Dr Stanley Ho: Father of modern Macau

Tuesday 26 May 2020 saw the end of an era. At the age of 98, Dr Stanley Ho, the father of modern Macau, passed away at the Hong Kong Sanatorium and Hospital.

Tuesday 3 June 2009 represented an extraordinary moment of triumph for the Ho family. Dr Stanley Ho received the Global Gaming Expo Asia (G2E Asia) Visionary Award from Macau’s then-Chief Executive Edmund Ho – no relation – who took office pledging to topple the casino monopoly, granting new casino concessions to Las Vegas names. Nearly a decade after that pledge, Ho’s SJM Holdings held the biggest market share among Macau’s six operators, outdoing the likes of Sheldon Adelson and Steve Wynn.

Cutting the ribbon to open Asia’s leading gaming trade show, Stanley Ho was flanked by official representatives of China, Britain, Australia and the US. The former two nations honored Ho, the latter two scorned him. Regulators in the US state of New Jersey had only two weeks earlier called Pansy Ho an “unsuitable” partner for MGM based on her association with her father. Yet, with the world watching, there she was, a 50% partner in MGM Macau, posing unabashedly for photos with her father.

Son Lawrence Ho also featured in family portraits, the day after opening the US$2.1 billion City of Dreams, developed by the younger Ho’s Melco Resorts in partnership with James Packer-controlled Crown Resorts, across the street from The Venetian Macao in the fledgling Cotai casino district. While Adelson’s Las Vegas Sands suspended its Cotai projects and flirted with bankruptcy in the wake of the global recession, Melco Crown pressed ahead. Macau’s casino liberalization guru, Jorge Oliveira, said LVS didn’t want “Stanley Ho 2 and Stanley Ho 3” getting new casino concessions, yet Ho and his children were integral to three of the city’s six gaming operations.

To celebrate his award, 87-year-old patriarch Ho gave a thoroughly professional 30-minute presentation, complete with slides, in perfect English.

“Gaming should never be a win-lose proposition,” Ho said, framing his vision of corporate social responsibility, backed by tens of millions of dollars in philanthropy in Macau, mainland China, Hong Kong and beyond. “From society, to society. This is my long-term vision. Although I’m not a gambler, I would wager that this is one of the best bets that you can make.”

Four weeks later, Ho fell in a bathroom at his Hong Kong compound, leading to three brain surgeries, effectively ending his business career, though he didn’t surrender chairmanship of his casino holdings until June 2018 at age 96. His own words and his decade-long health battle notwithstanding, make no mistake: Stanley Ho won and won big. From his 16 children by four different consorts to five decades as the King of Macau, Ho was larger than life, a passionate ballroom dancer, proud owner of Hong Kong 2008/09 Horse of the Year Viva Pataca and an extraordinarily successful businessman.

Wielding an iron fist in a velvet glove guided by superhuman quantities of brains, guts and charm, Ho created the modern Macau that China inherited in December 1999.

FAMILY TREE

Ho cultivated the image of Macau’s goodhearted uncle, backed with a reputation for ruthlessness and a hidden mean streak. For decades, Ho pressured sister Winnie Ho over two children fathered by their cousin Eric Hotung; one of those children sued Ho, claiming HK$2 billion (US$255 million) in unpaid STDM dividends. In 2011, Ho went on live television from his sickbed at age 89 to fight Pansy Ho and her allies over distribution of his fortune. Some Ho apples didn’t fall far from the tree.

Stanley Ho was born into the rogue branch of Hong Kong’s famed Ho Tung clan. His great-grandfather, Charles Bosman – Ho Sze Man in Cantonese – was a successful Dutch-Jewish entrepreneur in mid-19th century Hong Kong. His cousins include Bruce Lee. Bosman’s son Robert Hotung gained fame and wealth as a compradore (purchasing agent) with British trading house Jardines and was twice knighted by Britain.

Hotung’s younger brother Ho Fook succeeded him as Jardines’ chief compradore and had 13 sons, including Ho Sai Kwong. That son shared in the clan’s extensive wealth and influence until ruined in the 1929 global stock market crash. Two of his sons were driven to suicide and Ho Sai Kwong fled, leaving his ninth child, Stanley Ho Hung Sun, barely in his teens, to take care of his mother and two sisters. Handouts from relatives, often delivered with ridicule, built a strong desire to succeed in young Stanley. He became the first student from the lowest echelon of local high schools to win a scholarship to Hong Kong University.

When Japan invaded Hong Kong in 1942, Ho moved to Macau. Under Portugal’s wartime neutrality, Macau thrived as a base for smuggling into Hong Kong and China. Ho joined an import-export firm and quickly made a name for himself. When pirates boarded a vessel crammed with luxury goods and subdued the crew, according to the story, Ho managed to get free, grab a gun and regain control of the boat, safely delivering its cargo. Ho’s employers rewarded him with a million dollar bonus, though it’s unclear whether that was a million Hong Kong or US dollars. Regardless, the tale established Ho’s reputation as a guy who’d play rough to get things done.

In Macau, Ho found a home in the city’s extensive Macanese community, Eurasians that held key positions in government and business as a bridge between Chinese and Portuguese residents. He won the heart of coveted Macanese beauty, Clementina Angela Leitao, and they married in 1946; all four of Ho’s unions were of the Chinese traditional variety, short on civil legalities. But when Leitao died in February 2004 the Macau diocese found the marriage sufficiently kosher for a funeral mass in Macau’s Catholic cathedral, the Church of the Nativity of Our Lady, and burial in Sao Miguel Arcanjo Cemetery.

THINKING BIG

After World War II, Ho returned to Hong Kong, starting a construction company and becoming a leading property developer. But Leitao kept him connected to Macau, leading to STDM (Sociedade de Turismo e Diversões (de Macau) winning the Macau casino concession in 1962 with an unprecedented bid of US$410,000. Experts contend STDM wouldn’t have won without help from Leitao’s family, perhaps even inside information to raise their bid by the reportedly decisive US$10,000. Still, many cast Ho as a bit player in STDM’s all-star lineup.

In time, Ho dominated STDM and then the city. A US official in Hong Kong in the early 1960s described Ho as “a young man on the make.” Macau presented a less crowded field more in need of leadership than Hong Kong. While the Portuguese colonial administration dawdled and local elites thought small, Ho thought big.

In August 1970, Ho declared his presence with Casino Lisboa, combining Vegas with a European grand hotel as Ho sought to craft Macau as Asia’s Monte Carlo. Initially criticized by many as too fancy for Macau, Lisboa represented a “crucial stage” in Ho’s career, University of Macau Associate Professor of Business Economics Ricardo Siu acknowledges, but as part of a larger story.

“The most lasting contribution of Dr Stanley Ho to Macau may indeed be reflected from his ambitious and unceasing efforts to modernize the Macau economy,” Siu, a Macau native, says. Those efforts were in striking contrast to the “short-termism” of Macau’s Portuguese administration and continued despite “critical uncertainties” in economics and politics during the 1980s and 1990s.

Early on, Ho pioneered hydrofoil travel in Asia between Macau and Hong Kong, replacing the previous overnight cruise with a one hour jaunt. (STDM pays gaming tax of 38% rather than the 39% levied on the other concessionaires in exchange for harbor maintenance, including dredging). Ho’s Shun Tak Holdings assembled one of the world’s largest hydrofoil fleets, developed its Hong Kong terminal into a major shopping and office complex and was listed on the Hong Kong Stock Exchange in 1973.

Under Ho’s direction, STDM invested in infrastructure, including Macau International Airport, flag carrier Air Macau and the city’s first iconic convention venue, Macau Tower, and ran horse and dog racing. It also took stakes in banks, hotels and properties, including Macau’s only department store, New Yaohan, which it rescued when the chain went bankrupt in 1997. By then, it was hard to spend a dollar or pataca in Macau without Ho getting a piece of it.

PLAY DEAD

Inside his casinos, Ho introduced junket rooms, private casinos-within-the-casino run by gaming promoters. Financial investigator Angela Veng Mei Leong (no relation to Ho’s fourth wife Angela Leong On-kei) wrote in a seminal 2002 paper that, before the advent of junket rooms in Macau, “the power of the triad societies was limited because they did not have direct administrative access in the casinos and only limited profit was earned from loan sharking and other illegal ‘ancillary’ activities like prostitution, drug trafficking and smuggling … With the arrangement of gambling rooms and the establishment of the ‘bate-ficha’ business (rolling chip business using ‘dead’ chips) in the 1980s, a ‘lawless’ space was created for triads in the casinos.”

Ho was widely accused of underworld ties but never charged or convicted of any crime. He abandoned casino efforts in the Philippines and Australia amid doubts he’d get licensed. Beyond Macau, Ho ran casinos in North Korea and Portugal, where he received the Great Cross of the Order of Prince Henrique, the nation’s highest civilian honor, and, as in Macau, had a street named for him during his lifetime. New Jersey relented on its Pansy Ho ruling after she reduced her stake in MGM China and MGM failed to find a buyer for its share of Atlantic City’s Borgata. Stanley Ho was appointed an officer of the Order of the British Empire (OBE) in the 1990 New Year Honors, to go along with top awards from Macau and Hong Kong.

Probity questions aside, junket rooms represented a major business advance. STDM received an upfront payment, rent, guaranteed chip sales and a percentage of revenue while cutting marketing and administrative costs and shifting credit risk to VIP room operators. “That was a brilliant hedge, a brilliant move,” regulatory specialist and Spectrum Gaming CEO Paul Bromberg says. “It led to the prolonged success of STDM. In their heyday, they were the most profitable casinos in the world.” STDM also let Ho’s friends run satellite casinos at their own premises.

Despite his legendary business sense, Ho missed the possibilities of gaming liberalization. “It remains a mystery to me why he did not take the opportunity, between March 2002 and May 18, 2004, when Sands [Macao] opened, to get on the front foot and invest much more in the casino business than he did,” Newpage Consulting principal David Green, a former Australian gaming regulator and consultant to Macau’s government, says. “Perhaps he just lacked belief.”

KNOW YOUR CUSTOMERS

In Ho’s defense, a major change spurring Macau’s explosive growth, the Individual Visitor Scheme enabling mainland Chinese to visit without joining tour groups, wasn’t enacted until October 2003 in response to the SARS outbreak. More fundamentally, though, Ho’s monopoly had decayed to the point where gaming table markings were drawn on felt worn blank and player refreshments were available for purchase at dirty drinks counters. Ho himself scoffed at new rivals planning to invest hundreds of millions of dollars. “We know our customers,” he reassured anyone who suggested the neophytes weren’t crazy.

Witnesses say Ho’s jaw dropped when he saw Sands Macao’s casino floor on its May 2004 opening night. At an emergency staff meeting, he appealed to Chinese pride, urging executives not to let foreigners outdo them. Announced just after the Sands opening, Grand Lisboa, adjacent to the original Lisboa, opened in February 2007, though hotel rooms occupying the upper 40-something floors of Macau’s tallest building weren’t available until December 2008. It proved an effective response at a fraction of the cost of new rivals’ properties, but it wasn’t Ho’s only move.

In February 2008, Ponte 16 opened at the Inner Harbor pier formerly receiving Hong Kong overnight steamers. Ponte 16, 49% owned by junket promoter Success Universe, was close to Macau’s historic center, leveraging the peninsula’s advantage over landfill Cotai.

STDM also proposed Oceanus, a US$1 billion icon for the Outer Harbor, Shun Tak’s Hong Kong ferries hub. Resembling a massive ship’s prow, Oceanus would rise over 40 stories, flanked by Macau’s tallest skyscraper, its largest retail mall, offices, apartments, casino-hotel and an STDM-run replacement ferry terminal. When Chief Executive Ho announced casino development restraints in early 2008, foreshadowing Beijing’s visa restrictions, STDM abandoned the scheme. Today’s Oceanus, evoking Beijing’s 2008 Olympic Water Cube, is a HK$194 million remnant of the original plan. A global design competition to replace the original Lisboa – Stanley Ho and Edmund Ho reviewed entries exhibited at Lisboa in September 2008 – was dropped when global financial markets collapsed days later. Ho didn’t let his ego override financial prudence.

In 2006, the opening of Wynn Macau and Galaxy’s StarWorld marked the start of real competition in the VIP business (Sands had been reluctant to engage junkets). Rolling chip commissions rose from around 0.7% to above 1.2%. Ho complained of “cut-throat competition,” and warned of renewed casino-related violence – gangland shootouts on Macau streets were a feature of the late 1990s before Portuguese and Chinese authorities cracked down.

Many saw Ho’s fingerprints on a 2007 deal that drove commissions higher still. Junket consolidator AMAX signed to delivered VIPs to Lawrence Ho-run Crown Macau (now Altira) for 1.35% commission. The low margin VIP business depends on volume for profits, and Stanley Ho had more volume and a stronger balance sheet than heavily leveraged rivals. By August 2007, the newcomers sued for peace, creating a casino industry council with Ho as its chairman that, with government approval, set a maximum commission rate of 1.25% in an agreement which came to be known as the Cotai pact.

Ho achieved the long-held ambition of listing STDM’s majority owned casino arm SJM Holdings on the Hong Kong Stock Exchange in July 2008. The listing, delayed by lawsuits between Ho and sister Winnie, a 7.35% STDM stakeholder, gave Ho access to public capital markets to pay for expansion, such as the US$4.6 billion Grand Lisboa Palace in Cotai. SJM will be the last Macau concessionaire to open a property in Cotai, more than a dozen years after The Venetian Macao.

Ho’s faith in his understanding of the Macau market was rewarded with SJM returning to the top of the gaming market share table from early 2009. It’s unknown whether Ho recognized the importance of Cotai before his July 2009 collapse that left him largely bedridden, but it’s clear that SJM would have been better off if Stanley Ho had remained in charge for another decade or two. Bringing the company back to the top after liberalization showed that the adept dancer could still find the right steps even when he no longer called the tune.

As Ho sought to distribute his holdings from late 2010, Pansy Ho led a drive to secure a larger share for herself and siblings over fourth wife Angela Leong and other family members. A 2011 settlement made Pansy Ho an STDM director while guaranteeing Leong’s management dominance at SJM for six years. Ho’s 2018 resignation from SJM, elevating Pansy Ho’s sister and Shun Tak lieutenant Daisy Ho to his chairmanship while offering co-chairmanships to Leong and longtime SJM CEO Ambrose So, seemingly tried to split the baby again.

In January 2019, Pansy Ho announced an alliance with the Fok Foundation, which holds the STDM shares of original partner Henry Fok, to vote cooperatively, thus giving them a majority of STDM shares and effective control of SJM. The alliance hasn’t brought any wholesale changes to date, but, like their father, Pansy and Daisy Ho may be playing the long game.

Ho had his critics and it would be wrong to sanctify him after his passing. But it is beyond dispute that Dr Ho influenced Macau – and arguably by extension the casino gaming industry across the planet – more than any single individual in history. As one industry veteran put it, “You just can’t compare Stanley Ho to normal people.” The choreography of Macau has never been simple, and few have ever been as nimble for as long as Ho, who rarely put a foot wrong over a half century in Macau.