Baccarat is more popular than Blackjack, but why? Lee Davy has a chat with the Pokertek Co-Founder Lou White to find the answer to that question by taking a look at the gambling mecca of Macau.
Why is Baccarat such a popular game in Macau?
Why is Blackjack not?
Two questions that I prod and poke during this article but first let me give you some numbers.
In 2008, the money gleaned from the Blackjack tables around the Macau casinos equated to HK$2,247,000; whereas money gleaned from VIP Baccarat (through Junket operators) equated to HK$73,772,000 and standard Baccarat HK$21,264,000.
Now that’s a wide chasm, but nowhere as big as today.
In 2013, the money gleaned from the Blackjack tables around the Macau casinos equated to HK$3,052,000; whereas money gleaned from VIP Baccarat (through Junket operators) equated to HK$238,524,000 and standard Baccarat HK$91,599,000.
That represents a 35% increase in Blackjack revenue, whereas the VIP Baccarat revenue has increased by 223% and the standard Baccarat revenue has increased by 91%
Lou White is the PokerTek Co-Founder (NASDAQ:PTEK provider of PokerPro™ electronic poker tables and ProCore ™ electronic Blackjack and Baccarat tables) and he knows one or two things about the casino business in Macau. So I reached out to him and asked why the revenue figures were so heavily weighted in Baccarat’s favor.
“Baccarat was I believe first introduced in Macau with some of the original casinos opened there in the 1930s. It proved to be very popular with the Chinese players and the rest is history. Luck and superstition is a big part of the culture of gaming in China.
“It doesn’t matter how you dress it up, Baccarat is essentially a coin flip, Player wins or Banker wins (with an occasional tie). The coin flip means little to Baccarat players in Macau. Instead, they are more interested in the trends of player and banker wins. You’ve probably seen the LCD screens next to any Baccarat table with all the red and blue dots. This is where the fun starts and what drives the gaming decisions at the Baccarat table, by keeping a watchful eye on trends and pictorial representations of these trends in what are called “Roads”.
“If you ever see a Baccarat table jam packed with people it’s because the trend of player or banker has popped and they are going to play that table hard until the trend goes in the other direction, or maybe a certain player is believed to be lucky that day so other players want to ride his or her wave of luck.”
It seems that the presence of skill erodes the likeliness that destiny can shine hence the preference to Blackjack over Baccarat.
But why is Baccarat so appeasing to the high rollers?
Once again Lou has some really good insights into why Baccarat players are pushed into the higher limit games.
“The problem you have in Macau is table cap. There is a table cap of 5,100 gaming tables in Macau, and all dealers have to be Macanese residents. If it wasn’t for these two constraints right now there could easily be many more gaming tables in Macau.
“As there aren’t enough tables to meet demand, the casinos respond by increasing the minimum bet to maintain an increase in revenue -basic supply and demand at work. It’s not unusual to find the smallest minimum bet at a Baccarat table in Macau at HK$500 ($75); now how difficult is it to find a $10 Blackjack tables in Vegas?”
So there are not enough tables and the problem is only going to get worse. In late 2015, early 2016, the Cotai Strip is going to see the creation of another four mega casinos, and yet the government only have plans to increase the table cap by 3% per year.
This means you are only going to see an average of 150 additional tables per year with four brand new monster mouths to feed. The cap is already met and so this means the current incumbents will have to give up some of their table space. This means the lowest earning tables, like Blackjack, will vanish, and the table cap on the high earnings tables will keep on rising.
With the table minimum rising wouldn’t this mean that fewer people could afford to play? Where does the money keeping coming from?
The answer lies in Mainland China.
“It’s not just the table numbers that are capped in Macau,” says Lou White. “The actual numbers of people who can visit from the Mainland is also constrained. As a Chinese resident you can’t just pop along for a game of Baccarat whenever you want to, and there is also a limit to the amount of cash that you can bring in from the mainland.”
With 20% of the world’s population living within the borders of China, and limited access to the casinos of Macau, then it becomes a little clearer why there is such a high demand for the seats in the game irrespective of the price to play.
The challenges that the cash-cap provides is also a reason why the VIP Baccarat business is doing so well because the Junket Operators take care of all the red tape thus allowing you to spend your time worrying about nothing more than your destiny.
So with little word from the government about a rise in table cap, how is Macau going to continue to grow it’s Baccarat revenues at the 223% and 91% increases that it has experienced in the past six years.
The answer might well lie in electronic tables and a man named Jay Chun.
Chun could see that Macau’s table cap was going to become a problem and so he created LT Gaming to be the solution.
There are areas in with Macau casinos that house a Baccarat, Roulette and Sic-Bo table that are surrounded by what is known as ‘Stadium seating’. It’s not unusual to have between 100-200 terminals surrounding these three tables with around 50 terminals representing one table.
I guess destiny has no cares for technology.
Not when it comes to a good old fashioned game of Baccarat.
The most profitable table game in the world.