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    China Business
     Apr 13, 2012

Sands bets big again in Macau
By Muhammad Cohen

MACAU - Sands China doesn't think small. The US$4.4 billion Sands Cotai Central casino resort that opened on Wednesday is the biggest piece of the world's largest tourism development project, featuring the world's largest Conrad, Sheraton and Holiday Inn hotels.

Along with Sands China's Venetian Macao and Four Seasons Macao hotels, they've been built on what was 10 years ago unwanted half-submerged landfill linking Macau's outlying islands, Coloane and Taipa.

"When we got this piece of land, I thought we were being exiled," Sheldon Adelson, chairman of Sands China and parent company Las Vegas Sands (LVS), said at Wednesday morning's opening


day press conference. "I went back to the Macau government and said, 'Thank you for the land, but I can't find it.'"

Even though he was looking at muck, Adelson imagined creating an Asian version of the Las Vegas Strip in Cotai. In August 2007, LVS opened the $2.6 billion Venetian Macao, a supersized version of its Vegas namesake with 3,000 rooms, a million square feet (93,000 square meters) of convention space, an 800,000 square foot shopping mall, and the world's largest casino.

That casino floor eclipsed the Sands Macao that LVS built three years earlier on the Macau peninsula, the traditional casino district, and recouped its $265 million development cost within nine months, proving that Vegas could play in Macau.

It was also the catalyst to transform LVS from an also-ran to the world's largest casino company by market value. American rivals Wynn Resorts and MGM International followed with their own mega-properties in downtown Macau.

Cotai comes alive
In August 2008, LVS opened the Four Seasons Hotel next to the Venetian in Cotai, and in June 2009 rival Melco Crown Entertainment debuted its $2.1 billion City of Dreams resort across the street with 1,400 rooms under three international hotel brands. Last year, Galaxy Entertainment Group opened Galaxy Macau with 3,000 rooms, introducing three new hotel brands to the market.

All of the resorts have shopping and, of course, casinos. Macau is the only part of greater China where casino gambling is legal. Before the opening of Sands Macao introduced competition to the market previously monopolized by Stanley Ho's Sociedade de Jogos de Macau (SJM), Macau's gambling revenue was $2 billion, about half the take in Atlantic City. Last year, Macau's casinos raked in $33.5 billion last year, more than five times bigger the take of Las Vegas Strip casinos.

Now comes Sands Cotai Central, originally slated to open in 2009 but mothballed due to the global financial crisis of 2008 that pushed LVS to the brink of bankruptcy.

"The opening of Sands Cotai Central is a game-changer for the future of Macau as a leisure, entertainment and business location," Adelson, who also serves as LVS chief executive officer, said. "Having changed Las Vegas to a city of convention, business and leisure tourism, we're going to make Macau a city of convention and leisure tourism."

Driving into Cotai now, seeing Galaxy's Asian fantasy palaces, then the Gothic Venetian, the sparkle and shimmer of City of Dreams, and the blazing video boards of Sands Cotai Central, Cotai has the look of Las Vegas.

Lessons learned
When completed later this year, Sands Cotai Central will include 5,800 hotel rooms, 1.2 million square feet of retail and convention space, and two casinos totaling 300,000 square feet. "This place is 30% bigger than the Venetian, but it doesn't feel that way," HSBC regional gaming analyst Sean Monaghan observes. "It's a more well-rounded property. They've learned a lot about making things appeal to a broad array of people."

In particular, he cites the use of natural light, also a feature of the Marina Bay Sands in Singapore, the most profitable property in the LVS portfolio.

University of Macau associate professor of business administration Ricardo Siu says: "I believe that Sands China has learned from its experience in Macau and is fine-tuning its business strategies to be successful in this Chinese-based and policy-driven market.

"For example, interior designs of the new properties and related entertainment in Cotai Central are more focused on the perceptions of Chinese consumers and fitted into the long-term growth of Macau."

Currently, most visitors to Macau don't spend the night, just coming for the day from mainland China or Hong Kong. Those that do stay spend an average of 1.2 nights, a figure that has stubbornly held despite a building boom of more than 10,000 hotel rooms, nearly all in the four- and five-star category with prices to match, along with vast expanses of shopping and casinos.

The Holiday Inn, with more than 1,200 rooms priced around $150 per night, specifically targets China's emerging middle class - projected to soon reach 700 million by 2020, according to Euromonitor International. Sands China president and chief executive Edward Tracy calls it "affordable luxury. There's nothing like it in this market."

Until now, nearly all of Macau's new hotels have been in the five-star category with prices to match.

"If you build to a certain scale, you can make it affordable," Tracy adds. "We recognize that not everyone comes here for Gucci; some come here because we have Levis."

Chasing MICE
Sand Cotai Central is a key piece of making Macau, specifically Cotai, a major center for MICE, the lucrative meetings, incentives, convention and exhibition business that brings business travelers spending company money to destinations for multi-day stays.

Adding Sands Cotai Central to Venetian Macao and Four Seasons Macao will give Sands China nearly 8,000 hotel rooms, 9,000 conference rooms, and 600 retail and dining outlets, linked by an overpass across what LVS trademarked as the Cotai Strip. "This is the largest tourism project in the world, an unprecedented, fully integrated resort city at the center point of Cotai and the best of Macau," Tracy said.

"There isn't a convention in the world that needs this much space," Adelson said. "We have built a multiplicity of amenities unlike anyplace in the world."

Before Adelson, now 78 years old with personal wealth estimated by Forbes at $24.9 billion, began promoting Las Vegas as a convention destination, the average stay there was 1.3 nights, according to LVS president and chief operating officer Michael Leven. The average stay in Las Vegas has grown 3.6 nights.

More significantly, revenue from non-gaming activities, including hotels, shopping, shows and gourmet dining, has overtaken revenue from casinos. In Macau, more than 90% of the casino hotels' revenue comes from gambling. China and Macau officials have said repeatedly that they want Macau to become a more diversified leisure and tourism destination.

Exclamation point
Holiday Inn, Sheraton and Conrad add global clout and global sale force networks to Sands China's reach. "The brands give us credibility to grow the MICE business," Leven said. "Sands Cotai Central puts the exclamation at the end of the sentence. It's a game-changer for MICE in Macau."

"It's more incremental," RBS director of equities research for Asian conglomerates and gaming Philip Tulk says. "There's no tradition of conventions and exhibitions in Macau."

Comparing Cotai to Singapore, where LVS built a million square foot convention center as a key feature of Marina Bay Sands, Tulk notes, "Singapore has the space, but it also has the roads, the infrastructure all in place. It's going to take for this place to develop that.

"I believe in the vision Sheldon Adelson has, but it's going to take time. It's not a three-year thing. Maybe it's a 10-year thing."

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. See his blog and more at MuhammadCohen.com.

(Copyright 2012 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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Macau needs decades to go beyond gambling
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