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MelcoPBL Gets It

I'm just getting around to reading MelcoPBL's quarterly results which were released about two weeks ago. Yeah yeah yeah, I've been enjoying a little too much holiday pudding, what can I say. For those who don't know, MelcoPBL are the operators of Crown Macau and the City of Dreams project that is currently under construction in Cotai. Anyways, I got about as far as the first two pages before I had to post something about CEO Lawrence Ho's assessment of Crown Macau.

Take it away Larry...

The third quarter was a transitional period for Crown Macau as the property became fully activated from late July. Based on our estimation for the month of October, Crown Macau's combined VIP and mass table game market share of the whole market was approximately 8%, continuing the positive growth trend and despite the introduction of a major new entrant into the market. [He's referring to Venetian Macao - CM ]

We are very optimistic that we can continue to drive additional improvement at Crown Macau, as a result of our previously announced reconfiguration of the property to accommodate additional VIP capacity with a commensurate reduction in mass market and slot capacity. This reconfiguration reflects the positive reception Crown Macau has received from the market and complements our competitive advantage in the VIP segment driven by our market leading amenities and strong local relationships with junket operators.

We believe that this reconfiguration will lead to significantly increased gaming activity at Crown Macau and an expansion of our already strong junket network. Our previously announced Gaming Promotion agreement with Ama International Limited has the potential to meaningfully accelerate this process, largely due to the working capital solution this agreement brings to the property. The physical reconfiguration of the property is scheduled for completion by December 1, and, pending satisfaction of certain conditions, we anticipate that full Ama operations will commence at Crown Macau by year end. Final table mix plans for the reconfiguration of Crown Macau is still being finalised. Following completion of the reconfiguration and based on our current plan, Crown Macau is expected to have approximately 187 VIP gaming tables, 57 mass market gaming tables, and 230 gaming machines.

I doubt many of you reading this have been to Crown Macau. I have, and what I found while walking the casino was a lot of empty mass market tables, a ton of video slots that NOBODY was playing, and a very active high limit VIP area. At the time, I thought... golly, this place is gorgeous, but there's nobody here! Huh? I went across the street to the Greek Mythology Casino and the mostly mass market joint was hopping with activity. Huh? Old beat down casino filled with regular joes, new beautiful casino, empty except for high rollers. Weird.

*The lightbulb above my head opens its mouth and speaks*

Crown Macau isn't for the mass market Chuck... it's a six star experience for six star bank accounts, six star taste and six figure minimum bets, ya dummy!

Two star people feel out of place in six star joints. Three star people feel out of place in six star joints... Four star people can do five and six star, but six star people can't do five and four star joints. There's a two level, upward sliding scale that doesn't work in reverse. Get it?

To see MelcoPBL coming right out and saying pretty much the same thing in the opening paragraphs of the quarterly report (the quarter in which I was there) was great validation of the thoughts of my pet lightbulb and me.

A month ago, MelcoPBL added a few more exclusive agreements with major junket operators who will supply high rollers (previously giving action to the Sands Macao) for a commission. With all these new high rollers coming to Crown Macau, where are they going to play if the VIP areas are already quite occupied? Why not replace barely used slot machines and mass market tables with more gaming real estate targeted for the customers who are a perfect fit for Crown Macau's six star atmosphere.

MelcoPBL gets it.

The big money wants the big experience and will happily pay the big bucks for it. If Crown Macau were any less fantastic than it is, they'd never be able to pull this off. You can't hoodwink a person with champagne tastes into thinking sparkling apple cider is Dom Perignon, nor can you coerce a person with a McDonald's budget to spring for Kobe beef burgers. The mass market is the crop, VIP is the cream. Each strata of player attaches themselves naturally to the casino they feel the most comfortable in, hence the crowds at Greek Mythology playing HK$25 baccarat and the crowds in Crown Macau's VIP area playing 100-1000x that.

My one fear is that Crown Macau may become pigeonholed as unattainable, or too exclusive for walk-ins, not that there is any foot traffic in Taipa anyways. Las Vegas' Bellagio launched with a PR campaign that played it up as exclusive, which kept a lot of dollars on the other side of the fountain show. I'm very excited to see how the numbers at Crown Macau evolve over the next quarter or two. With an avalanche of gaming opportunities in Cotai just a year or two away, MelcoPBL runs the risk of being vaporized if their VIP acquisition and retention plan isn't locked down. Just like the stellar design of every nook and cranny of Crown Macau, they've got everything planned out.

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Comments & Discussion:

Good post Chuck. Thought you would like to know that MelcoPBL has a 3-year contractional agreement with the new big junket deal they just signed with AMA International (A-MAX). So they should have "the cream of the crop" even after the Cotai gets build out.

thanks for the tip off macauman. i've been trying to research a listing of macau junket operators but, of course, it's easier said than done. apparently, there are about 100 of them licensed to do business in macau. the macau government websites, of course, are useless for this research. i've been told that the hong kong yellow pages have listings for them, but can't verify this.

Hi. I've visited Crown Macau and also the original Crown in Melbourne. Its got quite similar design cues. It seems to me though that overall the design is more geared towards westerners than to the chinese. The most obvious evidence of this is in the urinals. Being about 6' tall, I didnt notice anything, but my 5'7" said, what the, these urinals are designed for westerners!

I just cant imagine how angry an average height Chinese millionaire will be when he realises he isnt tall enough to go to the urinal!!

Has anyone heard of such an issue??

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