Sands China charts an aggressive path for its gaming machine business

Sands China offers a variety of gaming experiences for its patrons. Venetian Macau Resort Hotel is designed to attract customers interested in enjoying dining and shopping in addition to gambling.


Looking at the revenue figures for Macau, where slots barely approach 5 percent of the total, it’s easy to conclude that gaming machines are a bit of an afterthought, but that’s not the way Sands China Ltd. (SCL) looks at it.

The recent launches of life-changing jackpot games Megabucks and Fa, Fa, Fa are just the latest in a string of slot department initiatives at SCL’s Macau properties, now four in number, with the opening of Sands Cotai Central last month, which will give the group a total of 5,500 machines in the market when it is fully opened (HK$1 = US$0.12). In addition to its exclusive progressive jackpot games, the company has invested in new VIP spaces, built strategic relationships with a number of game manufacturers, diversified its game mix and is pushing forward on the service and marketing fronts.

All of which makes a world of sense because, let’s not forget, 5 percent of the world’s largest market is still a pretty big number. So it’s well worth the heavy lifting needed to persuade a still sometimes-hesitant player base that slot machines are a reliable and potentially rewarding form of gambling.

“On a percent of revenue basis, the slot market in Macau looks pretty minute, but when you think about it on the grand scale of things, you’re talking about a $1.5 billion market, of that, we had over 26 percent,” said Lance Gautreaux, vice president of slots operations, Venetian Macau Ltd. “And that revenue figure should grow to $2 billion this year.”



Macau operators need to find ways to alleviate customer fears that slot play is “manipulated” if they expect to generate more machine revenue going forward.

OVERCOMING CULTURAL CHALLENGES

Slot revenue in Macau has not grown as fast as many may have hoped for before the wave of the casino development this century in part because the cultural objections to the games and the way they are traditionally marketed are still being surmounted here.

For one, there is the “hungry tiger” stereotype, whereby slots are seen as pre-programmed money eaters that can be manipulated by operators on the fly. While exposure to the machines has greatly increased in the last decade and players have grown in sophistication, the image lingers, and the government’s recently published technical standards for slot machines, which are set to go into effect October 1, are seen as a possible marketing tool.

“As we move forward and the slot market grows and guests grow more comfortable with the machines, they are becoming more aware of how they work, more comfortable playing the games and the mechanics behind playing the games, from the line selections to the betting and all those different things,” said Gautreaux. “We’re seeing a growing favorability in terms of the integrity of the slots. With the release of the technical standards, any player can go online, read through the standards, understand that the machines are regulated and that there are requirements that have to be met before a machine can be approved and placed on the floor. That will give players a greater sense of comfort in my mind. We’re in a pretty technology-savvy area of the world and the standards will be one of our messages to our players. Some still have the perception that someone can go in the back of the house and change settings whereas the machines are really just a pre-set computer that has been fully vetted, and any changes we make to a machine are pre-approved by the government.”

Another challenge is growing the rates of carded play and implementing traditional loyalty-based marketing programs, an endeavor which faces the twin challenges of individual privacy concerns and strict communications rules.

That said, Sands is adding carded customers “at a very rapid rate,” said Rahul Kaushik, vice president of loyalty and customer relationship management, Venetian Macau Ltd., who noted that the Sands Rewards Club now counts 1.3 million members.

“The distinctive profile for our slot customer is that they are far more likely to join the club and be rated,” said Kaushik. “To have a card and put it in the machine works for people intuitively; they understand the point systems. On the other hand, there’s a whole segment of the market that we don’t know enough about. Our strategy on that side is not to be solely focused and hung up on the fact that we want to get them signed on, but also to have something of value at this property that takes care of those people, too, whether that’s promotions, random draws or life-changing events.”

About 80 percent of SCL’s rated slot revenue comes from people who belong to the players club, which is a pretty big number for Macau, said Kaushik. The company has a number of reward programs tied to coin in, but, at the same time, “communication is a challenge here and it continues to be. We’re very limited regarding the use of media in China and we respect that. Also, from an e-mail adoption perspective, it’s nowhere near what you get in an American or western market. If they are high net worth enough, they have a host assigned to them, so there’s a one-to-one relationship. We’ve also created a second level of one-to-one relationships with telemarketing. Beyond that, we have to rely on in-Macau and on-property communications, and that is the primary vehicle for us in terms of communicating to the masses.”

An obviously powerful slot marketing tool the company has is the properties themselves, which are differentiated from a price-points perspective, giving SCL an unparalleled ability to address the full range of consumer preferences in Macau.

“Sands Macau has the peninsula core gamer personality; I want to play, have my meal, and get out,” explained Kaushik. “It’s got that look and feel. The Venetian is more full-resort experience. People want to play but they also want to shop, enjoy dining, entertainment, concerts and spa. Shopping has been a huge growth area for us, more so here than the overall market growth. The Plaza Macao and the Four Seasons is the premium brand, with the best service and the best product available in the market. Sands Cotai Central will cover both the middle and upper market-affordable luxury with the Holiday Inn, all the way up to Sheraton and Conrad.”



Sands China is banking on loyalty cards and other marketing programs to bolster slot play at its Macau resorts.

NEW GAMES ACROSS THE BOARD

Ride into Macau on the Taipa ferry from Hong Kong and you’ll see a steady stream of video ads touting a central plank of SCL’s new slot game strategy: Megabucks, which resets at HK$50 million, and a progressive version of the top game in the market, Aristocrat’s HK$5 Fa, Fa, Fa, which resets at HK$9 million.

“Megabucks is the top jackpot in Macau, so it’s a life-changing experience that is really strong from an advertising standpoint, as is the recently deployed HK$5 Fa,Fa,Fa,” said Gautreaux, who noted that the Megabucks payout could easily grow to between HK$75 million and HK$100 million. The game is exclusive in Macau to SCL.

“We can offer Megabucks because we have such a large operation, now with Sands Cotai Central coming online,” said Gautreaux. He said the win-per-unit on Megabucks is trending up and well above house average of US$375 per machine. The game started last Dec. 31; Fa, Fa, Fa debuted March 1.

Beyond the new WAP’s, the company has a number of irons in the fire with manufacturers to diversify its game mix. Most of SCL’s machines are video and its floors are about 45 percent Aristocrat. The pre-Cotai Central number was 3,500; of which 2,200 are at the Venetian and 1,100 at the Sands, with Plaza operating just under 200 machines. At Sands Cotai Central, which is referred to as Parcels 5 and 6 of the Cotai Strip, Parcel 5 will have 770 machines and Parcel 6 will have just over 1,300, bringing the total number to just over 5,500. Game themes are typically refreshed at an annual rate of 15 percent, and the machine replacement rate runs at about 6 or 7 percent, according to Gautreaux.

Aristocrat typically enjoys up to 60 percent share of slot floors in Macau, so SCL keeps the door open a little wider for other manufacturers than do its competitors. “We really have gained a lot of traction with the less dominant manufacturers here, such as IGT and Aruze,” said Gautreaux. “We want to give the gamer extra options and try to be first-to-market with new product, or at least staying on top of what’s new, bringing product from different markets and make it work here. We are working closely with IGT on additional games that are exclusive to us, trying to incorporate a lot of Chinese culture and beliefs into the games and graphics. We’ve got some different themes and math models that we think will also be popular with the local market and that are going to be released in the next three to six months.”

Among the hottest new games in the mix are those being supplied by LT Games, a local manufacturer with an exclusive patent on semi-automated baccarat and whose live table multi-game system is extremely popular in Macau. These dealer-operated, semi-automated table games supporting up to 50 multi-game selection terminals are “huge and it’s growing more rapidly than most things,” said Gautreaux. “LT has a few hundred units at the Paradise, which is a casino on the Peninsula. Just through walking their property a member of our team noticed those and was interested. We installed the games at both Sands and Venetian and they’ve been tremendous. We have 151 terminals installed with three tables at the Venetian. We have one roulette and one sic bo, which counts as one table. Each of the others in baccarat games with two shoes on each. So essentially you have four baccarat games going at the same time and then SicBo and roulette.”

The LT multi-game product is popular with both slot and table game players, many of whom enjoy the games’ low minimum bets (HK$20) relative to live table games, which never dip below HK$100. Out of the total customer base that plays the LT Product in Venetian, 23 percent of those players strictly play LT Electronic Table Games only. For Sands it’s higher at 28 percent, showing a strong unique following for the LT product.

SCL has ambitious expansion plans with LT, said Gautreaux. “We have a whole development timeline with them for 2012 whereby they will develop games specifically for us,” he said. “We’d like to deploy baccarat variants that we use in Singapore that are really popular with players. LT has been doing anything we ask to move our electronic table game technologies and products forward.”

On the systems side, there is still plenty of work to do. SCL uses Bally’s ACSC system, but, “we’re still on a 4.0 version which has been greatly modified to our specific needs, whereas Singapore is on 11.2, available in the market for some time,” said Kaushik. “Because we have been adding properties so fast there was never really a good time to do upgrades with backward compatibility.” Several new systems-based initiatives are in the pipeline, such as CRM platform, real-time rules engine, self service kiosks and a player user interface solution that is being developed for SCL and is scheduled for a test run shortly.



One of the high limit slot areas recently opened at the Venetian Macau.

RELATIONSHIP BUILDING

Like slot operators in competitive markets everywhere, SCL has ramped up its focus on player retention and development, making abroad range of investments. Four new, private high-limit spaces opened at the Venetian in January, complete with plush furnishings, private restrooms and personal entertainment technologies such as sound systems and a tablet gaming interface that enables VIPs to play actual slot games using an iPad.

VIPs are not card resistant; SCL has about 75 percent rated play on the high end.

They are cultivated via a newly created business development team specifically aimed at high-end slot players, which has been pursuing player acquisition all over the region, said Kaushik. “We’re working hard at acquisition as well as enhancing our service once they do get on the property.”

To that end, SCL last year deployed a slot dispatching software, WRG’s Real-Time Slot Service, which gives real time event information to a dispatcher who then relays it to the floor. “With that, we’ve been able to achieve response-times of one minute or less across all of our properties,” said Gautreaux. Completion times for jackpots are about 4.5 minutes and regular events are 2.5 to 3.0 minutes. “We’ve pushed responsiveness pretty hard. It’s a very important piece for our service in slots.

“The value and quality of service that we offer is really something that we’re putting a lot of effort into,” added Gautreaux. “That’s what differentiates us. You go around town and you see pretty much the exact same product in every building. Whether it is the VIP experience or the mass gaming experience, it’s really about us driving service initiatives once the guest does come to the property.” SM



Lack of live table game options will likely turn more Macau mass market gamblers toward slot play.

SIDEBAR: Table game cap could fuel slots in Macau

The view from smaller operators isn’t that far removed from that of Sands China, when it comes to the long-term potential of the slot business in Macau. Anticipated gains in product quality and player awareness are part of the outlook, but so is regulation. In particular there’s a cap on table games that limits Macau to 5,500 tables (as of late last year the market was 198 shy of that figure) and 3 percent growth post for 2013.

“The table cap is making it difficult for casino operators to expand their mass market; thus further opening the door for slot numbers to grow and develop,” said Andy Crisafi, vice president of operations, Weike G Management Macau Ltd., a company that offers a turnkey solution for casinos by setting up, supplying and managing their slot operations on a revenue share basis. They are currently running two slot operations within Macau; with plans to expand in the near future. Weike G is the sister company of Weike Gaming, a Singaporean based slot machine and systems provider within Asia.

Weike works closely with LT Game who led the charge with live-streaming gaming products in Macau at Kam Pek Paradise Casino. LT Game operates over 600 machines at Kam Pek which allows customers to play multiple games of predominately baccarat along with sic bo and roulette on any one terminal. With the table cap implementation, this product has been very appealing to operators in Macau as a single table can account for multiple terminals, depending on regulatory approval. The games can also be played for as little as HK$20 per hand which attracts mass market players who are still somewhat resistant to pure slots (HK$1 = US$0.12). They are also a nice way around the table game cap, should present rules not be relaxed.



LT Games live dealer-aided electronic table game product has proven popular at Kam Pek Paradise Casino and other resorts.

“It’s the whole trust thing; live-streaming allows customers to freely choose to play from multiple baccarat, roulette and sic bo tables,” said Crisafi. “Through live streaming, players can view the cards being dealt in real-time. This appeals to a segment of the market that is still somewhat skeptical of electronic table games.”

There’s optimism on the high-end as well. Another area that is showing phenomenal growth is the high-limit slot play, mentioned Crisafi. “We have patrons spending HK$5,000 a spin on the machines and they’ll sit there for a few hours, sometimes playing two or three machines at a time. This has helped our operations achieve a threefold growth within the last 12 months.”

Future growth will also depend on more responsive products from leading global gaming vendors down to regional suppliers such as LT and Weike, which are focused on customizing games for the local market, noted Crisafi. “Overall Macau’s gaming market is still young and there’s plenty of opportunity for growth and improvement as Macau hurdles quickly forward within this industry.



SIDEBAR: Vendors place their bets on Sands

Leading slot manufacturers are in agreement: The growth of slots in Macau and, by extension, the Asian market, will depend heavily on progressive operators such as Sands China Limited (SCL). A sampling of their views follows:



Kurt Gissane

Kurt Gissane, managing director of Asia Pacific, Bally Technologies

“SCL continue to be extremely progressive in showcasing the very latest innovative gaming technologies available to market. They have been first to market with a number of our products, as well as our new Pro Series platform, and we often utilize their venues as showcase sites for local or visiting operators. SCL have been pivotal in the overall growth of the mass market slot segment in Macau, which, based on their results has proven to be a tremendous success and in my opinion, will continue to grow. The invaluable insight we receive from our partners SCL, greatly assists our ability to develop regional specific technology that will aid in the growth of the slot machine segment going forward.”

David Punter

David Punter, general manager of Asia Pacific, Aristocrat Technologies

“Aristocrat is very excited about the life changing Fa, Fa, Fa jackpot at Sands Macau.

Traditionally Aristocrat jackpot product; Fa, Fa, Fa Hyperlink is positioned is positioned at 20 cent or $1 denomination with the highest ever jackpot being just over HK$20 million in Macau. This configuration has proven performance in Macau and a strong player base across Asia Pacific. Now seeing this product move into the life changing jackpot space in the $5 denomination is exciting as we could potentially see higher jackpots and turnover than ever. Fa Fa Fa has proven to be Asia’s most successful slot product . The product has enormous player appeal and the brand resonates with players all over the region.”



Steve Walther

Steve Walther, vice president, marketing, Aruze Gaming America

“The Sands Group is a fantastic business partner for Aruze Gaming because they have shown the ability to take a risk on industry new-comers. Our product performs well on their floors, and as such we have received significant floor share for the new Sands Cotai Central. All operators are looking for ‘something new’ to improve their market positions, however they don’t want to lose their profit because of this challenge. They also do not want to rely on a single manufacturer as a more diverse floor provides players with a better atmosphere, more choices and greater engagement. As a market grows and evolves, we don’t often see the changes in the market in small periods of time as they happen slowly. To make big changes happen, operators must take big risks, and Sands takes those risks to appeal to the market and impact its position in a positive manner.”