Some might say we make our own luck in life. Others would stick to the saying, “The harder you work, the luckier you shall be.” We could believe that Steve Wynn, for one, has no truck with Lady Luck, even though it was in his joint that Frank Sinatra crooned the most famous Vegas hit of them all, “Luck be a lady tonight.”
And yet the original gaming tycoon, who built a fortune in the Nevada desert, lost much of it in a high-stakes game with Kirk Kerkorian, and then made a new one with little more than his wits, charm, a couple of billion and a devoted wife, would have to admit that the Lady can sometimes be a tramp.
In September, just as it looked like he was set for another record quarter of earnings in Macau after a strong summer, the Lady turned savagely against him in his VIP rooms. In the first two weeks, he got whacked so hard by some whales that his intra-month market share dipped below 10%. Unfortunately, the timing could not have been worse, coming just as his neighbor, MGM, had made it known to the junket industry that it was ready to play the game more aggressively, with generous revenue-share deals and front-money incentives. One piece of evidence pointed to another, and soon a few analysts were downgrading Ebitda forecasts. His property came back in the last week of the month, as the Lady perhaps realized she had been too harsh, and he ended up holding slightly above theoretical. But his competitors held better, and so his market share slumped from around 14% to 12%.
It was the kind of experience that must have drawn empathy from every one of his competitors, but especially from those who saw their rolling-chip volumes dip by a lot more from August to September. Altira was the worst, down 25% (but much may have flowed to its sister property), followed by Sands Macao at -19% and StarWorld at -16%. Even the mighty SJM was down slightly MoM and if it hadn’t been for a phenomenal performance in the premium-direct rooms at the Plaza, Sands China would have had egg on its face, too as the Venetian held poorly. Only MGM saw its roll up on a monthly basis.
To be sure, Lady Luck masked a deteriorating performance across the market in September, which is traditionally a weaker month, stuck as it is between the end of summer and the biggest month of the year. Win-hold percentages were great for everyone in September, well above theoretical in almost all cases. The market has come back staggeringly strong in October thanks to a record-breaking Golden Week but, again, we won’t know how much of that is volume-related or luck-related until we see the month-end figures.
Which brings us to this week’s apology. We have to confess that it has taken us far longer than it should have to give the brass at Melco-Crown a nod for the way they have always highlighted the luck factor in their earnings releases. We have to assume that they will not just do this in bad times, but will do it in good times, too. Like when they release their 3Q results.
To be sure, the MPEL team deserve some credit (no pun intended) for the hustle they have shown over the past quarter. It’s not enough that they have one of world’s three VIP marketing superstars in Kelvin Tan. He alone could not have accounted for the sharp rise in rolling-chip turnover at the two properties. There had to have been single-minded focus among the management team, ie, Lawrence Ho and Ted Chan, on how to punch above their weight in the VIP market. This hustle and focus was finally rewarded in September, with a record blended win-hold between Altira and City of Dreams.
Will this luck hold? That is the everlasting question, not just for MPEL but for everyone in this market. True, win-hold becomes less volatile as volumes increase. SJM will never likely see a 4% month. Yet neither will it likely see a 2% month. Galaxy tends to be less volatile, too, because it has so little premium-direct business. Indeed, as the proportion of premium-direct rises at properties such as COD and Plaza, so can we expect some more wobbly MoM performances – at least until those volumes are big enoughj in themselves to smooth out luck variations.
And so, as this US$24bn-a-year market goes to $30bn, and then to $40bn, and so on until the bubble pops (if it ever does), it would be wiser of all of us who are trying to gaze into QoQ and MoM crystal balls to have a little souvenir statue near at hand, preferably in the shape of a Marilyn Monroe figure. There is only so much hustling we – and the concessionaires – can do. The rest is up to her.
Used with permission & copyright IntelMacau
