HONG KONG - Wynn Encore Macau opened last Wednesday, and Wynn Resorts chairman
Steve Wynn used the occasion for an encore of earlier attacks on US President
Barack Obama amid bouquets for China's leadership. Wynn also announced he's
focusing future investment on Macau and might even move his corporate
headquarters there.
"The governmental policies in the United States of America are a damper, a wet
blanket," Wynn said in an interview with Bloomberg. "They retard investment;
they retard job formation; they retard the creation of a better life for the
citizens in spite of
the rhetoric of the president."
That echoes Wynn's comments last July during an earnings call with analysts.
"Right now we are watching the United States government deal with complex
problems that clearly seem to be beyond their intellectual ability," he said
While questioning the intelligence of former Harvard Law Review president
Obama, Wynn was effusive in his praise for Macau's then-newly anointed chief
executive, Fernando Chui Sai-on, a member of one of Macau's cabal of ruling
families, chosen in a backroom deal and endorsed by the 300 electors (also
chosen in an unopposed election) in Macau's Beijing-approved version of
democracy. Chui's candidacy sparked grassroots outrage in Macau, including a
protest ad run in Hong Kong newspapers - no Macau publication would dare risk
the wrath of the local elite.
From Macau's handover to China in December 1999 until May 2009, Chui served as
secretary for social and cultural affairs. Despite Macau's vast government
surpluses, thanks to the casino boom, Chui did little to improve Macau's dismal
social services, most notably healthcare, a field in which he holds a PhD from
a US university. Some in Macau see Chui as an empty suit fronting for big
business interests/
Smart government
But for Steve Wynn, Chui cuts a heroic figure. Contrasting Chui with the US
leadership, Wynn praised Chui for "understanding issues that affect people" as
well as exemplifying the "the level of education and sophistication that
permeates the Chinese, the People's Republic of China government.
"These are very smart people, very highly educated people, very thoughtful
people. My own feeling is the government of Macau will protect - and so will
the central government in Beijing and the regional government in Zhuhai at
Guangdong province, Guangzhou - the government will do a very enlightened and
thoughtful job of protecting the interest of the citizens and the business
enterprises that support the health of those businesses," Wynn said in July.
A five-star resort developer, Wynn apparently remains seduced by the five stars
on China's flag. In last week's media rounds for the Encore opening, he said
that, since 60% of Wynn Resorts' revenue came from Macau last year, "it's not
improbable or unrealistic" to consider relocating the company's headquarters
from Las Vegas to Macau. The remarks sparked reactions ranging from disbelief
to pleading for Wynn to stay with Las Vegas and the surrounding state of Nevada
as it tries to recover from its worst economic distress in decades. The
billionaire gave the US gambling capital another blast, saying, "I don't think
the Las Vegas market at the moment beckons a large investment."
"Steve Wynn is a larger than life figure in the Nevada context, an artiste, a
visionary," said William Eadington, director of the Institute for the Study of
Gambling and Commercial Gaming at the University of Nevada, Reno. "His
properties are well run, but Wynn's personality is such that he's always
looking for the next project. At this time, Asia is where to find it."
Growth node
Asia is home to global gaming's strongest results and best growth prospects, so
it makes sense for the industry to focus here. Last month, MGM Mirage chose to
sell its interest in its profitable Atlantic City property rather than its
struggling MGM Grand Macau, based on Macau's superior long-term prospects. This
week, the US$5.6 billion Marina Bay Sands, the world's most expensive casino
resort, opens in Singapore. It joins previous record holder, Resorts World
Sentosa, a US$4.8 billion property that opened in the Lion City in February.
Encore, a US$600 million hotel with 414 rooms and 61 gaming tables, adjacent to
Wynn Macau's 600 rooms and 400 tables in Macau's traditional gaming area, is
Macau's only casino hotel. As the property debuted, Wynn announced plans for a
third Macau resort in Cotai, the landfill linking Macau's outer islands of
Taipa and Coloane, where Las Vegas Sands (LVS) - chaired by Wynn's arch-rival,
Sheldon Adelson - and Melco Crown currently have mega-resorts and Galaxy
Entertainment plans to open its own next year.
"We will build one modestly sized hotel with the most beautiful gardens and
extended spaces," Wynn said. Even this modest property, projected to open in
2013, is likely to include hundreds of rooms and gaming tables and cost well
over US$1 billion.
Setting limits
Wynn Resorts has a longstanding application with the Macau government for a 21
hectare (52 acre) Cotai plot. The government has not reported the status of the
plot, and Wynn previously has been cagey about his intentions. The government
has also been unclear about permitting future casino development. In his policy
address last month, Chui committed to controlling the size and growth of
gambling. Secretary for Economy and Finance Francis Tam Pak Yuen fleshed out
Chui's pledge by announcing a limit of 5,500 gaming tables, compared with 4,770
at the end of 2009.
Last October, following a Macau government briefing, Wynn declared, "If they
limit the amount of tables, there is no reason to build anymore." Analysts also
note that new LVS and Galaxy Cotai properties are expected to each have more
than 600 new tables, which would push Macau past the government's limit.
Those details don't seem to trouble Wynn, but they should. In the mainland, and
especially in Macau, money and influence trump rule of law every time. That may
work for Wynn in the short run to get his new casino, but he ought to wonder
what it means for the long run.
Yankee ingenuity?
Macau and China welcomed Las Vegas veterans Wynn and LVS at the time of casino
liberalization in 2002. The stagnated gaming sector needed an injection of
capital and expertise that the Americans could provide. The authorities
expected the Las Vegas veterans to transform Macau into an international resort
and convention destination, but instead Macau has become a place for mainland
Chinese, predominantly, to lose and/or launder vast sums of money. Macau could
have developed that way without American know-how, and today foreign capital
and expertise are at best marginally required. There are also frequent
grumblings about how much mainland money winds up in American pockets through
Macau.
The interests of Chinese authorities and the Americans coincided with the Hong
Kong stock offerings of minority stakes in Wynn and LVS Macau interests. The
Americans raised sorely needed capital while retaining control of their assets,
and Chinese investors got to share in casino profits.
However, the two sides' interests don't always coincide, as shown by the visa
restrictions Beijing imposed from mid-2008 that hit Macau's casinos far harder
than the global recession. Wynn is betting that won't happen again, or that
Macau's ruling families won't successfully lobby Beijing for a larger stake of
the business. If the authorities in Beijing tell Wynn and his colleagues that
they need to take in Chinese partners or sell more shares in their Macau
casinos, no one can stop them. Don't expect Obama and company to rescue a
billionaire gambling mogul who insults the administration whenever he gets a
chance.
So Wynn needs to talk sweet to Chinese authorities, to stay on their good side,
because every pataca he gets from Macau is at the sufferance of Beijing and its
Macau handmaidens. Maybe he'll even trade in his US passport for China's red,
five-star model. But Wynn and his Macau colleagues should keep in mind that
when snuggle with a dragon, you risk getting burned.
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
of
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.
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