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Wynn makes Encore bets on China
By Muhammad Cohen

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 Americaís 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 Cohenís blog for more on the media and Asia, his adopted home.

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