Saturday, August 08, 2009

Packer casinos bet on beds to get them out of the red, by Vanda Carson - The Sydney Morning Herald - 8th August 2009

James Packer's Macau casino joint venture hopes to turn around the ailing fortunes of its two casinos by encouraging more of its visitors to stay and gamble until the early hours of the morning, when profitability is at its peak.

In announcing Melco Crown Entertainment's second-quarter earnings yesterday, the chief financial officer, Simon Dewhurst, told analysts the company planned to entice gamblers to spend more at the tables to reverse the slide of the past year.

The Nasdaq-listed company posted a loss of $US24 million ($29 million) in the three months to the end of June - compared with a profit of $US36 million in the period last year - due to a slump in visitors to Macau, a lower house win rate and fewer VIPs at its baccarat tables.

The company owns the Altira casino, which opened in May 2007, and the larger City of Dreams, which opened in June.

Over the past three months, the average amount of money won by the house on table games at the Altira casino was half what it was a year ago. The average house win each day was $US10,800 a table in the three months to June, compared with $US22,600 in the three months to June last year.

The overall result was below analysts' expectations, but Mr Dewhurst said he was hopeful that earnings would improve as the new City of Dreams casino became established and the economy picked up.

He said the opening next month of the 800-room Grant Hyatt Macau as part of the City of Dreams complex would likely boost gambling turnover, and that he expected a 20 per cent rise in the ''efficiency'' of gamblers.

Casinos give gamblers hotel rooms free because it directly boosts gambling revenue by allowing them to play through the night. The new rooms would ''ensure the gambling floor stays busy from midnight until 3 or 4 o'clock in the morning'', he said.

Casinos try to encourage gamblers to play at baccarat tables for long periods of time because it increases the house win rate. ''If someone buys in and sits for three hours, rather than one hour, it generates a higher hold percentage,'' Mr Dewhurst said.

The "hold" percentage - or casino win rate - on mass-market table games at City of Dreams would rise as loyalty to the casino, and the number of hotel rooms, increased, he said, adding that the house win rate could rise from its current 16 per cent to 21 per cent.

The City of Dreams has 600 hotel rooms, half of which are used to entice high rollers to visit and a further 150 of which are used as incentives for players on the lower-end, mass-market casino floor.

The company declared a bad-debt provision of $US4 million after a pair of high rollers did not repay money they had been lent by Altira to bet at the casino.

Mr Dewhurst said doubtful debts were "a function of our business - we have to manage them as best we can". (Credit: Fairfax)

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