Wishing everyone a Happy & Prosperous Lunar New Year of the Water Dragon !  In Macau and Hong Kong region, this LNY is one of the coldest in 16 years! The average temperature is below 10 degree with the first few days at 5 to 8 degrees…Brrrr!

Still, this is not a showstopper for visitors and gamblers to Macau!

Here goes for our Top 10:

1) We won’t see more than one new monthly gaming record

We called the MOP27bn mark for monthly GGR a year ago. We scraped the underside of that in October, at MOP26.8n. We don’t think that mark can be broken until possibly October 2012, despite recent trends in the mass market. The junkets are facing a macro picture in which their customers are grappling with a property market where transactions have fallen by as much as 70% recently, and prices are being slashed by developers in a brutal struggle for survival. Without the junkets firing on all cylinders, MOP27bn is like Mission Impossible, only harder.

2) Bad debt will be a challenge

This is not 2008 all over again. Sheldon Adelson is back in the Forbes Top 10, worth US$20bn. His company, and all the others, are well cashed-up. They could take a bad-debt hit or three. Many of the leading junkets have similarly improved their capital bases by loading up on private equity rather than debt. But little is really known of the way the junket world functions, despite the best efforts of Nick Niglio and the boys at AERL. These people, who still account for three-quarters of GGR, “own Macau” (to quote Adelson). And yet no one can reliably say how they manage their cash flows.

Here’s an educated guess: As in any industry, we see a period of consolidation for the junkets in 2012, as the good consume the bad and the ugly disappear. Relationships between concessionaires and junkets will be put to the test as this process unfolds. Once bad debt levels get to alarming levels for Western-trained casino managers, the question is whether they will pull in their credit lines, and stomach a drop in rolling-chip volumes, or accept the inevitable and write off the debt that they should have seen as a by-product of keeping Wall Street happy anyway.

3) Beijing will keep its grip on the property market, and tighten its grip on Macau

Frankly, we are surprised the Politburo Standing Committee has been able to hold its nerve this long. It’s not quite conflagration yet, but the negative effects of the country’s tight credit policy are being felt sharply across China. The SCMP had a great feature story this week about how the property market is in crisis, with the number of developers expected to be cut by a third this year as nearly a trillion yuan in private-lending loans fall due to people who cannot repay. Prices are being cut by as much as a half in cities such as Beijing and Shanghai as the survival of the fittest is played out, and hundreds of thousands of homeowners are being plunged into negative equity. Land sales have dried up, which means local cadres are having a hard time financing their development plans.

And yet there is no more than a slight change in rhetoric evident in regular dispatches from behind the walls of Zhongnanhai, plus a few cuts in the banks’ reserve ratio requirements. It is clear that the party leadership is united on the need to bring the property market under its thumb, and it may take some time yet. All of which is not good news for Macau’s VIP market.

We obviously wonder how much of this is really about bringing prices to within affordable levels for China’s middle class, and how much is about the center stamping its authority on the periphery. Regardless, we also see a year ahead in which it will be that much harder for Macau’s chief executive to get a sympathetic hearing in Beijing about Cotai land allocations or the table cap.

4) Mass will continue to grow, yet margin assumptions must change.

The equivalent of the junkets in the mass market are the travel agents. Although still smaller as a percentage of arrivals compared to FIT visitors, people who come to Macau via agents will be increasingly important as the longer-distance market grows. These agents need to be paid. But they will do their jobs well and, as long as there are enough hotel rooms available, they will continue to help grow the visitor market beyond Guangdong.

5) The opening of Lot 5 will disrupt the market.

Speaking of buying the mass market, the opening of Lot 5 in April 2012 will likely see an influx of visitors on tour groups as a big new hotel tower comes online. This is what you can do when you have around 1,200 new budget rooms and around 600 luxury rooms at your disposal: hand them out to the best-yielding suppliers. We are less bullish than many other analysts about the impact of these new rooms on gaming revenues for Sands China, simply because we think it’s harder to break a gamblers’ loyalty than it seems (as noted in the case of Galaxy Macau’s opening). However, Sands China does have an important weapon in its arsenal, which is the Venetian brand. Even without the necessary tables at Lot 5, there is still the Venetian across the road. Many predictions for what Lot 5 will do in the VIP market are way off, we believe, but the mass market will undoubtedly flock to the new property.

6) The opening of Lot 5 will benefit COD and hurt Galaxy Macau.

As noted, it takes time to build up the mass business. COD had two years to do it before Galaxy Macau opened; Galaxy Macau will have had only one before Lot 5 opens. Moreover, COD is right next door to the new hotel tower, whereas Galaxy Macau is a long walk away. The center of gravity will undoubtedly form around the other side of Cotai this year. It will be tough for Galaxy Macau’s marketing team to cope.

7) Gingrich will get the GOP nomination, thanks to who?

Newt Gingrich didn’t come up with the line that the Palestinians are an invented nation on his own, we suspect. We don’t really care what his views on the Middle East are, to be honest, but we do care about what he might do to the balance of power between the US and China if he somehow makes it all the way to the Republican Party nomination for the US presidential election. With a certain person’s financial backing, that seems eminently more possible in 2012 than it was in 2011. But that certain person will also make it more likely that the incumbent and his Democratic Party choose to make China the central issue of the presidential election. Would that be good for Macau’s American concessionaires, and one in particular? Hard to imagine, but it might be worth the gamble for a certain person, because if Gingrich somehow makes it all the way to the White House, then the ball game would likely change for him in Macau overnight.

8 ) Jacobs will get his day in court, the question is when

There is little doubt that 30GB of data means the lawyers will be making all the money in 2012 as their billable hours stack up while they wade through tens of thousands of documents submitted into evidence by former Sands China CEO Steve Jacobs against his former employers. But it also means, to our educated guess-prone minds, that he must be pretty confident of having his claims verified. The only question is whether Judge Gonzalez wants to get Jacobs in court and be done with it asap, or whether she will keep allowing the case to be dragged out.

9) SJM will wake up and get moving

SJM management used to take delight in pointing out that Sands China was building on quicksand out in Cotai, and that real gamblers still preferred the peninsula. That complacency cost it dearly when the Venetian opened. Nevertheless, after a few years of struggle, the former monopoly operator regained the upper hand and widened its lead over the upstart. But as 2012 approaches, it is becoming clearer again that Lot 5&6 will tilt the playing field back in Sands China’s favor. Only this time around, it’s obvious that SJM’s brain trust are no longer resting on their laurels. In short, we expect to see SJM move aggressively against its American rival in the coming year.

10) Manila will be on everyone’s radar

A third regional force will arise in the gaming industry in 2012, led by Filipino tycoon Enrique Razon, who has employed an all-star cast to open and manage his new Bloomberry integrated resort in Manila Bay. Bill Weidner, Brad Stone, and Garry Saunders are obviously determined to show that the success of Sands China in Macau and Marina Bay Sands in Singapore wasn’t only due to the chairman’s vision. They have hired an exceptional team already, including Dennis Andreaci and Joe Valdez (who helped get Galaxy Macau open), and we understand one of the best senior executives in Macau, who has been hibernating for the past year, will run the property.

They will be joined in the neighborhood by the Henry Sy-owned integrated resort run by another former Galaxy stalwart, Ciaran Carruthers.

Will Galaxy’s loss be Macau’s loss as well in 2012? It’s hard to make predictions now about the impact of these two new resorts opening in Manila, which is not exactly known as a Chinese tourist-friendly destination. But if the brain drain is any indication, it ought to be competitive.

And that’s it for 2011, folks. As always, please stay tuned, and here’s wishing you all the best for 2012 and beyond. Used with permission and copyright IntelMacau.com. 

2012 ushers in the Water Dragon! Baccarat Great Learning is pleased to share with all players and students of the grand game of Macau.  Lesson 33 will be about the shoe rejection methodology that increases the effectiveness of Xuxu Siyou master play. The accompanying Hongbao will be simple but vital! Access Lesson 33 here. 

In ancient China, the celestial Dragon represents an emperor and  power. Today, it  is the ultimate auspicious symbol signifying success and happiness. May the celestial Dragon bring great good luck to everyone! 

A Merry Christmas from Macau! It’s 12 degree here with the winter just starting. I will be here for a couple of week and will be shooting footages of Macau as well as enjoying the festive seasons. We visited Senado Square on Xmas eve to immerse into the atmosphere before heading for supper. Besides the tons of casinos in Macau, do take some times to visit the parks, museum as well as Macanese food. Wishing readers of MacauCasinoWorld.com a Merry X’mas and Happy New Year 2012 !

Melco-Crown has never been in better shape. Regular readers of this newsletter know how much we like the company, for a variety of reasons. Adding to those now is the fact that, starting Wednesday, it will have its shares traded on the Hong Kong stock exchange.

Why should this matter? Why indeed. The company says it has done the listing “by introduction” in order to get on a level playing field with its peers in Macau, all of whom are listed in Hong Kong. Access to wider sources of funding, etc, etc, blah, blah. What we really like about it is that the company now has its shares on its home turf. Readers can take that to mean whatever they like, but the essence of it is that if the much-touted “win-win” relationship between the US and China ever does start to sour to the point that trade spats become more serious, MPEL will have at least one leg on the right side of it and can give up the other leg if necessary.

The numbers are out on the DICJ website: MOP26.85bn, a new record, up 8.4% over the previous record set in August. What more is there to say?

I received an exciting email from David Sofer telling me that Master Zuan Xin materialized briefly earlier this month in Macau from his Confucian Analects translation project to play an exhibition shoe. Such wonderful news and to hear and see Zuan Xin fought another Baccarat fight! Sure was great that The Queen of Clubs was there,too!

We have the great fortune to have exclusive account from The Queen of Clubs on Zuan Xin’s demonstration of the advance learning of Baccarat Great Learning: the XuXu Siyou.  

Click here for a special report of that day where we learn to become one with Zuan Xin’s teaching for 11/11/11 and beyond!

Photo used with permission and copyright Galaxy Macau Entertainment

We’re not going to start bashing our esteemed compatriots in the gaming world who make a living from providing informed opinions. Glass houses and all that, you see. But we cannot let the article in Macau Daily Times today, “Gaming cap to boost electronic tables” go by without comment.

We think Union Gaming’s Macau researcher, Grant Govertsen, and Vegas-based Jonathan Galaviz are people who have put out much valuable insight on Macau in the past. What they told MDT in today’s paper, however, was completely off the mark, in our humble opinion.

First, we do not believe for one moment that Chinese gamblers are going to start sitting down at electronic tables more often, and gamble bigger amounts, just because the government has put in place a cap on the number of live tables. It is going to take the market a long time to get back to the crowded conditions of pre-Sands, circa 2004, before Chinese gamblers struggle to find a seat at a traditional baccarat table.

Second, we don’t think for one moment that the government is likely to be comfortable with an explosion of electronic table games, in any case. The article may have quoted DICJ chief Manuel das Neves as saying there are no plans to cap electronic games, but this is the same man who thinks the market is only going to grow by 30% YoY this year. In other words, he’s missing the bigger picture: the point of the table cap is to refocus the concessionaire’s energy and attention on the non-gaming facilities of their projects, not to get them investing in more gaming hardware that doesn’t require local labor.

Third, we really don’t think it is our place, or anyone else’s, for that matter, to tell the government it should stay out of the way of market forces. As we see it, from the government’s point of view, the first 10 years of reform and liberalization have not exactly gone according to plan. Macau is far from realizing its ambition of becoming a world-class entertainment and leisure destination. Wynn, a name synonymous with luxury and Cirque du Soleil, came in and built a gigantic warehouse for gaming tables and slots, interspersed with a golden tree, a few nice restaurants and fancy shops; MGM, another name synonymous with luxury and Cirque du Soleil, came in behind them and did a carbon copy but with a courtyard instead of the golden tree. SJM has continued to be SJM, focusing on people who come to Macau to gamble and have sex, usually in that order. Galaxy built a wave pool, a multiplex cinema, a nightclub, and 52 new restaurants. Not bad, so far. But only Melco-Crown and Sands China have really spent serious money on non-gaming attractions.

This will likely change quickly and dramatically over the next 10 years, as Galaxy builds out its next phases, Lot 5&6 opens, and the rest of the operators construct megaresorts in Cotai. But it wouldn’t be happening if the government wasn’t demanding it, that’s for sure. And we do agree that it’s in Macau’s best interests that it continue to do so. Stay tuned for more, electronic table games included. Used with permission and copyright IntelMacau.com

Carlo Santarelli and Kelly Knybel, who cover the gaming world from the comfort of New York while glossing over spreadsheets from sources in Macau, reckon we are on track for another record month of gaming revenues in October. Gee, we wonder where they got that idea from. Nevertheless, we concur. All this pain across the border is not showing up in Macau. We have spoken to friends recently who have come back from China more alarmed than before, and yet who walk into the casinos here and are amazed.

We were on the main floor of the Grand Lisboa yesterday and were gob-smacked, to be sure. The few days before October 1 are usually a low period. Nothing could have been further from what we saw last night. And if you don’t believe us, ask Ciaran Carruthers and his mob at www.apgmacau.com to get you the headcounts you need to convince your investment committee that yes, SJM at HK$15.44 is a steal – even before they have figured out their dividend policy and announced details of their Cotai project. Used with permission & copyright IntelMacau.com

Whoops. We missed this yesterday. According to a report in the China Daily, the Macao Dragon ferry operator abruptly ceased operations yesterday, and immediately triggered an investigation into the heavy volume of ticket sales recorded just prior to the shutdown.

The company’s liquidators have promised to do a thorough search for evidence of wrongdoing. Other unverified reports claim as many as 150,000 tickets were pre-sold for the ferry service through Groupon and Beecrazy, two popular group-buying web-based services.

The mind is easily cast back to the abrupt termination of Viva Macau, which also left thousands of passengers fuming. Here’s hoping this incident doesn’t cast yet another black spot on Macau as a tourism destination. Used with permission and copyright IntelMacau.com