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Macau’s agency gamble

It’s been described as a “graveyard of advertising agency remains”, but doing business in the sprawling casino land of Macau is always going to be a gamble. Matt Eaton asks if the rewards are worth the risks.

Macau’s meteoric rise as a gaming powerhouse has been nothing short of spectacular. Millions of affluent Chinese consumers and the liberalisation of gaming have made Macau one of the fastest-growing economies globally, overtaking Las Vegas as the world’s biggest earner of gambling revenue.

The relaxation of Beijing’s travel restrictions has seen tourism double over the past five years, hitting a massive 21.7 million in 2009. Tourism is expected to increase to more than 30 million by 2012.

Over the same period, Macau’s economy has followed a similar trajectory. After dropping sharply in the early months of 2009, Macau’s economy rebounded in the final months of the year with gross domestic product hitting a healthy US$21 billion.

While visitors to Macau are known to spend primarily on gaming, official figures show they are also spending money on dining, shopping and entertainment. Q3 retails sales for 2009 rose 17%, driven by 55% year-on-year growth in sales for watches and jewellery. But it’s the gaming market which is driving the most interest.

In recent years, some of the world’s biggest gaming brands have marked their territory in the Chinese enclave with Las Vegas Sands, Melco Crown, Wynn and Galaxy all part of a sprawling gaming empire that generates huge dollars.

The Macau government’s data shows January 2010 recorded gaming revenue growth of almost 65% compared with the same month last year, with gross receipts at US$1.1 billion. This follows annual record revenue of US$14.9 billion for the full 2009, a 9.7% year-on-year increase.

Stanley Ho’s Sociedade de Turismo de Macau kept its position as market leader with a share above 30%, followed by Las Vegas Sands with 22% and Melco Crown third with 16%. Wynn Resorts took a little over 13% followed by Galaxy Casino with 10% and MGM Grand Macau at almost 9%.

Such fast-paced growth, however, is creating challenges. Restrictions on foreign talent and a difficult business culture has given Macau and its money makers a bad reputation, whereby long-term partnerships are complex and difficult to maintain.

Rolling the dice

Casino launches are big business, but are the risks worth the rewards? Yes, according to some, but you have to know what you’re getting yourself and your business into.

In June 2008, Melco Crown Entertainment’s appointed Omnicom to manage the marketing and communications for its City of Dreams resort launch, a move PHD managing director Ray Wong described as a “significant leap into the future of integrated brand communications”.

The appointment saw Fleishman-Hillard, DDB, PHD and Tribal DDB appointed to manage public relations, advertising and media, recruitment and digital communications for its highly publicised launch.

That account has been divided up with creative duties moved to M&C Saatchi and all digital communications shifted to Publicis Modem.

After what were believed to be tense negotiations, WPP managed to maintain its grip on the Las Vegas Sands, which sees Mindshare, Ogilvy Redworks, JWT and, to a lesser extent, OgilvyOne, pool their resources under a Team LVS arrangement.

New agencies are also starting to eye the market. SK+G, a Las Vegas-based marketing agency, recently opened its doors in Hong Kong for work on the HK$14.1 billion Galaxy Macau resort, scheduled to launch in early 2011. A media-buying agency is also expected to be appointed to the Galaxy business soon.

Many agency executives spoken to for this article were reluctant to speak on the record, but all agreed that doing business in Macau was a challenge.

“Very few companies have sustained long-term relationships with any agency,” says one executive.

Another says the fact Casino operators are not traditional marketing-driven companies such as P&G, Amex, Unilever and IBM make it difficult to maintain a standard professional relationship.

“They’re different types of companies. They don’t have these types of arrangements as a standard way of doing business. You need to operate in a slightly different way,” he says. But others disagree, arguing that, while it is tough, it is also rewarding.

Richard Thomas, president and CEO of DDB Group Hong Kong, admits that working on the City of Dreams launch was difficult, but ultimately fruitful.

“The casino business is a fast and hard business, but that’s the nature of the industry,” Thomas says.

“As long as you’re ready for that it’s OK, if you’re not ready for that it will be hard. We enjoyed it and I’m really glad we did, not just for business. I would do it again at the drop of a hat.”

Thomas adds that while the agency was not able to expand its contract beyond the original terms, he said maintaining a long-term relationship is possible.

It’s not unrewarding, it’s just hard.

Richard Thomas
President and CEO of DDB Group Hong Kong

“We haven’t maintained a long term relationship with them [City of Dreams], but it doesn’t mean it’s not possible,” he says.

“I think it depends on a lot of dynamic issues like where the business is going for the casino, it’s quite a high-pressure environment and that is obviously reflected on the agency’s staff, so I think it’s quite tough on people. It’s not unrewarding, it’s just hard.

“Historically if you look casinos in Macau, in particular, it’s quite common that they launch with an agency and then make changes after the initial launch phase, it’s not uncommon.

“I’m not saying it’s right and I’m not saying it’s wrong, but it seems to be that way.”

But with new casinos slated for 2011, competition will only become more intense, leaving some to question whether doing business is worth it. As one source says: “We would look very, very carefully if we were approached by a casino operator.”

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