19 minute read
FOCUS
Covid provides catalyst for change
When a once (hopefully) in a lifetime event occurs, it’s fairly clear that some things will never be the same again.
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A global pandemic that brought the gaming industry to its knees, closed down international borders, grounded air travel and crippled economies is bound to spark some changes. In fact some people note that it’s often events such as this that are the catalyst for real innovation.
Combine some of these changes with advances in technology and exciting times may lay ahead.
In our Focus section this month, we take a look at some things that will be different once the industry fully recovers.
We start by looking at the traditional casino floor layout. The days of long banks of slot machines have gone due to social distancing requirements that require every other unit to be turned off.
The rules have required casino floor managers to be more creative and to listen to what the customer wants and how the customer wants to play. People are social, but are more wary than before of people they don’t know and slot machine set up needs to reflect this change.
Those that have listened have found the changes are paying off in terms of more revenue from fewer machines.
We also look at how Covid has driven the adoption of technologies to improve the customer journey. Customers want frictionless play and the casino of the future will need to respond if they are to get them to come back through the doors. This is likely to involve the introduction of more smart tables and table game systems, as well as no chip, or virtual chip play.
Such a move could trigger innovation in betting types for table games, such as in the run betting.
Not all is positive, however. As casinos open up around Asia, operators may find that the Chinese punter doesn’t come flocking back in the same way as had been anticipated. While the world has been focused on Covid and the closure of borders, Beijing has been intensifying its campaign against gambling and cross border capital outflows.
It has shown itself to be merciless when it comes to achieving its policy goals, as industries such as technology and education have found out to their cost.
We ask again what this might mean for gambling in Asia and those casinos readying to accept Chinese guests. Will they be disappointed and do we need to accept the idea that Macau might also be in the crosshairs.
In a similar vein, our last article in the series takes a look at China’s ban on children gaming more than three times a week. We ask whether the ban will have an impact on the esports community of which China is such a large and growing part.
If the young are unable to practise, where will the esports stars of the future come from?
Covid accelerates slot optimization
Social distancing rules and changes in consumer preferences due to Covid are helping to prove a theory that slot optimization experts have held for some time.
Fewer machines in more private configurations can paradoxically boost revenue per unit, rather than reduce overall yields.
As casinos reopen, many operators are noting strong pent-up demand, but also subtle changes in customer preferences and how they want to play.
“In the U.S. people don’t want to be near people they don’t know and they do want to be near people that do know,” said Bruce Rowe, a 40-year industry veteran and slot optimization expert. “So people who had recognized this and had their games organized into carousels or pods rather than long banks of games didn’t have to redesign their casino floors as much as those who had long banks of games.” “Once they started to study the data they found they were making more money on that,” he said in an interview.
Players want private spaces to play with friends and family, they want a sense of security and they also want to be able to see what else is going on around them in the casino, both from an entertainment and safety point of view.
Casino operators in the past had no incentive to provide such arrangements, but the social distancing forced by Covid has given a push to try new ideas.
“Take a bank of four and six,” Rowe said. “You take the six and reduce it to four and you take the four and reduce it to three and those games will make as much, or more money than the four to six games you had previously.”
Rowe said they are finding that they are able to generate 20 percent to 30 percent more revenue from the same unit with the new configurations.
Another change that Rowe has noted is a move to double-wide seats, because you can play with someone you came with, but not someone you didn’t. This kind of preference was already in evidence prior to the pandemic, but operators have been slow to pick up on the trend.
He said in Australia, he has seen a customer take a chair from the buffet area and put it on the casino floor to be able to play the same machine as her companion.
While some of the manufacturers that have their own machines on the casino floor in the U.S. have recognized this and are providing wide seating, the operators have been slower to react.
“It has fascinated me that the operators won’t spend the money on them but the manufacturers will if they’re putting a machine on the floor that they own,” he said.
A key question for casino floor managers following the pandemic will be assessing the risk profile and budget of their clientele and how that may have been affected.
All evidence so far points to the fact that customers have saved up cash from 18 months of enforced isolation and are willing to spend on gaming, with the U.S. reporting record revenues.
However, not all customers are created equal and for some Covid will have damaged personal finances.
“Does our product match the risk profile of these customers as they come out of Covid is a question that’s in my mind and I’m posing to my customers,” he said.
Another sector that has undoubtedly performed well during Covid has been the live multi-game terminals. They can provide the excitement of the live table, without the need for plexiglass divisions and can also help the less experienced player to become comfortable without being intimidated by the table experience.
However, Rowe said in many cases they could do better.
“I just saw one this weekend and was shocked at the lack of theatricality and thought that went into the presentation,” he said, with no lighting on the dealers.
“The games are often brought in, but they have not set them up in a way that designs the space to create the energy that we’re looking for.”
While Rowe is currently grounded in the U.S. he has spent time in Macau and worked with Genting Malaysia.
He expects strong pent-up demand once Resorts World Genting reopens and notes that the local players already had a preference for a more communal-style of play.
“I would expect in Macau that when the slot players do come back into the more private salons, which already had distancing and private places, that those areas will probably do very well.”
Making it easy and making it fun: a journey through the casino of the future
In this special report, we asked gaming industry executive David Croft, former general manager of product and strategy at The Star Sydney, to put himself in the shoes of a patron visiting a casino of the future. What technology will he come across, what kind of experience will he have? We see the entire customer journey through his eyes.
"The customer journey of the future will all be about removing obstacles and annoyances to make the experience seamless."
Entry points
The journey starts as early as the car park. Upon arrival, I’ll tap my device on the entry gate.
Sat Nav interaction will direct me to the nearest preferred car parking space.
Before I leave the car, a welcome message will come through, which includes personalized marketing offers.
If I’m arriving on foot, instead, I’ll come through a Gantry equipped with facial recognition software. This has the ability to pick up excluded customers. Fortunately, I’m not one of those and my arrival is acknowledged through welcome messages and personalised marketing offers. I’m looking forward to my personalised offer for the visit. It could be:
• A discounted meal at my favourite restaurant
• First drink free at the bar
• Matched bets
• Jackpot bonus
• Triple Points
• Hotel room upgrade
Either way, there will be something for everyone on every trip to continue to engage and reward customers.
What To Play?
Next, I’m stepping onto the busy casino floor. With technology, the frustration of finding my game of choice on this huge, busy floor has been removed.
Today, I want to play $50 Baccarat. Easy. First thing I’ll do is open my trusty myCasino app. I’ll see there is one seat available on tables 15 and 16 or three seats on the $75 table - number 18. The app supplies directions on how to find the tables and it also gives me information on the table trends, jackpots and maybe even who the dealer is with a quick tap.
Actually, on second thought, I’ve decided to play Dragon Cash instead. No longer do I need to walk around trying to find the empty machines with the jackpot level I like. Again, on my device I’m now able to see where the empty chairs are and what the jackpot is sitting at. I walk directly to my device without disappointment.
Getting In the Groove
Once seated, my experience will be a seamless tap to bring funds from my digital wallet to the device. I will have the choice to set play limits and bank any larger wins. I can order directly from the device for F&B – no more hoping the waiter comes past my machine. If I change machines after ordering I am easily found again.
I will get suggestions for games similar in structure to the game I am playing and I may have personalised jackpots – funds that only I can win.
On the table games, similar to a slot, I will be able to buy using funds in my digital wallet. I will have the choice of playing with chips or playing chipless tables that enable a broader range of bet odds.
From the dealer’s point of view, technology will have removed the administration work from the operations of running tables, so the table now opens on the hour, there are no breaks in play for chip counts and the dealers are more attentive to the customers enjoyment due to improved coaching as this is now the focus. With the introduction of smart table technology supervisors are no longer doing hourly head counts and float checks, or estimating ratings.
Thanks to smart tables, my ratings are now accurate, relieving a frustration as I get rewarded for my play, get the right number of entries into draws and the personalized messaging is far more relevant.
In addition to the game play I now have the chance to win mega lotto size jackpots with all devices connected, bringing a real sense of excitement to the property. Lots of winning sounds reverberate across the property and I can play in areas where jackpots are shared between all players in that area.
If the tables are full I can find my games on ETG and my choices have now widened. I can choose to sit with many others in a stadium and share the emotion of wins and losses with them. I can sit in a more intimate setting around a device or dealer with a few others. Or if I want some privacy I can find a private pod just for myself where I can control the game speed.
Due to the nature of the product I have a great choice of games, sidebets and pricing at my fingertips, or I can use my own device to hook into the live games on the floor whilst sitting at the bar or in front of the big screens watching my favourite team play in a comfortable chair. All possible through the digital wallet and integrated gaming systems.
Retiring For the Day
When I am ready to leave I can cash out through one of the devices on property, move my funds to my bank account or just leave them there for next time. If I have valet parking I can notify the attendants that I will be leaving and my car will be ready for me when I exit.
I am no longer carrying cash or loyalty cards, my access to parking, food and drink is easy, my ratings are accurate, the service is outstanding and no doubt after I leave I will receive the obligatory thank you message with a relevant, personalised offer available on my return.
China crackdowns loom large over international travel plans
As international borders begin to reopen, a key question for the industry in Asia will be whether the preferences of the Chinese outbound traveller have changed.
Pre-pandemic they were the driving force behind growth in Asia’s IR industry, but Covid has masked policy changes from Beijing that may have a longer lasting impact on the region’s prospects.
China clamping down on gambling is nothing new. However, over the past few years the Mainland government has turned up the heat, with a range of increasingly draconian measures.
Beijing has also made it abundantly clear in recent months that no target is too big when it comes to achieving its political aims. A crackdown on private education, fintech, real estate and gaming has wiped trillions of dollars off the value of Chinese stocks this year.
The latest campaign appears to have its roots in early 2019 on concern about capital flight due to gambling, as the online industry was mushrooming in countries such as Cambodia and the Philippines.
In August of that year, the Chinese government issued a strongly worded statement through its embassy in Manila urging its neighbours to help crackdown on online gambling, which it said poses a threat to China’s financial stability.
The Philippines responded with tighter regulation of its own industry, while Cambodia immediately issued a ban on all online gambling activities. Last month, Beijing once again called on Cambodia to stop gambling amidst reports the industry was quietly thriving.
The government didn’t stop there. In 2020, China said it had drawn up a blacklist of nations that were targeting its nationals for gambling purposes and has imposed criminal penalties for marketing to its residents. The list has since been expanded twice, however it has never been published.
The latest move has been a ban on all cryptocurrency transactions that was issued in late September. Add to this, Beijing’s “common prosperity” policy, which aims to address the country’s gaping wealth gap through higher taxes, including taxes on property and inheritance and the outlook for Chinese gaming in Asia as travel resumes is highly complex.
“(President) Xi Jinping has indeed shot from the hip in all directions in the last few months, bringing down Fintech, cramming schools, game providers etc and now every family that earns more than $75,000 a year is told to face more taxes soon to skim off “excess” wealth,” said Prof. Wolfgang Arlt, founder of the China Outbound Tourism Research Institute.
“So after borders open, Chinese will try all kinds of ways to get money out of the country, gambling will certainly be one of them,” he said, adding that he has no doubt the Chinese will continue to gamble for “the next 10,000 years.”
However, where will they go?
Macau has always been viewed as a special case where gambling will be tolerated, but even here there are question marks. Some observers have questioned as to why China is dragging its feet in reinstating electronic issuance of individual visit schemes and group visas, even though quarantine-free travel has been possible since Sept. 2020.
“I think the PRC has shown that it is concerned about the nexus between high stakes gaming and capital outflows,” said one Macau industry veteran, who asked not to be named. “I think it will always accept that people will want to travel to Macau for recreation, but it has drawn a few lines in the sand, not least with criminalising the recruitment of PRC residents for involvement in gambling “tourism.”
“COVID-19 has inadvertently provided a pretext for the Central government to reduce the attraction which Macau holds by restricting access,” he said, adding that there is also good reason for prudence from a virological standpoint.
“So, in short, two public policy objectives can be met with the same suite of measures.”
Professor Arlt points to the recently published draft consultation paper on amendments to gaming law as a clear sign Beijing is seeking tighter control over the industry.
“The new “45-day public gaming consultation” will probably not kill gambling in Macau, but result in tighter rules and controls and a bigger cut for the Chinese central government,” he said.
“All “non-gaming” tourism attractions will not be able to compensate for losses in gaming, Macau is simply too small and has been overflowing with Chinese visitors in the last decade during holidays already.”
Elsewhere, there are already signs that the industry is preparing to wean itself off over dependence on China as travel resumes. The Philippines has a strong domestic market, which underpins the industry. It has also traditionally enjoyed strong visitation from Korea and Japan and some operators say they will be redoubling their efforts towards these markets.
Australia, which also has local support, has seen its international business hit by a double whammy of Covid and the Crown Resorts inquiries, which have resulted in the end to all junket business. As a result, the jurisdiction is also unlikely to be looking to China to fill its casinos.
Elsewhere, operators in recent filings have spoken of reviewing their marketing to target the growing Southeast Asian demographic.
China game restrictions could have upside for esports
There has been a general belief that Mainland China’s toughened restrictions on underage video gaming could undermine growth of the fast-growing esports industry, though some experts say otherwise.
Last month, the National Press and Publication Administration (NPPA), the government regulator for video games, issued a new rule that further reduced the amount of time young gamers are allowed to play.
Under the rules, minors under the age of 18 are now only allowed to play video games on Friday, Saturday and Sunday, between 8pm and 9pm, effectively giving them a total of three hours of video game time per week.
It’s a significant tightening of restrictions from the previous rule set, which gave young people 1.5 hours per day on weekdays and 3 hours a day on weekends and holidays.
“What was already quite limited has just become nearly impossible, and the specific hours of 8pm-9pm are important too – because one could imagine that parents might not want their children to have screen time at that hour of the day,” said Niko Partners in an analyst note.
The moves are part of China’s attempt to clamp down on video game addiction, a campaign which began as early as 2005. A study conducted in 2020 found at least 17 percent of Chinese adolescent gamers suffered from Internet Gaming Disorder, with traits including high neuroticism and low conscientiousness, spending unhealthily long amounts of time playing, and high expenses.
“Gaming addiction among minors in China has been a topic that regulators have wrestled with for more than 15 years,” noted Niko Partners. “While China’s government has been positive on video games recently and has promoted segments such as esports and cloud gaming as key growth areas, gaming addiction among minors is viewed as a negative output of the popularity of video games in society.”
As a result, there have been concerns that the blanket restriction on video games is likely to have negative consequences for China’s esports scene. Like any sport, many esport professionals become so through years of training and practice beginning at an early age.
However, esports industry expert Hai Ng of Neomancer says that the restrictions may actually be beneficial for China’s esports and esports betting sector. Hai believes that the young gamers who have lesser access to gaming during their down time will move instead to watching streamers and spend more time engaging in esports viewership instead.
“If anything, there is an upside that a lot of people are missing. Absence makes the heart grow fonder. If you can’t play it, you’re going to find a substitute.”
Hai also believes that given China’s push to professionalize the esports industry, the government will put in place exemptions for young esports professionals. Their time playing the game will fall under “professional employment”, thus being exempt from the rules.
“China is also rallying behind the idea of esports becoming an Olympic sport, so there might be further regulations or notices in the future that might prevent negative impact to the whole ecosystem,” said Niko Partners’ Darang Candra.
“In the same way they’re going to train gymnasts, they’re going to train esport athletes,” adds Hai.
Nevertheless, Niko Partners believes that the new rules will cause a decline in the number of gamers under 18, from the current level of 110 million, which could also discourage minors from taking up gaming as a hobby or career.
Though Niko Partners doesn’t believe there will be much of an impact on video gaming revenue, as youth gamers make up between only 1-5 percent of gaming revenue across the board.
Hai believes that the segment that will suffer most from these new rules will be “Gacha” style games - generally free-to-play games that rely on loot box-style mechanics to attract real-money spend.
