10 James Murren
Chairman and CEO
MGM Resorts International
The three Macau casino operators who have yet to open megaresorts on Cotai—SJM, Wynn Macau and MGM China Holdings—are all capacity-constrained at their peninsula properties, and MGM China more so than the other two.
Of the 5,700 gaming tables in Macau in the first half of 2014, MGM China operated a mere 423, by far the lowest count in town—Wynn Macau was next to last with 465, but only because 30 of its VIP tables were shut during a renovation of the gaming floor, so its real count is closer to 500.
A lack of hotel rooms is also holding back MGM China’s performance. “We have been tremendously capacity-constrained on hotel rooms in Macau. We have the smallest number of rooms,” pointed out James Murren, chairman and CEO of MGM Resorts International, majority owner of MGM China, during the company’s Q2 earnings call last month. “It’s a problem,” he added. “We continually rent rooms out at the Mandarin Oriental next door and in the city itself. We know that we can drive more mass business, which we’ve been the innovator on and leader. When we open up Cotai with triple the number of rooms that we have in our current facility, and if we can expand it even further, then we think the ROI there is pretty spectacular .”
Mr Murren reiterated that the US$2.6 billion MGM Cotai is on budget and on schedule to open in 2016 and said the project is now so far advanced that the company feels it’s in a position where it can petition the government for permission for a second phase of the resort. “Probably in the next quarter, we’ll be able to give you a budget on that,” he said.
MGM Macau is by far the biggest revenue generator in Las Vegas based MGM Resorts International’s bulging portfolio of gaming, hospitality and entertainment assets, which also boasts 16 US casinos, including signature Las Vegas Strip resorts Bellagio, MGM Grand, Mandalay Bay and The Mirage. The company also owns 50% of the sprawling CityCenter hotel complex on the Strip, featuring ARIA Resort & Casino.
In the first half of 2014, MGM China Holdings, in which MGM Resorts holds a 51% stake, recorded US$1.8 billion in net revenue, almost triple the $652 million taken in at the company’s second biggest earner, Bellagio—and without the steady stream of Chinese high-rollers being fed Bellagio and MGM’s other US properties by the Macau operation, the difference might have been even greater.
“Well, there’s no doubt that we’re getting more high-end business here in Las Vegas as a result of our increased visibility in Macau,” acknowledged Mr Murren during the earnings call. “And the combined efforts of the US operators that are in Macau, bringing customers to Las Vegas, benefits all of us here. So we get a good share of that play regardless of who brings them over here. And our competitors get a good share of our customers’ play when we bring them over. It’s the nature of this business.”
Prior to the $1.5 billion MGM China IPO on the Hong Kong Stock Exchange in May 2011, MGM had held a 50% stake in the Macau operation. Pansy Ho, daughter of erstwhile Macau casino monopolist Stanley Ho, held the other 50%. Ms Ho pocketed the proceeds of the 20% public offering and privately sold an additional 1% to MGM at the IPO price so it could assume a controlling interest. Ms Ho’s stake was diluted to 29%.
Given the property’s critical importance to the parent company’s earnings, engineering that buyout may be one of the smartest investments Mr Murren has made since becoming chairman and CEO of MGM Resorts in December 2008. He had joined the company as CFO in 1998, prior to which he had pursued a career on Wall Street that saw him lead a pivotal recapitalization of the company’s predecessor, MGM Grand Inc., in 1996 and culminated in a managing director’s position at Deutsche Bank.
Mr Murren is credited as the architect of the key acquisitions— Primadonna Resort & Casino in 1998, Mirage Resorts in 2000 and Mandalay Resort Group in 2005—that transformed MGM into one of the world’s largest gaming companies. They also loaded it with debt. Since 2008, he has led an extensive corporate recapitalization and costcutting which together kept the business afloat during the financial crisis and has helped it weather a challenging Las Vegas market since.
The major drag on the company’s balance sheet when the financial crisis hit was CityCenter, the $8.5 billion resort and retail megacomplex that was under construction at the time in partnership with Dubai World. Getting CityCenter open in December 2009 has to rank as another of Mr Murren’s great achievements, but the resort has struggled to produce the earnings that were anticipated for it, and the cash flow contributed by MGM China has been crucial to Mr Murren’s ongoing efforts to manage the company’s US$12.9 billion in debt. MGM China generated $451 million in adjusted EBITDA in the first half of 2014 and has been supplying its parent with a steady stream of dividend checks.
While the herculean task of debt reduction has consumed the better part of Mr Murren’s six years at the helm, his strength as a strategic thinker has worked to keep the company as innovative and opportunistic as it is big.
Its MGM Hospitality arm has progressed from vision to reality, opening two luxury resorts in Sanya on China’s Hainan island over the past two years. MGM Grand, Bellagio and SkyLofts hotels are planned or in various stages of development in North Africa, in Dubai and Abu Dhabi and in India, and a number of five-star properties are being mapped for cities across China in partnership with renowned Diaoyutai State Guesthouse. All these are expected to drive visitation to MGM Resorts’ gaming properties in Macau and the US.
“It’s still early days on hospitality,” said Mr Murren during the earnings call. “Once we open a hotel in a major market like Beijing or Shanghai, the two projects that are under development right now, that will have a bigger impact [on the company’s US operations]. But as we stand right now, our two hotels are in Sanya, which is in Hainan Island, which really more benefits MGM Macau.”
11 Kazuo Okada
His friendship with Steve Wynn is in ruins. He’s been unceremoniously tossed out of the giant resort company they founded together, whose public listing he helped bankroll. He’s been rejected in South Korea. Any chance he might be licensed for a casino in his home country of Japan is likely doomed. In the Philippines, where his problems began, he’s been under a criminal investigation for nearly two years.
But then you can never count out a billionaire—certainly not one as obsessed with a vision as immense as Kazuo Okada’s—and the true eccentrics like him, those whose passion is the quest and who like to play it fast and loose with the born instincts of a gambler and a congenital inability to grasp the possibility of defeat, you may even find yourself rooting for them.
And don’t bet against multibillion-dollar pleasure palaces either, especially not when they’re close to China and there are casinos attached to them.
In the Philippines, Mr Okada is staking a battered reputation and a considerable fortune on his—Manila Bay Resorts—the US$2 billion mega-hotel and casino the 72-year-old machine gaming magnate envisions as the category-killer at Entertainment City. He’ll be up against some formidable competition. Solaire Resort & Casino has finally got its feet under it, it’s growing revenues and expanding. City of Dreams Manila, priced right up there with Manila Bay Resorts, is slated to open later this year with Macau casino giant Melco Crown Entertainment in charge.
But then nothing has come easy for Manila Bay Resorts. The biggest obstacle Mr Okada has set for himself is securing a credible partner or partners to take a majority stake in the land underneath it and thereby resolve, or so he hopes, the criminal charges he and a host of Filipinos and Japanese nationals connected with the project could face under a finding by the Philippine Justice Department that straw companies were set up to evade limits on foreign ownership of land and other rights. Intertwined in this controversy is an alleged bribery scheme involving a politically connected businessman who is among those named in the land ownership probe.
Actually, everything looked to be settled earlier this year via a three-way partnership that would have placed 60% of the land rights in Philippine hands in accordance with the law. Then it unraveled, apparently after one of the partners, First Paramount Holdings 888, backed out—not the first one to do so on Mr Okada’s tortuous road to Entertainment City. Philippine subsidiaries of Universal Entertainment, the Tokyo-based pachinko/slots giant that is his corporate flagship, then canceled their agreements with the other partner, Century Properties Group, which had signed on to develop a sizable portion of Manila Bay Resorts’ residential and retail components. Century sued and in July obtained an injunction barring Universal’s affiliates from negotiating to secure new partners.
As messy as all this is, Manila Bay Resorts continues to forge ahead to a scheduled 2015 opening, in part because the government is all in, too. Entertainment City’s 120 hectares were created and carved out of the country’s teeming capital city to boost tourism and provide badly needed jobs. Despite the embarrassment Mr Okada’s legal troubles has caused the government, they want the investment, and Universal is not without a store of goodwill—its Aruze subsidiary operates a manufacturing and game design branch in the country and is a fairly significant employer.
Universal categorically denies all the charges against it and says it is working cooperatively with the government to resolve the land ownership issues, and the company has been assured, it says, that it will have until “completion of the development” to do so.
Century, in the meantime, has said it is open to mending the dispute and restoring the partnership along previously agreed lines. “The plan is for us to discuss among ourselves out of court, and then take it from there,” a spokeswoman told Reuters.
Which touches, ultimately, on the fundamental appeal of Mr Okada’s vision—the fact that there is so much about Manila Bay Resorts that can go right.
Its 44-hectare footprint is the largest in Entertainment City. The first of its three planned phases will feature 1,000 hotel rooms, none smaller than 60 square meters, with suites that top out at 600 square meters and villas designed at an expansive 1,000 square meters and larger. There will be 22 restaurants at opening, a domed pool with a Las Vegas-style beach club and nightclub, a luxury spa, sizable meeting and exhibition space, 7,500 square meters of high-end retail, parking for 2,400 cars, and all of it set behind a display of dancing fountains bigger than the famed Bellagio’s on the Las Vegas Strip.
The casino will be the largest in Manila, 30,000 square meters, replete with 500 table games and 3,000 slot machines.
Subsequent phases will include hotel towers, luxury residences, more retail and an oceanarium among their attractions.
12 Michael Mecca
President and COO
Galaxy Entertainment Group
Galaxy Macau, Galaxy Entertainment Group’s flagship resort on Cotai, is the city’s highest-grossing casino, commanding a 13.5% share of Macau gaming revenue in the second quarter. It’s not the most profitable, however—that honor goes to The Venetian Macao, whose share was 9.2%—owing to a larger proportion of its revenues being derived from the VIP segment, where margins are lower than on mass-market play. Galaxy Macau’s share of the city’s total mass- market revenue stood at 9.6% in the second quarter, versus The
Venetian’s 13.7% and Sands Cotai Central’s 9.9%. But in the VIP segment, Galaxy Macau ruled supreme, with a 15.8% Q2 share (while The Venetian took 6.5% and SCC 5.7%). Moreover, GEG appears to be grabbing VIP business from its competitors in a shrinking market. In the first six months of 2014, VIP revenue market-wide was up 3% year on year, but Galaxy Macau’s VIP win rose 44% to just over HK$17 billion (US$2.2 billion). At the group’s StarWorld Hotel and Casino, VIP volume rose 12%, but because the property ran unlucky in the quarter (recording the lowest VIP win percentage in its history, at 2.5%), win declined 2% to HK$4.3 billion.
In the mass segment, the company’s first-half growth trailed slightly the overall market’s 36% increase. Galaxy Macau’s mass win rose 32% year on year to $5.4 billion, while StarWorld Macau saw mass win grow 35% to $2.2 billion.
GEG has certainly come a long way in developing its mass business in the past three years, following the May 2011 opening of the US$2.1 billion Galaxy Macau. Prior to that, it had been a VIP-centric company, operating StarWorld on the Macau peninsula since 2006. Galaxy Macau’s arrival could not have been timed better, coming just as China’s burgeoning middle class created a fundamental shift in the dynamics of the market away from VIP and toward the mass.
Michael Mecca joined GEG in March 2009 in the run-up to the opening of Galaxy Macau. His mission, said Deputy Chairman Francis Lui, was to take the company “to the next level in its development as a leading Asian gaming corporation”.
A big part of Mr Mecca’s job, as he saw it, was to take the strong customer service standards established at StarWorld, the company’s previous flagship, and transplant them to the much larger Galaxy Macau.
“StarWorld has always been one of the most prominent VIP casinos anywhere in the world,” he says, “and our responsibility at Galaxy Macau was to ensure we gave that same level of welcome and memorable experience as our VIPs have always enjoyed with us to our mass players and premium-direct players.”
Mr Mecca and his team have made steady gains in drawing mass players, initially outstripping GEG’s rivals in growing mass revenues, but the latest figures suggest Galaxy Macau is in need of a boost. The property’s retail complement in particular appears to be lacking, with 35 stores hardly sufficient to cater to all the needs of its main-floor visitors. Fortunately, the property’s shopping and other offerings will receive a major upgrade come mid-2005, when Phase 2 is unveiled at a cost of US$2.5 billion, doubling the size of the resort, adding as many as 500 gaming tables and JW Marriott and Ritz-Carlton hotels with a total of 1,300 rooms. Furthermore, Phase 2 will have more than 200 shops and more than 100 F&B outlets.
While focused on overseeing the expansion, Mr Mecca is mindful of the need to continue nurturing the company’s frontline staff to ensure guests receive the coveted “World Class, Asian Heart” experience promised in its marketing campaigns. “We spend a great deal of time and energy training our people on a regular, ongoing basis,” he says. “We have dedicated people in every department who spend their entire time on the floor, and there are impactful behaviors that we monitor that are all geared towards providing the required level of service. You’ll see that every one of the security guards, as you enter, they’ll make a motion of welcome. And the dealers, after each hand, they’ll look up at the customers and make sure everything is OK. Every department in the property participates in the program, and our goal is to provide a level of service second to none in the industry.”
Prior to joining GEG, Mr Mecca served as president and CEO of Planet Hollywood Resort & Casino in Las Vegas and held senior executive roles at Mandalay Resort Group, Caesars World, Crown and Las Vegas locals giant Station Casinos. He has more than 30 years of experience in the hotel and gaming industries.
13 Angela Leong
Executive Director, SJM Holdings
Sociedade de Jogos de Macau
The head of government of the largest casino market in the world was returned to office last month by the decision of an elite committee of 400. Angela Leong was one of those who cast a vote.
The 53-year-old Guangzhou native, a former dancer and the mother of five of Stanley Ho’s 17 children, has ridden a dazzling upward trajectory, emerging a few years back from a bruising family battle for control of the ailing tycoon’s empire as the largest individual shareholder of SJM Holdings, the Hong Kong-listed parent of the
casino operating giant he founded, and one of the most powerful individuals in Macau gaming, indeed, one of the wealthiest in the Pearl River Delta, with a net worth estimated by Forbes at US$2.3 billion.
Her property holdings, described as “vast” by The Wall Street Journal, include a significant interest in L’Arc Macau—a 56-story casino hotel that includes private residences, retail shops and a 10,000-squaremeter gaming floor that operates as one of 14 independent sublicensees of SJM—and a massive plot of land on Cotai adjoining the site where SJM’s $3.9 billion Lisboa Palace is under construction.
She is a director and owns one of the largest personal equity stakes in SJM’s biggest investor, STDM, the Hong Kong company that ran the Ho casinos in the monopoly era and whose far-flung holdings include interests in banking, retail, property development, transportation and infrastructure and, of course, gaming. She also controls 10% of SJM’s operating company, Sociedade de Jogos de Macau, and is its managing director. She is also vice chair of the Macau Jockey Club and heads a trade group representing the city’s junket operators and promoters.
Her connections and influence extend well beyond gaming, however; they reach into every facet of the region’s social, commercial and political life. She was elected last September to her third term in the Macau Legislative Assembly representing a pro-business, pro- Beijing coalition—the New Union for Macau’s Development, it’s called, SJM Chief Executive Ambrose So is its chairman. She sits on the chief executive electoral committee as a representative of the Assembly. She also holds seats on the Jiangxi Provincial and Zhuhai Municipal committees of the Chinese People’s Political Consultative Conference.
As a lawmaker and major stakeholder in SJM and STDM she has been at the center of protracted discussions on the future of the Outer Harbour Ferry Terminal, Macau’s lifeline to Hong Kong. Essentially, she has succeeded Stanley Ho as the public face of SJM. She was the one who revealed the details of the company’s plans for an extensive renovation of its wholly owned Casino Jai Alai, which are slated for completion next year and will include a shopping mall, cultural spaces and a showcase of Macau cuisine.
When air quality tests conducted last year left no doubt that the government’s partial restrictions on smoking in casinos were failing, she stepped forward as an intermediary between the industry and officialdom. It was to her office at SJM that workers’ rights group Forefront of Macau Gaming delivered a petition calling for more effective restrictions, and she wasted no time in leveraging her standing with SJM and her legislative seat to move the government toward the total ban that eventually was instituted. It was astute, too, a little flourish of populism—she would be running for reelection shortly—more important, it ensured a level playing field for SJM, whose portfolio of satellite casinos, many of them aging and inadequately ventilated, were among the worst offenders.
She was a driving force behind the joint venture that secured for Lisboa Palace one of its most distinctive elements, a HK$2.5 billion (US$322 million), 270-room Versace-branded hotel. The famed Italian fashion house is hugely popular among China’s nouveau riche, and the hotel at Lisboa Palace will be only the third in the world to carry its name.
But it’s the 18 hectares she controls next to the resort that will play a far greater role in its fortunes. It would transform its developable area from the smallest on Cotai to one of the largest, and negotiations are under way to incorporate the land into its future expansion plans.
14 George Tanasijevich
President and CEO
Marina Bay Sands
“He’s the last guy I thought would be CEO of Marina Bay Sands,” an industry executive with extensive experience in Singapore says of George Tanasijevich. “He’s not a gaming guy.”
That hasn’t stopped Mr Tanasijevich from successfully presiding over what’s likely been the world’s most lucrative casino resort. He helped shape the property that’s become not just the signature landmark of Singapore but the iconic integrated resort property that companies and governments around the globe want to emulate.
“When working in Singapore, I gave tours of the casino to many international dignitaries that were keen to learn how to emulate this business model,” Ovion Partners Managing Director Peter Klugsberger, a former MBS executive, recalls.
Trained as a lawyer with an MBA from the University of Chicago’s Booth School of Business, Mr Tanasijevich worked for a top US shopping mall developer and operator before joining CapitaLand in Singapore, Southeast Asia’s largest real estate conglomerate and, coincidentally, a losing bidder for a Singapore IR in partnership with MGM. Mr Tanasijevich moved to Macau in 2004 as Las Vegas Sands’ director of development, then moved to Singapore in 2005 to play a leading role in the MBS bidding process, utilizing his government relations skills and local experience.
When MBS Chief Executive Thomas Arasi left in January 2011, Mr Tanasijevich became CEO as well as LVS’ managing director of global development. Insiders praise Mr Tanasijevich’s team at MBS, led by Executive Vice President Andrew MacDonald.
With second-quarter EBITDA of US$417.8 million, up 17.6% from a year ago, on a 51.9% margin, MBS is almost certainly the single most profitable casino resort on the planet. The hotel boasted 99.1% occupancy for its 2,561 rooms at an average daily rate of $409, and income from its attractive, hugely profitable 800,000-square-foot shopping mall rose 12.6% to $40.3 million.
On the other hand, rolling chip volume fell 27.3% and massmarket table drop fell 4.9%. Casino revenue rose due to a rolling chip win rate of 3.45%, well above the 2.85% MBS uses as its benchmark, and also significantly better than the 2.53% achieved a year earlier. Normalized for luck, EBITDA for the quarter fell 4%.
Those numbers illustrate the dilemma for MBS as it struggles with Singapore’s near-total ban on junket play. Gaming revenue shows extreme volatility since a handful of high rollers play a big part in determining the results. In the absence of junkets, MBS also has to absorb the credit risk. Receivables have hovered above $1 billion for the last seven quarters, and the property has made provisions for reserves totaling $420 million for potential non-payment.
Along with volatility, there’s low growth amid Singapore’s evertightening gaming marketing restrictions, so MBS hopes to find growth in other segments of the business. LVS Chairman Sheldon Adelson announced earlier this year that the resort is seeking adjacent land to build additional hotel and convention space. But even with Mr Tanasijevich’s negotiating skills, Singapore authorities remain cool to the idea.
Those skills are being further tested as Mr Tanasijevich spearheads LVS’ efforts to win a license for one of the IRs the Japanese government is expected to issue.
“If they think Singapore is tough, just wait until they have to deal with Japan,” one industry executive cautions.
As in Singapore, LVS has made a good choice by letting George do it.
15 Tan Hee Teck
President and COO
Resorts World Sentosa
Entrusted with the crown jewel of Genting Group’s global gaming portfolio, Tan Hee Teck enjoys the full confidence of Genting Executive Chairman Lim Kok Thay. That faith from the top also puts Mr Tan at the leading edge of Genting’s drive to expand into Japan.
Resorts World Sentosa has been a stunning success, even though it has run second in Singapore to Marina Bay Sands in revenue and its growth prospects are limited. The problem is the Singapore government wants integrated resorts to draw tourists and give it a cooler image, but it doesn’t want junket promoters, especially the ones from Macau that can supply the most potentially lucrative players but tend to operate in a less transparent environment than the local regulatory regime is comfortable with. At the same time, the government really doesn’t want Singapore residents to gamble either, or certainly not to gamble too much. It restricted RWS’ and MBS’ local marketing efforts from the outset and has tightened the leash further. Global Betting and Gaming Consultants reports Singapore topped the world in per capita gaming spend last year at US$1,376, 43% higher than second-place Australia. Before the IRs opened in 2010, Singapore didn’t rank in the top five. Those numbers will likely tempt the city-state’s stringent Casino Regulatory Authority and likeminded government ministers to rein in the marketing even more.
RWS parent, Singapore-listed Genting Singapore, of which Mr Tan serves as president and chief operating officer, reported strong numbers for the first half of the year. Gaming revenue grew 19% to 1.27 billion Singapore dollars (US$1.02 billion), adjusted EBITDA rose 27% to S$714 million, with net profit up 24% to S$389 million.
However, the numbers were a tale of two quarters, illustrating the difficulties of finding steady growth in Singapore, a problem RWS shares with rival Marina Bay Sands.
In the first quarter, gaming revenue rose 29%, adjusted property EBITDA was up 58% and the net grew 77%. In the second quarter, gaming revenue rose a healthy 9% but adjusted property EBITDA was up just 2% and net profit fell 22%. That volatility is a consequence of RWS relying on a relatively small pool of VIPs for the bulk of its gaming revenue. Investment brokerage Union Gaming Research Macau estimates the property has a 60% VIP market share.
RWS works with the only three junket promoters registered to operate in Singapore, all of them Southeast Asia-focused, and they are not believed to be delivering significant numbers of players. Most of the VIP business is direct, with RWS granting the credit. For the half-year, impairment charges increased a greater than expected 82% to S$140 million. Union Gaming says the charges relate to VIP debt that’s been outstanding nine to 12 months and which management feels will be “a challenge” to collect. Moreover, management is forecasting a drop-off in VIP play through the rest of the year, perhaps lasting into the first quarter of 2015.
Mass-market revenue is estimated to have fallen 4% in the second quarter and is likely to remain stagnant. Surprisingly, revenue from non-gaming, which includes Universal Studios Singapore, fell 3%, the first year-on-year decline in the property’s history. Some analysts chalk that up to the strength of the Singapore dollar in comparison with falling currency values in neighboring Malaysia and Indonesia, which supply significant numbers of visitors, along with China. Singapore purchasing power for the Malaysian ringgit is down 5% and for the Indonesian rupiah a whopping 19%. RWS is seeing corresponding declines in spending per visitor, and if the trend continues could experience an outright decline in visitation.
Not surprisingly, Genting is counting on Mr Tan, who was responsible for the group’s success in landing the Singapore license—which might have been calamitous otherwise for the group’s competing Malaysia casino, Resorts World Genting—to come through in Japan.
Some RWS staff complain that the very hands-on chief executive’s Japan-related absences hold up decision-making. But he has a lot of balls in the air. Genting has reportedly registered no fewer than nine subsidiaries there.
16 Linda Chan
Executive Director and COO
Come Chinese New Year 2016 and the debut of the US$4 billion Wynn Palace on Cotai, Linda Chen will be sharing her fourth resort opening with her employer and mentor and biggest fan, Steve Wynn.
It’s a distinction not many can claim. Fewer still can say they were there when it all began with the opening of The Mirage on the Las Vegas Strip in 1989. Back then the 47-year-old Taiwan native was, a wide-eyed graduate fresh out of Cornell University’s prestigious School of Hotel Administration.
“It was,” as she recalled in a recent interview, “the best experience anybody can have.”
The years in between have been quite the ride as well. As chief operating officer of the company that drives something like 70% of parent Wynn Resorts’ total revenues and more than 65% of its EBITDA, Ms Chen is regarded today as one of the sharpest competitors in Macau, a skilled diplomatist at the very top end of the market, where the Wynn brand is legendary, and an adroit manager of the higher-yielding mass market, the upper end of it, the so-called premium mass, in particular. She’s even been touted at times as Mr Wynn’s successor, a suggestion she dismisses. “Mr Wynn is very young, he’s not ready to retire soon,” as she recently told CNN. “I hope he works for another 30, 40 years, and I’ll be alongside him.”
In any event, the quiet force she embodies has served Wynn Macau well, together with its sister casino, Encore at Wynn Macau, and never more so than in the city’s current operating environment, wracked as it’s been market-wide by several months of declines in VIP play and revenues, a phenomenon experts attribute to bigger-picture issues in China, the central government’s aggressive crackdown on corruption seen as the most formidable.
The results were especially evident throughout Macau in the second quarter, and Wynn was not spared. After a strong January- March period, the company’s rolling chip volume in the three months through 30th June was down 12% year on year, which was worse than the market as a whole (minus-6%), and it fell quite a bit shy of the first quarter (minus-27%). This came in the midst of a US$60 million renovation of the gaming floor launched in March at Wynn Macau which has put some 30 VIP tables out of commission— along with five mass tables and about 270 slots—and obviously that hasn’t helped. It’s a tribute to Ms Chen’s leadership that despite the challenges the company generated a 3% increase in second-quarter revenues to $960.7 million (EBITDA was up 6%), driven by a 43.3% increase in mass table revenue and a 14% increase in slot revenue. Through the first half, total revenues were up 8.8% to $2.09 billion. Gaming revenues increased 9.2%.
“This was notably higher growth than the market as a whole,” noted brokerage Union Gaming Research Macau. “In the context of Wynn Macau being a capacity-constrained property, with little or no hotel room product being made available to non-high-end customers, we would consider the property’s growth rates to be impressive and indicative that the various initiatives put in place are paying dividends.”
The company was looking forward to a rebound through the balance of the summer. On the second quarter earnings call, which Mr Wynn hosted from his office in Macau at the end of July, he said Wynn Macau and Encore were enjoying a record month, and going forward, Ms Chen will have a lot more to work with. The renovations slated for completion early in 2015 will result in “two really spectacular spaces,” as Mr Wynn put it, totaling 27,000 square feet.
Then there’s Wynn Palace, on track and on budget to open early in 2016 as the resort Mr Wynn says will be his greatest achievement, the sum total in one fabulous space of everything he and his vaunted team have learned over the years.
was involved in the debut of the MGM Grand, which opened on the Las Vegas Strip in 1993 as the largest hotel in the world, and later was appointed executive vice president of international marketing at Bellagio when Mirage Resorts was bought by MGM Grand (now MGM Resorts International). She also headed up international marketing for MGM Mirage, as the merged companies were known at the time. She rejoined Mr Wynn during the run-up to Wynn Resorts’ Nasdaq listing and the opening of Wynn Las Vegas. She came to Macau in 2002 after Wynn won its casino concession, assuming the role she holds today. She took on the same title with Wynn Macau when it went public on the Hong Kong Stock Exchange in 2009. She also serves as president of Wynn Resorts’ Wynn International Marketing subsidiary.
She’s confident Wynn Palace will exert an impact on Macau similar to what she saw at The Mirage all those years ago.
“Macau is about starting from the basics,” she has said. “In Vegas, it’s no longer about gaming. It’s about the entertainment. It’s where you would consider the best shows in the world, the best shopping and the best restaurants. It’s about the whole experience, and that’s what we wanted to do [in Macau]. … When we first came to Macau the scene was more about gaming. And the aspiration for Macau, the reason we wanted to be there, is taking it to the next level.”
17 Lee Choong Yan
President and COO
Genting Malaysia, listed on the Bursa Malaysia with approximately 24.3 billion ringgit (US$7.6 billion) in market capitalization, is one of the leading leisure and hospitality corporations in the world. Its portfolio includes Resorts World Genting in Malaysia, Resorts World New York City and the UK’s largest casino operation.
Lee Choong Yan is responsible not only for Genting Malaysia’s corporate development but also for overall operations at its flagship Resorts World Genting, situated an hour’s drive from Kuala Lumpur. His steady hand is credited with having kept the home market solid in the face of mounting regional competition as the company pursues expansion opportunities abroad.
Genting Malaysia has some of the deepest experience among Asian operators. Resorts World Genting, previously known as Genting Highlands, opened in 1971 at a time when gaming was virtually unknown in East Asia outside Macau. The mountaintop location has since grown into a leisure megalopolis of sorts, with some 8,000 rooms in five hotels, a business that generated US$1.8 billion in revenue last year. According to a company presentation released earlier this year, its 2013 EBITDA margins were the secondhighest in Asia, behind only Singapore’s Marina Bay Sands.advantage of the opportunities that lie ahead.
Nevertheless, the operating environment has grown challenging. The critical mass and convenience of Macau, the competitive tax rate and VIP commissions of Cambodia and the overall attractiveness of Singapore are drawing away many of its customers and hitting growth. The company’s five-year CAGR through 2014 was only 5%, and revenue was up only 4% in 2013 over 2012.
The company is responding with a 5 billion ringgit (US$1.85 billion) “Integrated Tourism Plan” that is remaking and expanding the resort with new hotels, a 20th Century Fox theme park and a 10,000-seat arena.
Expansion overseas has been promising as well. Genting Malaysia operates 41 casinos in the UK. Resorts World New York City is the most lucrative machine gaming operation in the US. Its Bahamas casino, opened last year, is expanding. And there’s a lot more to come in the shape of a US$4 billion megaresort scheduled to open on the Las Vegas Strip by 2017 under the umbrella of parent Genting Berhad.
Mr Lee trained as a chartered accountant in London and worked as an investment banker in Hong Kong prior to joining Genting Group in January 1997 and rising up the ranks to his current position, which he has held since 2006. He also holds various directorships in other companies within the group.
18 Nicholas Niglio
Executive Director and CEO
VIP baccarat’s contribution to total gaming revenue in Macau peaked at more than 73% in 2011 but has been declining since then as its growth has been continuously outstripped by that of the mass market. By 2013, VIP accounted for just under two-thirds of total gaming revenue. The decline accelerated this year with a contraction in the VIP sector, pushing the contribution to just 60% in the second quarter.
While many of Macau’s junket operators—who supply the city’s casinos with the vast majority of their VIP players—have been reeling under the sector’s slowdown, it’s the smaller ones that appear to be hurting most, while the larger ones, including Top 3-ranked Neptune Group, appear to be holding firm. The sector has entered a period of consolidation, and when it recovers the larger operators stand to emerge even stronger.
Nicholas Niglio’s presence as the only non-Chinese member of the board of directors of Neptune Group speaks volumes to the esteem in which he is held in Macau and Hong Kong by players, operators and investors.
With three decades of experience on two continents to his credit, Mr Niglio is charged with heading Neptune’s strategy of “continued controlled growth”. He was schooled in the hyper-competitive world of Atlantic City gambling in its heyday, joining Resorts International in administration in 1978 and moving into casino marketing. He served as vice president of casino operations at Caesars, the city’s pre-eminent high-roller venue of the time, and was senior vice president of Eastern Operations before moving to the Trump casinos in the early ’90s, where at various times over an eight-year career he headed up every facet of domestic and international marketing.
The seven years in which he’s been in charge at Neptune have seen the company grow not only in size but in scale. In addition to a comprehensive range of travel and hospitality services it provides its VIP clients, Neptune has begun to exert a sizable impact on the bigger picture, notably launching two of the flashiest high-stakes poker tournaments in the world—the HK$2 million buy-in “Macau High Stakes Challenge,” which attracted the likes of Phil Ivey, Tom Dwan, Sam Trickett and Eric Seidel to StarWorld Hotel two years ago to compete for the largest prize pool ever offered outside the World Series of Poker—and last year’s “Asia Millions,” co-sponsored with PokerStars, a HK$1 million buy-in shark fest that drew to City of Dreams about 100 big-time players from every corner of the globe.
Mr Niglio joined Neptune as an executive director in September 2007, shortly after the listed entity was created out of an existing Hong Kong-listed company called Massive Resources International Corp., which previously traded electrical equipment and securities. Neptune thus became the first Macau junket operator to gain access to Hong Kong’s stock market via a backdoor listing, a trend that picked up this year with First Natural Food Holdings’ HK$400 million (US$51 million) investment in Hengsheng Group in March and Macau junketeer Jack Lam’s purchase, along with two British Virgin Islands entities, of 66% of Sinogreen Energy International Group for HK$113.8 million, setting the stage for the listed company’s absorption of part of Mr Lam’s Jimei Group.
19 Ted Chan
Chief Operating Officer
Melco Crown Entertainment
City of Dreams was arguably the pioneer in targeting the high-limit cash players known in Macau as the “premium mass,” a segment offering significantly higher margins for operators than VIP and one that is showing more robust growth than the junket-driven high-roller business that has witnessed a significant slowdown of late.
“Premium mass is currently what everybody is actually looking for to grow their markets,” COO Ted Chan noted during parent Melco Crown Entertainment’s latest earnings call. “Our company really focuses more on the total experience of the customer, rather than cash, credit, rebate to customer, etc.”
That “total experience,” according to Mr Chan, entails offering the right mix of hotel rooms, F&B, retail and perks and is something he has been striving to improve ever since he joined Melco Crown’s Cotai flagship.
In August, City of Dreams unveiled its SOHO social hub—billed as “the place in Macau to see and be seen, chill out with old friends and connect with new ones”—featuring 16 restaurants, bars and daily performances. It’s the latest effort by Mr Chan and his team to bolster the property’s non-gaming appeal and joins such attractions as the popular “House of Dancing Water” spectacular produced by Franco Dragone, the thumping Cubic nightclub and sultry “Taboo” cabaret show.
“We are always raising the bar on leisure and entertainment offerings, which have been extremely well-received by our patrons,” added the 42-year-old Mr Chan, who is no doubt mindful of the need to do so, given that among the city’s six casino operators his company is the most reliant on VIP players, who contributed 84% of its total gaming revenue in 2013, compared to a market-wide average of 66%.
Melco Crown’s Q2 net revenue fell 7% year on year to US$1.3 billion and adjusted EBITDA declined 11% to $313.6 million. Weakness in Macau’s VIP sector was largely to blame, with the company’s VIP-centric Taipa property, Altira, taking the largest hit, with adjusted EBITDA plunging 62%, while adjusted EBITDA at City of Dream, where the premium-mass segment constitutes a much greater proportion of total earnings, was only down 3%. Adjusted EBITDA at the company’s Mocha Clubs chain of Macau slot parlors was down 11% to $8.6 million in the quarter.
Mr Chan took up his current position with the company in February 2012. For two years prior to that, he had been co-COO, Gaming, while Nick Naples headed operations. Mr Naples left in conjunction with Mr Chan’s promotion, the culmination of a gradual assumption of all senior roles at the company by Chinese executives.
Mr Chan is a longstanding and trusted associate of co-Chairman and CEO Lawrence Ho’s, having worked as his assistant between 2002 and 2006. He went on to head Mocha Clubs before leaving to become CEO of an outside company, albeit one that worked in close cooperation with Melco Crown—Amax Holdings, a Hong Kong-listed junket aggregator that played a key role in sustaining Crown Macau (now Altira), Melco Crown’s first casino, when it opened. He returned to the fold in November 2008 as president of Altira prior to assuming the co-COO position at City of Dreams in the summer of 2010.
20 Kingson Sian
Resorts World Manila remains on top of the gaming heap in Manila. The largest private casino venture in the Philippines when it opened in 2009, the US$800 complex has defied conventional wisdom that the market was too small and government-owned regulator/operator Philippine Amusement and Gaming Corporation too protective of its own turf.
A joint venture between Genting Hong Kong and Philippine billionaire Andrew Tan’s Alliance Global Group, Resorts World Manila struck the right chord with the market and continues to capitalize on its size and scale, combining a firm grip on the local consumer pulse with international reach and a prime location opposite Terminal 3 of the city’s Ninoy Aquino International Airport.
Kingson Sian, president of RWM parent Travellers International Hotel Group, is one of Mr Tan’s top lieutenants. Mr Sian serves as president and a member of the board of directors of Alliance Global and is a top-level executive at some of its real estate and hospitality subsidiaries. Most RWM operational executives come from the Genting side, many with experience at Star Cruises, which is under the same GENHK umbrella as its Resorts World Manila stake.
Travellers also is licensed to build the fourth and final IR at Manila’s Entertainment City about five miles to the west on Manila Bay. For now, though, Travellers remains firmly focused on RWM. Gaming revenue for the first half of US$311.5 million led its Entertainment City competitor Solaire Resort & Casino by $63.2 million, but in peso terms was down 22% from a year earlier. Win percentage for VIP play, which accounts for 80% of table volume, fell from 3.7% in the first half of 2013 to 2.2%. Hotel and F&B income fell 17.5%, despite occupancy rates of 87% or better at its three hotels. But the bottom line was strong, with EBITDA up 3.6% to $107.5 million on
improved margins, recovering from a promotion spending spree to counter Solaire’s opening last year, which drove a 24.7% increase in net income.
The resort is undergoing a $650 million expansion that will “effectively double what we have,” Mr Sian says. The phased project, to be completed by 2017, will add 1,100 rooms to the current 1,200 and will include two international hotel brands, a convention center, plus additional retailing and gaming facilities.
To help finance those improvements, Mr Sian successfully shepherded Travellers onto the Philippines Stock Exchange last November. Originally planned to raise US$1 billion, the IPO was delayed and cut back to $450 million. The smaller raising hasn’t changed the RWM expansion program, but the company remains cagey about its Entertainment City plans. The $1 billion IR, known as Resorts World Bayshore, isn’t expected to open before 2017. Some observers believe Philippine gaming revenue will have to improve a lot more than the 10% increase last year to convince Travellers that investing there won’t cannibalize RWM.
So while he has a lot of his own businesses to watch, expect Mr Sian to keep an eye on the Entertainment City openings later this year of City of Dreams Manila and Solaire’s Phase 1A expansion.