Clicks vs mortar: In conversation with Michael Zhu

Macau
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Michael Zhu, vice president of international operations, planning and analysis at the Innovation Group discusses the conflict of interests between land- based casinos and online gambling in Asia.

iGT: Skeptical casinos have been one of the biggest obstacles to online gaming in the US. How justified is the view that online poses an existential threat to land-based gaming?

Michael Zhu: There are a couple of separate issues. If we look at the generations in land-based casinos in the US their most ideal customer profile is someone of retirement age, probably older than 60-65 and female, with a decent disposable income level and lots of free time. That’s the ideal customer profile.

Social gaming and online gaming are aimed at much younger generations: people in their 20s and 30s, with limited time. They might only play a few minutes here and there, but that adds up to something.

More importantly this would be a generation that’s obviously more sustainable. And will probably have a higher level of income at some point, and a larger gaming budget available over their life-time.

Second, if you view Amazon versus traditional department stores like Macy’s, is Amazon going to take over market share? Yes, absolutely, and especially among younger customers. That’s the trend. But I’m confident that in my lifetime we’re not going to see conventional department stores being replaced. Just like casinos they will still offer an environment where family and friends can spend time together.

It is a head-to-head competition, but it’s not the case of one completely taking over the other anytime soon.

iGT: How significant is this younger and more digital gaming market in Asia?

MZ: Very. Another thing worth mentioning is the customer preferences here. Chinese, Koreans, Japanese or Vietnamese – they tend to adopt anew concepts much quicker than the US.

You look at these online payment methods , like Alipay and WechatPay, they’ve pretty much dominated the entire market in China. Whereas Samsung Pay or Apple Pay in the US are getting popular, but are far from dominating the market. It’s still a credit cards world.

So the level for agility, to adopt and jump over to a new platform, it tends to be much quicker, and more popular than in Europe and the US.

iGT: That being said, why is there such little appetite among casinos in Asia to offer online products, or sports betting?

MZ: This market has not come to that point yet. If you look at the six concessions here, all of them have been pretty successful at achieving their goals: sustainable and aggressive year-on-year growth. So there’s no need to spend money in these other areas now.

I imagine that in 10-20 years, with Japan’s IRs up and running, and on top of Korea and Macau, maybe there would come a point where you really need to push your brand forward and attract players in different ways.

iGT: Looking at it the other way around then – are casinos actively lobbying against online gaming legislation in Asia, as they do in the US?

MZ: Yes. There’s not much public reporting or media news in that particular field. But I think there’s no doubt that that’s what’s going on.

iGT: Do casinos wield a lot of influence is this area?

MZ: Absolutely. It’s hard to quantify how much, but the short answer is yes. Sheldon Adelson is the number one person who is totally against this online gambling concept in the US; he pushing for prohibition even in Nevada. To a larger extent they will have influence.

iGT: Do you expect Adelson in particular will already be lobbying against online gambling in this part of the world – perhaps in places like Vietnam where he’s looking to invest?

MZ: It wouldn’t surprise me.

iGT: Finally, social gaming as a promotional tool is one example where online has been very positive for casinos in the US. Would casinos in Macau like to do the sambaed attract more mainland players?

MZ: Macau has a unique position with a huge population base in such a close proximity. So from a marketing perspective there are perhaps more effective and direct channels to do your promotional activities.

Firstly, you can’t promote the concept of gambling in China. When I was working for Sands we had to market the property as the “Venetian Hotel Resort Macau”, whereas back in Vegas it’s the “Venetian Casino Resort”. You can’t use the word “casino” in Chinese law. That’s not just on social gaming platforms, but on any media platform.

But also most of the growth is still being driven by premium segments and junkets doing their things. So relatively speaking, it’s not yet necessary to push your brand into the mass segments. While it remains a good tool, it’s not the time to switch to that yet.


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