Inside Asian Gaming

45 44 Regional Briefs SJM Hires Former Venetian Macau COO Sociedade de Jogos de Macau (SJM), Macau’s erstwhile monopoly ca- sino operator headed by Stanley Ho, announced in November that it had hired Frank McFadden, the former chief operating officer of Ve- netian Macau – Las Vegas Sands Corp’s local subsidiary – as its new president of joint ventures and business development. Mr McFadden will be responsible for SJM’s new projects,including the Grand Lisboa, slated to open in early 2007. Nightclub Turned Casino The Babylon Casino in the Macau Fisherman’s Wharf theme park opened on December 23, becoming the city’s 24th casino – and a relatively small one, with about 80 gaming tables. A nightclub was originally planned for the site, but it appears dis- appointing visitor numbers at the theme park – owned by Stanley Ho’s SJM – led to the Babylon Nightclub to be scrapped in favour of a casino. In late September, it was reported that Fisherman’s Wharf could be sold through an initial public offering (IPO) on the Hong Kong Stock Exchange,but investor appetite for the listing could prove weak given the theme park’s poor performance to date. Macau Drives LVS Profit Again Las Vegas Sands Corp (LVS), the world’s largest casino company by market capitalisation, said its profit in the third quarter of 2006 in- creased 21% year-on-year on the back of rising gaming revenue. Net income rose to US$97.3 million in the quarter from $80.1 mil- lion in the same quarter of 2005. Revenue increased 26% to US$553.2 million. Sands Macau once again proved LVS’ top performer, with rev- enue jumping 39%,while revenue at the company’s flagship Venetian Resort Hotel Casino in Las Vegas climbed 11%. While the Venetian’s overall revenue grew, its casino revenue declined after a customer who lost millions in the third quarter last year did not return. LVS is on a bullish development binge in Asia, and plans to spend up to US$11 billion building hotels, malls, expo facilities, apartments and casinos on the Cotai Strip (including US$2.3 billion on anchor- property Venetian Macau), a further US$2 billion to build hotels and expo and non-gaming facilities on mainland China’s Hengqin Island (which sits adjacent to Cotai) and US$3.2 on the Marina Bay Sands in Singapore (scheduled to open in 2009). LVS is also in talks with the Japanese government to operate one of the country’s first casinos, should Japan legalise casinos. The company’s spending commitments also include construction of the Palazzo, an annex to the Venetian in Vegas, slated to open in the third quarter of 2007. LVS Expects Bumper Property Sales Las Vegas Sands Corp (LVS) announced in November that it could raise more money than it plans to invest on its Cotai Strip develop- ment in Macau through the sale of apartments and retail space. LVS Chief Operating Officer WilliamWeidner expects to raise US$6-12 bil- lion from the sale of retail space, and a further US$1-4 billion from apartments, on Cotai. LVS expects to spend about US$11 billion on developing the Cotai Strip. Goa Licenses New Floating Casinos The Indian State of Goa – a former Portuguese colony, like Macau, and one of the few states in the country to allow casinos – awarded three new offshore casino licenses in December. Currently, Goa has one gambling vessel and handful of hotel slot machine halls,and the state government hopes the new floating casinos will stimulate tourism and bring in much-needed tax revenue. In June, Goa also announced it planned to re-start its state lottery, which was suspended amid po- litical acrimony in 2003. The new licenses are accompanied by a hefty increase in the li- cense fees levied on casino operators – up from the previous 10 mil- lion rupees (US$220,000) to 50 million rupees (US$1.1 million). The last issue of Inside Asian Gaming reported on the state government’s plan to issue new casino licenses, at which time it set an upper limit of 10 new ship-based casinos, and eventually settled on three. South Korea’s Arcade Crackdown The South Korean government said it would tighten its su- pervision of the gaming industry in November after an au- dit agency held the government responsible for rampant il- legal gambling in video arcades. The controversy has rocked the nation since August, leading President Roh Moo-hyun and Prime Minister Han Myeong-sook to offer apologies. South Korea strictly regulates gambling. It has only one casino available for locals, while 16 others exist for foreigners. While the government has relaxed regulation to boost the industry in re- cent years, lax supervision has allowed illegal gambling to flour- ish in video arcades and internet cafes. The arcade game indus- try surpassed 20 trillion won (US$20.9 billion) last year, with the majority of consumers coming from the lower-income bracket. The inspection forced nearly 9,500 game parlours and 5,000 inter- net cafes nationwide to be closed for illegal operations, and police have arrested over 3,600 illegal operators. The government will also ban arcades from issuing gift certificates – used as cash equivalents. After a lengthy investigation, the Board of Audit and Inspection of Korea transferred a list of former and incumbent top officials to the prosecution on allegations of overseeing illegal gambling or bending the rules. The list reportedly included Chung Dong-chae, the former culture minister and lawmaker from the Uri Party, and two former vice culture ministers, Bae Jhong-shin, who held the post from 2002 to early 2006, and his successor Yoo Jin-ryong. The controversy centres on the “Sea Story,” an arcade gambling program released to game cafes in 2005 with government per- mission. When a player inserts cash into a machine with the pro- gram, images of squids, clams, sharks and other sea creatures spin and stop. If they form a certain arrangement, the player hits the jackpot. The game machines paid out larger winnings than were legally permitted, which made the program highly addictive. The issue gained public attention after the vice culture minister,Yoo Jin-ryong,was dismissed just six months into his tenure in August after he sought to curb illegal gambling. More Mainland Misappropriation Li Weimin, a township head in the city of Dongguan, Guangdong Province, is suspected of having misappropriated more than 100 mil- lion yuan (US$11.25 million) to gamble with overseas. Prosecutors were shocked to discover a low level official could have stolen such a large amount of money. Mr Li is suspected of having lost at least 90 million yuan (US$10.13 million) in overseas casinos between 2001 and 2004.“Li is said to have lost more than 4 million yuan (US$500,000) gambling in a Macau ca- sino on a single night,” claimed a CCTV report. Mr Li is also suspected of taking bribes in exchange for granting developers land use rights and granting government loans to private companies. Li’s monthly salary was less than 5,000 yuan (US$625), yet he and his wife Huang Caifeng owned 30 apartments valued at more than 100 million yuan (US$12.5 million). In 2004 alone, Li visited casinos in Macau 67 times. Investigators are also looking into allegations that he repeatedly took cruises on luxury liners, continuing his gambling in international waters. Crown Macau Starts Hiring Melco PBL Entertainment, the joint venture between Australian gam- ing and media company Publishing and Broadcasting Ltd and Hong Kong-based Melco International Development Ltd., announced in November that it planned to hire 3,800 people for its first casino proj- ect in Macau.The project will recruit two-thirds of its staff — or 2,500 people — from Macau. The six-star casino hotel Crown Macau, due to open April 2007, targets high-rollers with its 216 luxury rooms and a casino that offers 220 gaming tables and more than 500 slot machines. Lawrence Ho, Melco’s group managing director, acknowledged that gaming revenue will be the main driver of profit for Crown Ma- cau when it opens. “The hotel and the restaurants are there pretty much to support the gaming business for this resort,”he said. Melco PBL’s second Macau project, the City of Dreams mega-re- sort, is slated to open in mid-2008. Featuring 2,000 hotel rooms and an underwater-themed casino, the flagship project is being built on reclaimed land at Macau’s Cotai strip and will target more mass-mar- ket gamblers. Melco PBL also operates a chain of slot-machine par- lours in Macau.