We're Now Getting A Sense Of The New Gambling World Order
It's a dramatic shift to be sure - one with the ability to cripple companies unprepared for lean times - and as of Wednesday, we have a better idea of who will survive these changes.
That's when Las Vegas Sands, the largest casino firm in the US, reported a fourth quarter earnings beat.
How the firm managed to do that in the midst of double digit revenue declines from its Macau properties - and continued anemic gambling revenue from Las Vegas - holds the key to where global gambling is going, at least until Macau stabilizes.
First, a quick rundown of Q4 operating income Las Vegas Sands' properties to get us started:
- Sands Cotai (in Macau) - down 14.2%
- The Venetian Macao - down 25.8%
- Sands Macao - down 14.4%
- Las Vegas operations - down 3.7%
- Sands Bethlehem - up 49%
- Four Seasons Hotel Macao and Plaza Casino - up 53.2%
- Marina Bay Sands Operations (Singapore) - up 157.9%
So Singapore brought it in for Sands, hauling in $674 million in casino revenue alone for the fourth quarter. That's up 33.7% from the same time last year. Marina Bay Sands got its overall boost through a combination of more gambling winnings for the casino and cost cutting.Cost cutting and more house gambling winnings provided the same windfall for the Four Seasons in Macau.
The figure to watch here is called "rolling chip volume" in the gambling world. That's what tells you how much money high rollers are putting down to play. That number was down across the board (At the Four Seasons it was down 36.3%, and even in Singapore it was down it was down 26.8%) - but Sands made up for it by taking home more winnings for the casino, up 1.66 points and 1.35 points at the Four Seasons and Singapore respectively.
You know what they say about the house.
It's crucial to know who's capable of finding ways to put Asia's dwindling high roller money to work. What's happening in Macau is that Chinese President Xi's corruption crackdown is scaring big money players away.
The island's junket system - its own way of financing high rollers - made it easy for big players to get a lot of cash to the table. That system, however, is breaking down because Xi wants to know where that money is coming from.
You may be surprised to find out that sometimes it comes from ill-gotten gains.
High rollers with known ties to the Triad, China's mafia, have been chased off the island recently. Even the once-untouchable relations of Macau's casino scions are getting busted for illegal activity. It's a new world where kings are getting overthrown. As such, 16% of all the junkets on the island closed in 2014. These changes - and other things that turn off even the slowly growing number of retail Asian gamblers, like a casino floor smoking ban - aren't going away.
Additionally, none of this is particularly good for Las Vegas.
"We know that Asian high rollers have been very important to Las Vegas," said Professor Michael Green of the University of Nevada, Las Vegas.
Las Vegas is now a place where more money is made from food, beverage and entertainment than anything else. The high rollers the place has, it wants to keep. Not that it has a choice in the matter.
Without them, Green added, we may see issues in Las Vegas' construction industry.
"They're [casino CEOs] going to have to step up they're efforts around the world and in Las Vegas," he said. Adding a reminder that it isn't impossible - just hard. "They didn't get to where they are by booking losers."
So the winners here will be the companies that have diversified outside Macau, have strong Las Vegas food, beverage and entertainment revenue, and have strong revenue from retail gamblers (think: The Sands Bethlehems of the world).
You'll see more deals like this making casinos happy - popular DJ Calvin Harris just signed a three year deal with Hakkasan, which has a mega club inside the MGM Grand in Las Vegas. MGM also has a bunch of retail focused gambling operations across the US in places like Detroit and Reno.
Others who have their portfolios concentrated in Macau and Las Vegas, like Wynn Resorts for example, may not be as well positioned.
That said: We'll have to wait and see how the house did. It won't just have to win, it'll have to win big.