Machine makers vie for slots in Macau gambling boom - Sunday 12th of June 2005

Slot machine makers are jostling to hit the jackpot in Macau, where the world's fastest growing casino market has so far been driven by high-rollers playing table games such as baccarat and blackjack.

The former Portuguese enclave, described by one speaker at a slot machine trade fair this week as "Las Vegas on steroids," generated just 1.5 percent of its $5.29 billion in gaming revenue last year from games such as slot machines and video poker.

By comparison, half of last year's $5.3 billion in Las Vegas gaming revenue passed through machines, which are often favoured by casual holiday players such as retirees.

But Macau will change, according to casino operators and machine makers, who said a $15 billion strip of casinos, hotels and shopping malls being built on reclaimed land will pull in millions of lower-spending recreational gamblers.

Macau is the only place in gambling-mad China where casinos are legal.

"We used to put slot machines in toilets because they were slightly more profitable than urinals," said Lawrence Ho, who as head of Melco International Development (0200.HK: Quote, Profile, Research) oversees much of the gambling empire built by his father, Stanley Ho.

The elder Ho's 42-year casino monopoly lapsed in 2002.

Where Macau long relied on big spenders -- "high-roller" baccarat tables accounted for 72 percent of the $5.29 billion in gaming revenue last year -- smaller punters are the future.

Melco's joint venture with Australia's Publishing and Broadcasting Ltd. (PBL.AX: Quote, Profile, Research) has four new Mocha Slots outlets -- "Starbucks with 150 slot machines," according to Ho -- and plans to open four more outlets a year over the next couple of years.

Each machine brings in $200 a day profit in Macau, double the take of Las Vegas slot machines, Ho said, adding that his planned undersea casino, "City of Dreams", would install 3,000 machines.

BETTING BIG

Macau has just 2,637 gaming machines. Industry players expect that to grow by 20,000 in the next five years.

"We're very confident about Macau," said Paul Oneile, chief executive of Australian slot machine maker Aristocrat Leisure Ltd. (ALL.AX: Quote, Profile, Research) . "Every spare piece of land has cranes on it and it's all building casinos."

The city's explosive growth resulted from an end to Stanley Ho's monopoly and China's move in 2003 to allow an increasing number of its citizens to travel to Macau and Hong Kong.

Aristocrat said it expects to win 40-50 percent of the Macau slots market. The firm supplied around half of the machines in a casino opened last year by Las Vegas Sands (LVS.N: Quote, Profile, Research) , which is now building the $1.8 billion Venetian Macau casino.

Other machine manufacturers touting their wares here included International Gaming Technology (IGT.N: Quote, Profile, Research) and Star Games (SGS.AX: Quote, Profile, Research) .

Doubts persist about whether the new casinos will flood the gaming market, or whether China might one day clamp down on loan sharks that fund gambling trips.

The main fear among machine makers, however, is that casino construction will fall behind schedule because of a shortage of workers and building materials. But most executives exuded optimism.

International Gaming Technology, which sold 170,000 machines globally last year, hopes to get 28 percent of the slot machine market in Macau, said Joe Pisano, sales director for Asia.

The firm installed a "membership" system at Mocha Slots that manages patron's accounts, loyalty points and bonuses.

"China has the fastest growing middle class anywhere in the world and it's a culture with a strong propensity to gamble," said Pisano, flanked by two storm troopers and Darth Vader promoting a "Star Wars" slot machine.

Casinos are keen on slot machines because they give 4-8 percent profit margins compared to about 2 percent for a baccarat table. Computerised versions of roulette or black jack cram more games into a day, and cut down on the cost of hiring staff.

"A machine can't yell at you or steal chips," Ho said.

 

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