Vegas   Macau   AC   Reno   |   Board   Photos

Interview with Galaxy CFO Nigel Morrison

Finance Asia has published a very very interesting interview with Galaxy Entertainment CFO Nigel Morrison. He gives great insight into Galaxy's two pronged approach to Macau and insight into the mathematics of baccarat, high rollers and max bets in the VIP rooms.

On Max Bets and the glux of the House Advantage:
“You have to be able to work out that what is happening in the high-roller rooms is within the bounds of normality. It’s mostly statistics – understanding normal distribution and standard deviation,” he says.

The theoretical house advantage for baccarat is just over 1.3%, which means that for every $100 bet, the house should make $1.30. But the problem is that you need to play a lot of hands before arriving at that point. “Along the way you can win or lose 10% which could translate into losses of hundreds of millions a year,” Morrison says.

The outcome depends to a large extent on how the game is structured. Casinos have to decide on the maximum bet whether it be hundreds of thousands of dollars or even as high as one, two or three million dollars. This decision conditions how much business is done at a certain level. While there are always a lot of players willing to play at a lower level there are only a few that play at the level of the maximum bet. But it is a fine call because if the maximum bet is too low the casino can lose the client. But if the maximum bet is set too high and there isn’t enough volume, this can expose the casino to the risk of high losses.

“You really need to understand what your maximum bet is, and the implications of that for your cashflow in the business. So you need to have enough cash to protect yourself if you do have a losing streak.”

The maximum bet at Galaxy, and generally in the high-roller private rooms in Macau, is around HK$1.5 million which can produce some sizable wins.

A high roller bet of HK$1.5 million = US$200K. If anyone knows how this stacks up to what Vegas offers, please shoot me an email or leave a comment. charles at macautripping dot com.

He goes on to discuss Galaxy's longer term strategy for Macau and Cotai:

Galaxy has a two-pronged strategy for Macau and it is based on the view that there will be two markets. The first, based on peninsula Macau, will comprise the serious gamblers that come from mainland China.

“They are not there to drink fine wine and stay in expensive hotel suites. They are really there to gamble and are serious about winning, and that’s a slightly different psyche from the style of gambler you might see in the US or Australia,” says Morrison.

He reckons that StarWorld which is adjacent to Wynn Macau, MGM, and Grand Lisboa – which are all within walking distance of each other – will form a core destination on peninsula Macau – rather like the Las Vegas strip.

The second market will be based on the Cotai strip, a massive five square kilometre area of reclaimed land between the islands of Taipa and Coloane. It will be a different market, aimed at convention and exhibition delegates, and those looking for upmarket shopping and entertainment.

“We think it is going to take some time for that market to fully develop. Our view is that it is probably a couple of years away.”

This makes me curious if Las Vegas Sands will be able to woo away the hardcore high rollers from the peninsula to Cotai, or forego the high rollers for a higher volume, lower risk income stream with more emphasis on grinding out low-mid size players and expanding non-gaming revenue streams.

Advertisement

Comments & Discussion:

» No Guts, No Glory... Be The First to Post

Leave a Comment:

Welcome back ! » Profile