Inside Asian Gaming

inside asian gaming May 2014 12 “Sands brought us a different way of gaming,” directly elected Macau legislator Jose Maria Pereira Coutinho says. “It brought color, cultural exchange and an example for other operators of a path for doing something different.” “I remember the celebratory sense among everyone about Las Vegas now being in Asia,” says Morgan Parker, a guest at the opening who, enthralled by the potential of Macau, left his job as an investment banker to create the shopping mall at Macau Studio City as president of Taubman Asia. (Taubman and Mr Parker exited as the project sat idle for years.) “It was a watershed moment, but for real estate people and casino people it was thin, because we all knew Sands was not the fully fledged Las Vegas experience but merely a rudimentary cash box built for a moment in time. It was perfect, really. The benchmark in Macau at that time was so low that Sands blew people’s minds and raised their expectations.” “I think practically anyone could have opened a Sands Macao and made it work. I don’t think it reflects on the superiority of Western business acumen,” Newpage Consulting principal David Green contends. Global Market Advisors partner Steve Gallaway agrees. “The key to Sands Macao’s success was they opened their doors. Until the opening of Sands Macao, Macau was a capacity constrained market. There were simply too few gaming tables and electronic gaming devices available to properly serve gamers in the region.” In 2003, Macau had 434 tables and 814 machines; by the end of 2004, the count grew to 1,092 tables and 2,254 machines; as of 31st March, it’s 5,700 tables and 13,323 machines. Finally, a Win SandsMacao’s success broke a losing streak for Macau dating to 1637, when the Portuguese trading post that had elbowed into a Chinese fishing village lost its monopoly on commerce between Japan and Canton (now Guangzhou). Portugal’s envied Asian empire began sinking into irrelevance when it lost control of the passage between the Indian and Pacific oceans with the 1641 fall of Malacca to the Dutch and the China trade opened to other, larger European powers. The silting of Macau’s harbors and the growth of Hong Kong’s more beckoning deep-water port under British rule completed the process. When Macau returned to Chinese sovereignty as a “special administrative region” (SAR) in December 1999, the outlook was hardly rosy. “Macau was still emerging from what had been a turbulent period in its history, exacerbated by the Asian currency crisis and property collapse of the late 1990s, and the creation of the first SAR administration,” Mr Green says. What Macau had going for it, aside from its East-meets-West heritage, was gaming. The new government under Chief Executive Edmund Ho hoped to liberalize the market to make Macau a more attractive tourist destination. That meant ending the casino monopoly of Stanley Ho’s Sociedade de Turismo e Diversoes de Macau (Portuguese for Macau Tourism and Entertainment Group), which had controlled the casino business and much of Macau’s subsequent development since 1962. In November 2001, the government put out a tender for three gaming licenses. STDM, which had its monopoly extended to fit the tender process and keep Macau’s one reliable source of government revenue flowing, would have to bid for a license and face competition. Bidders had to commit to a minimum HK$4 billion (US$500 million) investment, underscoring the government’s desire for non-gaming amenities to complement new casinos. Aspiring licensees also had to impress an eight-member government Tender Commission, whose proceedings were secret, by law. Much of what’s known about the tender process emerged in Even though Sands Macao had no regular junkets, no hotel rooms, no shows and its six restaurants, including the longest buffet in Macau, bled money, the 1 million-square-foot (93,000-square-meter) complex earned back its entire US$265 million construction cost within nine months. “I think practically anyone could have opened a Sands Macao and made it work. I don’t think it reflects on the superiority of Western business acumen,” Newpage Consulting principal David Green contends. Cover Story