High Stakes Baccarat and Casino Earnings

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High Stakes Baccarat and Casino Earnings
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Your Objective as Casino Exec.

• Maximize profit
• If public company to MAXIMIZE SHAREHOLDERS value
• Which means to keep stock price as high as
  possible
• High stakes baccarat play can adversely affect
  price of stock

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Growth in Baccarat

• 92-97 worldwide baccarat volume grew at 10 per
  year
• faster than any other casino table game
• baccarat largest win of 18 largest on L.V. strip

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Table Game Revenue (18 largest)

• BJ 30.2
• Craps 11.7
• Roulette 7.6
• Mini Baccarat 4.8
• Baccarat 30.7
• Other Games 15

• Tables (including race and sports) 53.7
• Slots 46.3

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Of Total Casino Win

• 16.5 from baccarat
• 64 total tables

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Popularity of Baccarat

• Was not significant casino game until Fidel
  Castro came to power in Cuba and closed all
  casinos
• Played mostly by Mexicans and South Americans

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In mid to late 1970s

• Premium players came from Mideast
• Resurgence of fundamentalist Islam throughout
  Arabic world has made gambling politically
  incorrect
• Mideast premium play has declined dramatically

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In the early 1980s

• Premium players came from Mexico
• The 1982 devaluation of peso decimated high end
  Mexican play
• Only 4 or 5 truly big Mexican players left today
• Todays premium players come from Pacific Rim

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Baccarat Markets (by baccarat win)

• Macao (1 billion yearly win)
• Australia
• Las Vegas
• Kuala Lumpur
• Possible threat to market if Taiwan legalizes
  gambling

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2.5 Billion Baccarat Win (1996 - Worldwide)

• Market
• Asian
• Asian
• Asian
• Asian

• Macao 39 (6 casinos)
• Australia 19.1
• Las Vegas 18.7
• Malaysia 5.3 (1 casino)
• New Jersey 5

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Estimated Baccarat Market Share L.V. (1996)

• MGM Grand 24.6
• Caesars 23.5
• Mirage Resorts 23.3
• Desert Inn 16.7
• L.V. Hilton 11.1

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Estimated Baccarat Market Share A.C. (1996)

• Taj Mahal 37
• Caesars 20
• Sands 9
• Trump Castle 6
• Tropicana 6
• Showboat 6

• Ballys Grand 5
• Ballys Park Place 4
• Trump Plaza 4
• Resorts 3
• Harrahs 0
• Claridge 0

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Australian Casinos

• 30-40 of TOTAL casino win comes from baccarat
  at upscale properties
• L.V. 16.5

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What advantage does U.S. casinos have over
Australia?

• Long term relationship with players
• Australia gaming industry is relatively new
• Sydney and Crown, 2 biggest, are new
• Low marginal tax rate of 6.25 allows more to be
  given to player

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• Many Australian casinos pay turnover rebate of
  .7 to customers
• Las Vegas offers several mega resorts
• Australian casinos are thousands of miles apart

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European Threat?

• Most high-end baccarat players go to London
• However
• High tax rates, and
• No casino credit, prevents attractive player
  packages

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• Long distance from Pacific Rim
• Germany
• Taxed as high as 80
• German casinos won 1 billion in 1996, only 2.2
  or 22 million from baccarat

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Player Profile

• Whales bet up to 500,000 per hand
• win or lose up to 5 million per session
• come from pacific rim
• estimated 125-200 players worldwide

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• Middle Market bet between 50,000-100,000
• Win or lose up to 1 million per session
• estimated 300-500 players worldwide

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Where do they play?

• Like a 5-ton elephant
• Anywhere he wants
• Consequently
• Competition is intense
• Boils down to economics and aesthetics

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Which boils down to

• Which casino offers the premium player the most
  attractive package of
• Financial Incentives, in the
• Most Luxurious Setting
• The 3 legged stool
• Facility
• Relationship
• Deal

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Most Popular Marketing Strategies

• High betting limits
• Availability of credit and size of line
• Rebates on loss
• Dead chips

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• Freeze-out deals
• Offered only once by Trump but allow the casino
  to incorporate a grind element to high end play
• Complimentaries
• suites, staffed with butlers, pianists, etc.
• Low tax rate allows more for player
• Australia reduces rate for premium play

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Not Meeting Earning Projections Hurt Stock Value

• Earnings volatility associated with high stakes
  baccarat play
• How publicly traded companies can reduce
  volatility
• lower table maximums
• avoid unusually large betting limits

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• Expand customer base so more hands are dealt at
  larger bet sizes
• Expand other sources of revenue so baccarat has
  less impact