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August 2008 Reconsidered

It's amazing how compelling thoughts enter the brain while doing mundane tasks... in this case "doing the dishes."

While thinking about the August 2008 drop in RCV as reported by AMAX and their assumption that it was caused by visa restrictions from the Chinese government, I had a gold medal of an observation : what about the Olympics?

I'm sure that the 2008 Beijing Olympic Games had a serious impact on travel to Macau, 08-08-08 or not.

Pardon me if the following observation is a little 'tin foil hat' - I just can't help myself. Follow me here... AMAX' (MPEL by proxy) pinpointing the drop in RCV and other revenue on Chinese visa restrictions (when it was really caused by the Olympics) could be - if true - a phenomenally astute bait-n-switch political move. I wouldn't be surprised if we see other gaming companies raising the ante along with AMAX/MPEL's RCV 'bluff' that in the hopes to throw a curveball to those who administer the visa restrictions. The potential outcome would be for the restrictions to be loosened or removed altogether.

Paranoid? Conspiracy theory? Standard business practices? What do you think?


Comments & Discussion:

Chuck, actually AMAX cited both reasons that you stated in their official RCV press release. They said that the lower RCV was both because of the visa restrictions but also because of the Olympics. The link to the press release is here:

According to them, the visa restrictions mainly impacted their lower tier players who presumably didn't have the resources to work around the restrictions, while their higher end players were mostly unaffected.

With regards to your proposal of the lower RCV being a 'bluff', I don't think that is likely because that would require the cooperation of the other operators, who don't seem to be playing the same game. Note that although it was a bad month for MPEL, the Macau market as a whole saw revenues rise 44% YoY, far above analysts' expectations of around 20-25% YoY growth (down from the 50 % growth seen in 1H08).

Likewise, if the Olympics were the real reason for the lower RCV in August, why were the other operators so successful during the month. If August revenues did actually come in at around 20-25% as expected, then the Olympics effect makes sense. However, it was actually 44% YoY, so the poor RCV at Crown is something isolated to MPEL alone.

What I think is that MPEL was genuinely hurt in August, even though the market did well overall. MPEL suffered more than most because they are more exposed to Guangdong visitation than other operators (such as LVS). Thus, the visa restrictions really are being quite effective at slowing visitation, but MPEL is suffering from them more than other operators are.

Again, my strategy as Crown management would be to try to expand their client base outside of Guangdong, and to encourage AMAX to do the same. The visa restrictions only apply to visitors from Guangdong, so MPEL should be trying to diversify away from that region.

On a separate note, I wanted to ask your thoughts on the actual name 'City of Dreams'. Thinking about it, it does actually sound a bit corny. Also, if you look at the Chinese translation, it isn't short and snappy, and in fact it is hard to read and doesn't make much sense. The name in Chinese has 4 characters, and the first 2 don't make much sense, although the last 2 do mean 'dream'. Is City of Dreams and its respective Chinese translation a bad name??

thanks for all those details AND debunking my tinfoil hat!

Any thoughts on the name 'City of Dreams'. I have a Chinese friend and she said that the name for City of Dreams in Chinese didn't make much sense. It definitely wasn't as snappy as the name for Sands, which is 'Gold - Sand'.

I can't speak word one of any flavor of Chinese.

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