For nearly two decades, the revenue split for the typical casino in the United States has been logged in the decided favor of the slot machine. Anywhere from 60 percent to as much as 80 percent of gaming revenue in a given U.S. casino comes from the slot floor.
Not so in Macau.
In Macau-which generated more gaming revenue last year than the Las Vegas Strip and is poised to out-earn the entire state of Nevada this year-slot machines account for less than 5 percent of gaming revenues. Tables are king, and more specifically, the reigning monarch is baccarat, long a mainstay of Chinese culture.
The lifeblood of Macau’s casino industry is a steady stream of players from mainland China and Hong Kong, many of whom have never played a slot machine in their lives. Factor in the lucrative VIP junket market, and slot machine operators and manufacturers face a steep, uphill battle in gaining precious floor space from the table games, let alone any significant market share.
“Competing with table games is difficult when you’ve got games like baccarat, which is really a part of Chinese culture and tradition,” said Matthew Ballesty, general manager of casino planning and development for Crown Macau Casino. “When they walk into a casino and see a slot machine, it might be the first time they’ve ever seen one; or, they see a game they’ve grown up with (in baccarat). It becomes very difficult to get those people onto a seat playing a slot machine.”
According to Lindsay Stewart, vice president of electronic gaming for Sociedade de Jogos de Macau, this low level of interest in the games leaves little incentive for operators to clear out tables to make room for slots. “Every gaming floor only has a certain amount of premium play space,” Stewart said. “The main difficulty here is to get that space. Table games, obviously, have a far greater yield here than in any other gaming precinct in the world. It’s difficult at times to get the space you need to market and promote your product the way you’d like to. That means your game selection has to be all the sharper, all the more cutting-edge, to maximize whatever space you do have.”
Ballesty, Stewart and other slot operations and manufacturing executives addressed the subject of growing the region’s slot market in two separate roundtable discussions at the recent G2E Asia conference.
While all of the professionals at the sessions agreed that growing the slot market is a tall order-at Crown, the number of slot machines has actually dipped in the past six months, from 550 to 200, due to what Ballesty calls a “change in business model”-the coming of the more tourist-based mega-resorts like Venetian Macao and Wynn Macau has improved the outlook for slots a great deal.
Stewart pointed to rapid progress at Sands Macao, where he assembled the pre-opening slot team. “When I arrived here in 2003 to set up the Sands floor, we started on day one with 419 machines; three weeks later we had 520 machines; three months after that we were up to 660.” He said that while the Sands offered a lot more overall slot space than other casinos in Macau, the upward trend did spill over to many other casinos.
“In Macau during those four years, slots went from 0.4 percent of the slot floor to 4.6 percent,” Stewart said. “That may not sound huge, but when you consider that the overall market has grown by several hundred percent, it’s a pretty remarkable take-up rate.”
Peter Johns, director of slot operations for MGM Grand Macau, added that player’s club statistics show the increase in slot play is coming from repeat customers. “The numbers we see coming from rated play are staggering,” he said. “We’ve been open four months, and we’re looking at 70 percent rated play, which is quite a good pickup. One-time play represents only 30 percent of our market. There is a lot of repeat play, and that’s growing rapidly.”
Sustaining this rapid growth is the puzzle to be solved not only by the slot operators in Macau, but by slot manufacturers as well.
Manufacturers say building a mass market for slots is a balancing act between proven game programs and localized themes; for operators, it means the right mix of first-time appeal for the games and relationship-building on the slot floor.
As the market for slots in Macau expands, operators are listening closely to their customers, and manufacturers are listening to the operators. “The variables are different from property to property; what brings a player to a machine or what sends him away can change,” said Rossi McKee, vice president of marketing for Bulgarian slot-maker Casino Technology. “It is important to talk to our customers, and to get feedback from our players.”
As far as the game features that are most likely to build the mass slot market in Macau, manufacturers say that by and large, what works in other parts of the world works in the Chinese enclave.
“We develop our games for international markets, not necessarily for Macau or Asia,” said Alon Englman, vice president of game design and strategy for WMS International. “We really think long and hard about the players, and what really excites them. And, you’ll find that players are pretty much the same the world over.”
That said, some game features with worldwide appeal play particularly well in Macau, says Englman. “One thing that separates players in Macau is that they want a high sense of anticipation building up to a result; you can tell that by the way they squeeze their cards when they play baccarat,” he said. “The other aspect you’ll see players here very much concentrate on is community. When you go past table games, you’ll notice a lot of them are empty, but others are completely full. People want to play together.”
“We find that some of our games that are very successful in other parts of the world are the games that are successful here (in Macau),” agreed Ken Jolly, general manager-Asia Pacific for Aristocrat Technologies. “We have a number of Asian-themed games in this market, but I can tell you those are the games that are very successful in other parts of the world.
“Do we design specifically for Macau? No, but we try and bring the best games to the market, and we listen to our customers to work out what their customers, the players, are telling them, to glean some research and direct our marketing and sales.”
Customizing for the Culture
Listening to the operator, in fact, is key in bringing the most popular features to bear in pleasing Asian gaming customers.
Johns stressed the importance of manufacturers tailoring their proven game features to the Chinese market.
“Manufacturers should listen to the operator, and not try to dictate what they think will work on our floor,” he said, “and listen to the feedback we give them on what is working in the different venues. What works in other jurisdictions and in other parts of the world-you can’t necessarily say it’s going to work in Macau.”
Stewart added that all of the manufacturers have listened to this advice over the past few years in Macau. “Most manufacturers are on the ball now where Macau is concerned,” he said. “They’ve gained the same experience we have over the years. They know what works, what doesn’t-what’s got a chance of working. They’re far more receptive to feedback and design concepts.
“It’s a lot easier than it was. A lot of people tried to sell me a lot of junk five years ago. Now, there’s a lot more communication and mutual understanding of needs. There was a time when we couldn’t even get glass translated into Chinese. Those of you whose language is English should go to Russia or some similar jurisdiction and try to enjoy games when you can’t understand what’s going on. It was the same for the Chinese here. These issues were resolved quickly, and we’re thankful to the manufacturers for that.”
According to Kurt Quartier, vice president of
international casino markets for IGT-Asia, language and cultural particulars for Chinese markets are the
first step in designing effective games for Macau and nearby markets. Once that barrier is crossed, he said, the strengths of the math and game features take over.
“We’ve done quite a bit of work specifically on theming and language,” Quartier said. “As some of my counterparts have said, the math is pretty much the same; what works in one place will work in the rest. We had a similar experience in Russia before this market opened up. You would go and do Russian themes, and when you put the two math models next to each other, the original model still works better. We’re kind of seeing the same here, although we’ve also had some success with some of the Asian themes that were specifically aimed at this market.”
McKee noted, though, that successful math models must still take into account the specifics of each culture and language. “What has always been important to us is that we do develop games for specific markets,” she said. “Our experience has proven that yes, there are international games that tend to be successful more or less across borders, but there also are specifics that really need to be taken into consideration when you develop the games. That’s why our approach to games, especially for the Asian market, is to develop a specific library of Asian games.”
“It’s also a matter of keeping things simple when you’re dealing with a population coming from mainland China,” added Catherine Burns, vice president and managing director, Asia-Pacific, for Bally Technologies, “and of keeping a very open mind on your demographic. It’s one of those markets that involves trial, trial, trial, build on experience, learn from other markets, learn from what you see culturally, and go from there.”
Burns also cautioned against designing what she calls “American Chinese” themes. “Chinese people don’t eat fortune cookies!” she said. “Game developers need to get out to mainland China and feel the pulse.” She said that definitely extends to translating the games into Chinese. “None of us should be sitting here talking about language-we’re in China. Language should be something that’s automatic.
“But it’s difficult, because with language and character sets in Chinese, it’s such a rich, functional language that sometimes if you’re not using translators who are native, mainland Chinese, you can get the translations very, very wrong. We certainly found that out on a few of our early translations. We were using U.S.-based Chinese translation houses. We stopped that.”
The Right Mix
As the market matures in Macau and nearby Asian casino locations, slot-makers and operators alike are working to develop a game mix that will satisfy both the mainland Chinese who ferry over and the increasing numbers of international tourists.
Harmen Brenninkmeijer, CEO of Octavian International, commented that the varied nature of the customers coming to Macau has presented a challenge to game developers. “This is quite a difficult market to a certain extent, because on one side you have mostly tourist play, and on the other side you have the hard-core group coming over and over again from Hong Kong, or even locally from Macau,” Brenninkmeijer said. “To determine exactly what they like is, in principle, quite different. The education levels are very different for the different players? I still think we all have to find out what is really going to drive this slot market to where we can be truly successful.”
In the meantime, says Brenninkmeijer, “we’ve got to make money,” so the manufacturers look to what has been successful thus far. Multi-line video has been the mainstay for several years in Macau, although high-end reel-spinners enjoyed some success in the first year or two after gaming expanded.
Though the multi-line games are still pervasive, according to Quartier, reel-spinners are making a comeback, thanks to the five-reel versions of traditional video formats. “The new steppers play like video, so spinning reels are enjoying a resurgence around the world,” Quartier said. “It will be interesting to see how far they can go in this market. I think they can go a long way.”
SJM’s Stewart credits the manufacturers for responding to their feedback in making reel-spinners work. “Steppers originally worked very well in high denominations,” he said. “We had some spectacular performances from $10, $20, $50 and $100 denominations in the right quantities. But nothing was offered to us that really caught the players’ imagination, and a couple of manufacturers at that time were dead in the water.
“To their credit, the manufacturers sent teams out here, and they researched, restructured and rewrote, and now, a couple of the stepper games are quite spectacular-five-reel, with all the traditional video features, except for the reel setup. It’s to their credit that they saw where we were and addressed it. Of the top 10 games in Macau for the last five years, probably half of them are five years old-they are games we introduced up front when we first set up the Sands floor. The other half of the top 10 is that new product, from manufacturers evolving and developing their product to better meet the local preferences.”
Crown Macau’s Ballesty said communicating what works and what does not work to the manufacturers will be critical to the future growth of slots in Macau. That, he said, means talking to the customers. “The staff here is the best I’ve seen anywhere in the world,” he said. “They know the games, and they are excited by the games, and that rubs off on the customers.”
Most of the operators and manufacturers working in Macau feel the slot market will gradually expand to a ratio closer to the Western casinos, but no one expects a 50/50 mix any time soon. Brenninkmeijer calls recent projections that slots will match tables in Macau in seven or eight years “grossly optimistic,” but he adds, “you just never now. Right now, we know that a lot of the table business is from junkets. Is that going to expand or slow down? If it slows down, that’s going to move the slot percentage up quite quickly.”
“The problem at the moment is that most of the slot revenues come from very few people,” said WMS’ Englman. “The top 10 percent of players is making up probably 80 percent of the revenues, even in the slot area. What we need to develop here is a mass market, where there are a lot of people playing the slots. That’s really going to drive the market.”
When will that happen? The jury’s still out.