Crown Macau places bets on VIP punters
Shares in Melco International Development rose after the company said it would renovate its six-month-old Crown Macau casino hotel to cater almost exclusively to high rollers, while confirming its gaming joint venture signed a billion-dollar VIP junket contract with a unit of A-Max Holdings.
The Taipa Island-based Crown has been struggling since its soft launch in May to lure mass-market business away from its better located and larger rivals. The strategic shift means it will be the first of Macau's new casinos to go all-in on the high-volume, low-margin VIP gaming market, which accounted for 38.38 billion patacas or 66.6 per cent of all casino revenues in the territory in the first nine months.
Reconfiguration of the gaming area at the US$583.6 million Crown will boost the number of VIP gaming tables to 204 from 80, and reduce the number of mass-market tables to 55 from 142 and slot machines to 230 from 550. Total table count will rise to 259 from 222.
On completion, VIP tables will account for nearly 80 per cent of the Crown's floor, compared with between 15 and 40 per cent at rival Macau resorts, including the Wynn Resort, the Venetian Macao, Sands, Galaxy StarWorld, Grand Lisboa and the upcoming MGM Grand.
The shift means Crown will rely more heavily on third-party VIP junket agents, who bring in customers, lend them money and collect gambling debts in exchange for a commission on chip sales.
As the South China Morning Post reported on September 12, Melco International's US-listed joint venture Melco PBL Entertainment has signed an exclusive contract with a unit of A-Max Holdings that acts as a middleman representing 10 Macau VIP junket agents whose combined gross sales in gambling chips average HK$77.4 billion per month.
The three-year agreement calls for Crown to pay A-Max's partner, AMA International, a higher-than-average commission of up to 1.35 per cent of its VIP chip sales and requires AMA to deliver a minimum gaming-chip turnover of HK$30 billion per month. 'AMA could potentially triple the VIP business at Crown Macau,' Deutsche Bank gaming analyst Karen Tang wrote last month in a research note.
Shares in Melco International rose 6.95 per cent yesterday to close at HK$12.30, their biggest single-day gain in a month. US-traded Melco PBL rose 8 per cent to US$13.83 when the deal was announced on Friday in New York.
A-Max, which has a 49.9 per cent stake in VIP operator Ng Man-sun's rival Greek Mythology casino, plans to issue HK$3 billion worth of new shares to fund AMA's junket venture at the Crown. A-Max shareholders will vote on the deal next week.
