The Asian Vegas
Macau, once a seedy and corrupt outpost, is blossoming into a gambling mecca
From the Print Edition:
Dennis Haysbert, Nov/Dec 2006
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Although the Sands, with loads of gaming and not much else, is successful, it represents phase one for Sheldon Adelson and company. Their Venetian—heavy on luxe amenities and convention space—is more indicative of Macau's proposed future. "We're changing the face of Macau by making it into a classic destination resort that happens to have gambling," says Bill Weidner, president of Las Vegas Sands Corp., which owns the Venetian. "We will put $9 billion into Macau's Venetian and it will take up 35 million square feet. In Las Vegas, you just don't have the room to do what we're doing in Macau." To support that heft, there is a much larger pool of players for casinos to woo: "Within the five-hour market of Las Vegas, you have 450 million people. Draw the same circle around Macau and it is something like 3 billion."
While J. Terrence Lanni, chairman and chief executive officer of MGM Mirage, has a point when he describes the Sands Macau as the equivalent of "a basic locals casino in Vegas," the difference between Adelson's quickly constructed outpost (it took 14 months and has just 40 hotel rooms, all reserved for high rollers) and what preceded it in Macau is stunning. Just an hour's hydrofoil ride away from Hong Kong, and the only nearby place for legal table games, Macau was, until recently, loaded with nothing but claustrophobic, smoke-filled joints, all under the sole control of Stanley Ho. Despite the fact that Macau is a charming city with terrific Portuguese architecture and excellent restaurants, it has had a long-standing, and well-earned, reputation as a sleazy and corrupt place where prostitutes and the Chinese mafia are de rigueur. It remains the kind of destination that members of Hong Kong's polite society rarely brag about visiting (sort of like the old Vegas).
In 1999, however, governance of Macau reverted from Portugal to China, and things began to clean up. Three years later, Ho's contractual stranglehold on gaming expired. The Chinese government could have renewed exclusively with Ho, but it decided to de-monopolize the peninsula's casino business and, in the process, ratchet it up to Vegas standards. The hope was that by improving gaming, Macau itself would improve and the dive-like casinos that all but defined the place (and fed into the local crime scene) would be forced to evolve or die.
Twenty-three international gaming companies submitted proposals that they hoped would lead to casino licenses. Initially, three licensees were chosen: Ho, Adelson and Wynn. MGM's initial exclusion left Lanni feeling pretty bad and a little concerned for a segment of his business. "Not being in Macau is dangerous [for a major American gaming company]," says Lanni. "If the local Chinese people get used to going to a place close to home, and they like it, that is the place they will want to patronize when they come to Las Vegas."
The chosen few were already happily versed in the power of the Asian gambling dollar—it is believed that Asian players account for an important chunk of Nevada's high-limit play—and they jumped at the opportunity to get involved and vowed to upgrade Macau to Las Vegas Strip quality. And now that it's being done at lightning speed, the only logical worry would seem to be a potential for overbuilding. But that concern has failed to land on the radar. "It's not a question of how much capacity is added; it's what type of capacity," says Wynn, whose Wynn Macau is a scaled-down (but still super-upscale) version of Wynn Las Vegas. "If the properties are value-added and fanciful, great. If you are talking about a bunch of office buildings converted to baccarat rooms, oops, look out. But don't worry. That is not what we're doing here."
Sheldon Adelson and his crew from the Venetian were the first to cut the cards in Macau. Fifteen thousand people waited behind police barriers for the doors to part on opening day at the Sands. They poured in and crowded so tightly on an inclining escalator that the moving staircase ground to a standstill. Patrons were excited, and for good reason: even if they'd been to Macau before, they had never seen a gambling enterprise as plush as the Sands. "The old casinos in Macau were designed as if gambling was the wrong thing to do," says Weidner, referring to the warrens of small low-ceilinged rooms that are a hallmark of Stanley Ho's operations. "Las Vegas casinos [and the Sands in Macau] have open architecture that celebrates playing in the casino. It conveys the fact that gaming is a part of life and that it is OK to enjoy it. Macau casinos always felt more like opium dens."
For a while, it seemed as if MGM Mirage, arguably the top casino company in the world, would not be involved in the beautification process of Macau. Lanni believes that MGM originally was rejected due to the amount of tax it offered to pay. (The company came in slightly lower than Wynn, Ho and Adelson.) But he and MGM received a do-over after the original licensees were given opportunities to sell so-called co-concessions, which amounted to full-blown licenses for a second group of casino operators.
Stanley Ho sold his co-concession rights to MGM, which is now partnered with Ho's daughter Pansy on the MGM Grand Macau. (The name is perfect, as MGM movies rank among the few Western imports that have consistently gone into China over the last 80 years—never mind that, these days, the relationship between the casino and film studio is in name only.) While the situation may not be entirely perfect—"We'd like to have 100 percent and I'm sure that Pansy would like to have 100 percent, but there just isn't enough to go around," says Lanni—Lanni's attitude is that he'd rather be there than not be there. "We'll have 600 rooms and suites, but we're leaving a lot of areas unfinished so we can decide what we want to do," he says. "We'll have a significant spa and will be addressing it to the Far Eastern culture." Lanni considers this for a beat. Then he rhetorically asks, "But is that what the people really want? We don't know."
One thing that seems beyond question is the money that American operators stand to make in Macau. According to Weidner, the Sands is doing 40 percent better than he had anticipated. "We expected that it would pay for itself in a year," he adds. "[Within that time frame] it had already more than paid for itself." None of this is too surprising when you consider that tables in the Sands Macau scoop an average of $6,100 per day (50 percent more than they do at the Venetian) and contribute to the casino's daily take of $3.1 million.
That mathematical reality underscores that it typically takes around three years to recoup hotel expenses in Las Vegas. "Sands was built for speed and succeeded at doing what it was designed to do: make money," says Wynn. "A great deal of profitability has been taken out of that building. It's given [Adelson and his company] tremendous opportunity."
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