live table games have been dominant.
She said LT Game is also in talks with a big casino in the United Kingdom regarding a sale of the company’s LMG terminals and the deal is expected to be confirmed by Q3 this year.
Zhao is confident advances in technology will continue to help growth. Last December, the company launched a prototype of “Min,” a human-like electronic croupier, which could reduce labor costs by dealing cards automatically.
Paradise plans to add facial recognition technology and multilingual capacity to the robot, which was an idea initiated by chairman Jay Chun following a request from an overseas casino operator which was finding difficulty in finding dealers willing to work in extremely cold conditions.
The current prototype can deal with Baccarat within the context of the LMG stadium setting. It’s still being tested and further functionality may be added. More news is expected in the 2H2016.
“We believe the ETG would change the traditional gaming table landscape much like how the TITO system did for the slot industry,” she said.
“Today’s table game has yet to take advantage of the advancement in technology which would benefit all stakeholders – operators, dealers and players.”
Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.
ASIA GAMING BRIEF
PO Box 1139, Macau SAR
Tel: +853 2871 7267
Fax: +853 2871 7264