Wynn Macau resort bets it can beat
the house By Gary LaMoshi
MACAU - As the first of Macau's Las
Vegas-style resorts prepares to roll the dice,
China's gambling enclave has been dealt unpleasant
reminders of its violent past. The Wynn Macau
opening this week marks the path to modern, glitzy
growth rather than Old Macau's gangland grime. But
it's no sure bet which road Macau's casinos will
follow.
Wynn Resorts' US$1 billion hotel
and casino complex is the largest and most
complete resort ever built in Macau. But it's not
the last word, just the opening line. In the year
ahead, US gaming
giant MGM Mirage is scheduled
to open the MGM Grand Macau down the block from
Wynn. The 600-room property will be a "destination
resort", according to MGM Mirage International
president and chief executive officer Bob Moon,
featuring luxury retailing, gourmet dining and
entertainment. "That's what we do, we build
destination resorts," Moon said.
Without a paddle? A few
kilometers away, on the reclaimed land that now
joins the islands of Coloane and Taipa, Wynn's
Strip (and Wall Street) rival Las Vegas Sands
(LVS) is building the 3,000-room Venetian Macao.
Replicating its Las Vegas property's canals and
gondoliers while adding Chinese sampans, the
Venetian will anchor LVS's projected Asian version
of the Las Vegas Strip with 20,000 hotel rooms
from Four Seasons, Raffles, Hyatt and Shangri-La,
shopping malls including hundreds of stores, and
more than a million square feet (92,900 square
meters) of convention space. Oh yeah, and casinos,
too.
Casinos have been legal in Macau
since 1847, but things only got exciting when,
after 440 years as a Portuguese colony, the
territory returned to Chinese rule in 1999.
Mainland authorities ended the monopoly of
Sociedad de Jogos de Macau (SJM) controlled by
Hong Kong tycoon Stanley Ho. Three Las Vegas
giants plus Australia's Publishing &
Broadcasting Ltd (PBL), SJM affiliates, Hong
Kong's Galaxy Entertainment and their various
partners have projects totaling a staggering US$20
billion in projects in the pipeline. "All of Macau
is under construction," Moon said.
Wynn
will be Macau's first Vegas-style resort, but
LVS's Sands Macao introduced all-American gambling
glitz in May 2004. The 500-plus-table casino
features a 50-ton chandelier, 20-meter ceilings
and a colony of that Las Vegas staple, the
feathered, long-legged showgirl. The Sands earned
back its $265 million construction cost within a
year.
With the Sands and other new
entrants in the market, Macau's tourist arrivals
rose 40% in 2004, gambling income jumped 44%, and
gross domestic product soared a staggering 28%.
Growth has slowed, but last year arrivals reached
18.7 million and Macau's $5.6 billion in gambling
revenue nearly matched the Las Vegas Strip. Casino
tables in Macau win an average of $10,000 daily
for the house, more than double the take in Las
Vegas, thanks to higher betting limits. Macau's
annual gaming revenue is expected to rise to rise
by double digits to $23 billion in 2010.
A new game LVS happily claims
credit for transforming Macau. But the Sands Macao
was only a casino. It showed that Chinese tourists
- nearly 60% of Macau's visitors come from the
mainland, 30% from Hong Kong and another 8% from
Taiwan - prefer to gamble in fancy new
surroundings than in dingy dens. Wynn and the
other new resorts will test a far more risky
proposition: Do these visitors spend money on
anything besides gambling?
At Macau's
casino properties, gaming still accounts for 90%
of overall revenue. In Las Vegas today, half of
revenue comes from non-gaming sources, including
restaurants, shows and accommodations. "We won't
get that [revenue mix] in Macau right way," MGM
Mirage's Moon said.
So far, there's no
compelling evidence of a non-gaming market. While
Macau's visitor numbers and gambling expenditures
soar, average stays and hotel occupancy have edged
downward. Most visitors are daytrippers who drop
their money at the casino and go home. The Sands
has reduced upscale restaurant space for
additional gambling tables, and a theater in the
casino remains dark.
Wynn Macau and the
MGM Grand are betting they can uncover or create a
market for luxury accommodations and shopping,
making Macau a vacation destination, not just a
daytrip stop.
Venetian Macao will try to
duplicate LVS's legendary success in the MICE
market - meetings, incentives, conventions and
exhibitions. Over the past decade, LVS has
transformed Las Vegas into a leading
business-travel destination, filling hotel rooms
during weekdays when there are fewer leisure
travelers.
Galaxy emphasizes
affordability, emphasizing its offering at an
"Asian price point". Which approach (if any)
proves correct, and how successfully each
contender identifies and taps its market, will
help determine how quickly Macau achieves a more
balanced revenue mix.
Stanley Ho's
deal Meanwhile, gambling will pay the
bills. Despite inroads from the Sands and other
new properties, Stanley Ho's SJM still dominates
the gambling scene. Its flagship Casino Lisboa
recorded half of Macau's gambling winnings last
year. Other SJM casinos, including the Greek
Mythology and Pharaoh's Palace, took another 18%
of the market. The theme casinos are one SJM
strategy to fight newcomers in the mass market,
where they've made the deepest cuts into the
former monopoly's market share.
For Ho,
the name of the game has been premium players, and
it still is. VIPs account for an estimated 70% of
SJM's winnings. But it has been feeling heat there
as well, with competitors taking up to 30% of the
market. In early August, Ho complained about
"unfair competition" from the Sands, saying that
50 of SJM's 150 VIP rooms face bankruptcy. He
called for government regulators to address the
situation. As customary when his profit margins
come under threat, Ho warned of societal
instability and violence in Macau as a likely
result.
The Asian VIP business revolves
around junket operators. These agents receive
commissions from casinos to bring them players,
offer players services that casinos can't or
won't, such as credit, and give the high rollers
rebates based on their betting. In some cases, VIP
rooms are leased to junket agents or other
independent operators. Sands, which only turned
attention to the VIP market last year and captured
10% of it, claims other casinos offer higher
commissions. Since Galaxy - which focused on VIPs
immediately - and Sands have come into the market,
rebates to high rollers have reportedly risen
north of 1% from the previous standard of 0.75%.
'Cutthroat competition' One
translation of Ho's remarks from Chinese called
the situation "cutthroat competition", an
unfortunate choice of words. A week after Ho's
remarks, in the pre-dawn hours of August 19, the
executive director of Lisboa's most profitable VIP
room was found with her throat slashed. Her
casino-manager husband sat stabbed to death beside
her in a car in the mainland city of Zhuhai, just
over the border from Macau. A Lisboa official
denied reports that Golden Palace director Chao
Yeuk-hong, popularly known as Big Sister Cat, had
gone to Zhuhai on a debt-collection errand.
Less than 48 hours later, on a Sunday
afternoon in a McDonald's in Central Hong Kong,
three thugs with wooden clubs assaulted legislator
Albert Ho, vice chairman of the Democratic Party
that stands in opposition to the Beijing-approved
executive branch. But Ho attributed the beating,
and a subsequent threatening letter sent with
razor blades, not to politics but to his work as a
lawyer.
His clients include Stanley Ho's
sister Winnie - Albert Ho is not their relative -
whose long-running lawsuit over dividend payments
from a family business is delaying SJM's Hong Kong
stock market offering that could raise billions
for a war chest to match its Wall Street-listed
rivals. Hong Kong's previous attack on a lawyer of
Albert Ho's stature came three years ago; victim
Mok Chiu Kuen represented Winnie Ho at that time.
Albert Ho has refused to implicate Stanley
Ho in the attack. He points out that his clients
include many debt collectors, an industry with a
shady reputation across the globe. In fact, the
opening of Wynn Macau might have taken place a
year ago if Wynn Resorts chairman and chief
executive officer Steve Wynn hadn't insisted on
Macau passing legislation to allow casinos to use
local courts to collect gambling debts.
No
one has ever proved that Stanley Ho is linked to
Macau's triads (organized criminal gangs) or other
forms of organized crime, but there's no question
that casinos, particularly Macau's VIP rooms, have
associations with some very rough customers. A
gaming-industry analyst speculated, "As
competition increases, then so will the fighting,
and as this occurs there is the risk that it
happens everywhere."
For Wynn and the
other newcomers, expanding Macau's tourism revenue
beyond the gaming tables may be critical for more
than their financial health.
Gary
LaMoshi has worked as a broadcast producer and
print writer and editor in the US and Asia.
Longtime editor of investor rights advocate
eRaider.com, he's also a contributor to Slate and
Salon.com, and a counselor for Writing Camp
(www.writingcamp.net).
(Copyright 2006
Asia Times Online Ltd. All rights reserved. Please
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