Inside Asian Gaming

Oct 2007 | INSIDE ASIAN GAMING 11 Cover Story drive their VIP businesses, Mr Lui reminds us that in 2004, only Galaxy and Stanley Ho’s SJM were actively courting junkets. Wynn Macau would only open two years later, while “Sands at that time was educat- ing all the people that the future is themass market—that is where you make the most money, the profit margin is much higher.” But of course, Sands eventually realized that the majority of revenue continued to derive from VIP play, and dropped its mass market focus and sought to attract junket operators with higher commission rates. “We were the only ones who were true to our words. We said the VIP business is the strongest business in Macau, and will re- main that way for the foreseeable future.” Another claim made by each successive foreign casino operator opening shop in Macau is that they would halt the inexorable rise in junket commission rates by courting VIP players directly. Despite those claims, the majority of VIP customers are still brought in by junkets, who in many cases have long established relationships with their clients. Again, GEG never had any intention to cut out the middle man. According to Mr Lui:“In this part of the world, in Asia, in Macau, re- lationships count for a lot. I do not want to disrupt an already very established, very suc- cessful model.Why should I? “We have to do a lot of things very quick- ly, and the market is expanding so fast, so how can we do everything directly ourselves when the market is expanding by leaps and bounds every year? There are somany things that we have to attend to. I’d rather keep a very successful model going, keep working with the junkets and enlarge our share of the overall pie,” says Mr Lui. Other new entrants have not only failed to keep to their promises to cut out the junkets, but they have actually intensi- fied the competition to entice junkets by offering steadily rising commission rates. “If you just try to bid up the commission paid to the junkets, it’s not sustainable. Eventually, one day you have to look at the bottom line and backtrack. Some people have already backtracked. “We do not just want to compete on the commission offered. I think there are other areas in which we would be able to com- pete.This [StarWorld] is the best location. It’s a nice hotel, a comfy hotel.We offer the best services, we think. We’re very attentive. We have the facilities our customers want. “We want to put in elements we think would be successful, and liked by the Asian players. We know Asian players like to play in VIP rooms instead of on the main floor. That’s why we’ve concentrated our efforts on building the best looking VIP rooms in town. Our VIP rooms are more comfy and in- timate. I like to think most of the junkets and VIP room operators like to work with some- one who knows their culture. I think we can unashamedly say we know their culture, and they find talking to us easier.”Keeping Asians and Chinese in their element is a recurrent theme throughout StarWorld, with five of the property’s eight restaurants serving fa- miliar gourmet Asian cuisine, rather than try- ing to introduce them to more exotic dishes when they would rather keep their focus on the gaming tables. Another common assumption Inside Asian Gaming put to Mr Lui is that GEG and SJM are able to work with a larger universe of junket agents than US- or Australian- based operators, because of the stringent requirements imposed on Wynn, LVS and MGM by the Nevada Gaming Control Bo- rad, and on PBL by Australian gaming reg- ulators. Mr Lui says that is a false assump- tion, and perhaps even a vicious rumour intended to suggest GEG’s connections are not entirely legitimate. “If someone wants to work with us, it’s not just because they can only work with us and not with the Americans. They choose to work with us because they find us easier to deal with, we are more cooperative, and we give them more means to be successful.” Responsive planning A majority of financial analysts cover- ing Macau appear to have jumped on the “supply-creates-demand” bandwagon—ap- parently mesmerized by ever-bullish Shel- don Adelson’s mantra,“Build it, and they will come.” Mr Lui stresses that GEG’s projects, however, will be driven by demand. That’s not to say Mr Lui believes demand will be a constraining factor in Macau. “We think the market in Macau is going to con- tinue growing exponentially. Visitor arrivals reached 22 million last year, and we likely will have 25 to 26 million this year, and by 2010 over 40 million. So there is no shortage of demand.” The follow-up to StarWorld, the Cotai Mega Resort, located adjacent to Venetian Macao on the Cotai Strip, will offer capacity to meet tremendous demand. Cotai Mega Resort will be completed in four phases, and will eventually boast 15 million sq. ft of gross floor area. Phase onv e alone will have 5 million sq. ft, which Mr Lui points out will be considerably larger than just about all other resorts on Cotai, including City of Dreams and Macao Studio City. Cotai Mega Resort’s first hotel tower with 1,500 rooms and a casino and entertainment complex will be completed by the end of 2008, with the second tower, comprising 1,000 rooms,