Macau's Ho bubbles ahead with Oceanus
By Muhammad Cohen
HONG KONG - Amid debuts of multi-billion dollar casino resorts in Singapore and
a race to build more of the same along the Cotai Strip in Macau, the market
leader in the former Portuguese enclave still comes up a winner. Sociedad de
Jogos de Macau (SJM), the company founded by Stanley Ho, lost its monopoly
eight years ago, yet is making more money now with a smaller slice of the pie.
At the age of 88, and despite continued treatment at home after being
hospitalized from last July to this March, SJM managing director Ho appears
still to know Macau gambling better than anyone, if the evidence of his newest
casino, Oceanus, is
anything to go by. The casino fits a strategic plan and incorporates lessons
learned since rival casinos arrived on the scene in 2004.
Oceanus, opened in December on the former site of the New Yaohan Department
Store, was built in 15 months at the modest cost of HK$1.5 billion (US$194
million). The 345,000 square foot (32,100 square meter) casino with 276 gaming
tables and 605 slot machines targets the mass market, where SJM holds a
commanding 43% market share; its 30% overall share also leads rivals. Renowned
designer Paul Steelman's interior color scheme is inspired by ocean coral.
Vivid blues, greens, purples and pinks create the illusion of bubbles in the
sea along a rectangular EFTE exterior.
If the term ETFE is unfamiliar, just think Beijing's Water Cube from the 2008
Olympics. The initials stand for ethylene tetrafluoroethylene - a light but
strong transparent plastic. It's impossible for anyone acquainted with the
Beijing Summer Olympic Games - and everyone in China knows all about the games
- to see Oceanus and not associate it with the Water Cube. The building serves
as a living monument to the 2008 games that were such a source of pride for
China, and is as close as most visitors to Macau will ever get to the original
Water Cube. It's a powerful subliminal reminder that SJM's roots are in Macau -
even if Stanley Ho is from Hong Kong - and China, as Ho's rivals build replicas
of their Las Vegas properties in Macau. Oceanus makes gambling both Olympian
SJM dubs Oceanus "Macau's first casino" because it's just steps from Porto
Exterior and the ferry terminal for most boats from Hong Kong and the mainland.
(Much less convincingly, Oceanus is also marginally the closest casino to the
North Border Gate crossing from the mainland). The location reinforces key SJM
corporate themes and strategies.
Most visitors to Macau just come for the day, and SJM caters to that market.
From Stanley Ho down, SJM preaches that day trippers want to maximize playing
time, giving its Macau peninsula locations a key advantage over more distant
Cotai. Oceanus' proximity to Porto Exterior, where daily ferry traffic exceeds
50,000 passengers, is tough to beat.
Relocation, relocation, relocation
Using this particular site produced additional positives for SJM. It's the
former home of New Yaohan Department Store, which SJM acquired in 1997 as the
Japanese-owned Yaohan chain fell into bankruptcy across China, probably with
its eye on this very hunk of real estate. Building Oceanus presented SJM with
the scenario to move Macau's only real department store to a spot in the main
commercial district more easily accessible to Macau residents, its primary
Oceanus effectively replaced SJM's Casino Jai Alai, perhaps the most down of
Macau's downmarket gaming venues. SJM is awaiting government approval to
renovate that property. Depending on how SJM reads the market, it may opt to
expand the size and scope of gaming under the Oceanus brand there or other uses
that leverage the location. (Jai Alai's tenants include a well-known
spa-cum-massage parlour targeting Hong Kongers with packages including ferry
tickets.) Whatever SJM does with Jai Alai, it's already replaced an old,
unappealing casino with a new attractive one.
Some might shrug that a casino is a casino, so why bother with a new one? A
half-dozen years ago, SJM management might have led those shrugs. But, after
initial resistance, SJM has adapted to changes in the Macau market and shown a
willingness to learn from its rivals.
Time of Sands
The 2004 opening of the Sands Macao, about a 10-minute walk from the ferry
terminal, transformed gambling in Macau. The first Las Vegas style casino in
Asia, Sands Macao demonstrated that even unsophisticated group tour visitors
would rather lose their money in an opulent setting. Built by Venetian
developer Las Vegas Sands, the casino recouped its US$600 million construction
cost within a year, an unprecedented achievement. Oceanus updates the Sands
strategy, if not yet its success, as another stand-alone close to the ferry
terminal with a distinctive look.
The Sands also began Macau's era of mega-projects. Integrated resorts Wynn
Macau, Venetian Macao and City of Dreams all cost more than US$1 billion, as
did Wynn's Encore Macau, basically a hotel addition opened last month.
Oceanus was originally conceived in 2005 as an elaborate remake of the Porto
Exterior gateway including Macau's tallest skyscraper and largest retail mall,
offices, apartments and a hotel. The iconic main waterfront structure, designed
by controversial French architect Paul Andreu to resemble a massive ship's
prow, was projected to measure nearly half a kilometer long and 133 meters (436
feet) high. The price tag for the complex, including land reclamation topped
Flagship razing SJM had thought grandly before: its flagship Hotel Lisboa pioneered the
integrated resort concept in 1970, with many calling the company crazy for
building such a lavish property in Macau. In 2008, SJM launched an
international design competition to create a replacement for the Lisboa,
seeking "a timeless iconic development that represents the energy and
innovative character of SJM and of Macau". Stanley Ho declared, “It is time
once again for the Lisboa to move to the forefront as the leading example of
new developments in our city.”
The original Lisboa project marks a rare occasion that SJM subscribed to the
build-it-and-they-will-come theory of development that drives most of its
rivals. The tactic usually involves spending borrowed money like a drunken
sailor in an attempt to lead the market where the developer hopes it will go,
rather than following the market. Even SJM's biggest and brassiest Macau
project, the Grand Lisboa, was built at rational price under US$1 billion with
a phased opening that got cash flowing while most of its hotel remained under
construction (and under-demanded).
When the first hints of clouds appeared on Macau's gaming horizon in early 2008
(Macau's then-chief executive Edmund Ho announced the government's first
attempt to limit gaming expansion; new Chief Executive Fernando Chui Sai-on
announced a similar initiative this March even as a flurry of projects that
will exceed the new limits were underway and on the drawing board) SJM scaled
back the Oceanus project. After global capital markets froze in late 2008, the
company scrapped its plan to replace the venerable Lisboa. SJM's capital budget
for this year includes some renovations of the grand dame's gaming floor.
SJM knows the Macau market better than anyone and has the best relationship of
any operator with the local government and with Beijing. Oceanus serves as a
reminder that, despite Stanley Ho's lengthy hospitalization and advanced age,
SJM retains its edge. As long as the competition for Macau's gaming soul takes
place on its home turf, bet on SJM to eat the competition's lunch.
Macau Business magazine special correspondent and former broadcast news producer Muhammad
Cohen told America’s story to the world as a US diplomat and is author
Hong Kong On Air,
a novel set during the 1997 handover about television news, love, betrayal,
financial crisis, and cheap lingerie. Follow
Muhammad Cohen’s blog for more on the media and Asia, his adopted home.