Inside Asian Gaming

43 42 Regional Briefs Branson Seeks New Virgin Market Richard Branson’s Virgin Group and Australia’s largest gaming group, Tabcorp, are in discussions to build a US$3 billion casino in Macau. Mr Branson visited Macau in January along with Tabcorp’s Matthew Slatter in order to seek potential sites and partners for its develop- ment. During his Macau visit, Mr Branson held talks with Macau Chief Executive Edmund Ho, setting out details of a proposed entertain- ment complex, including three hotels and a casino. If approved, the complex could be completed by 2010 , and Virgin hopes to recoup its investment within 18 months. The Financial Times reports Mr Branson is close to acquiring a prime 20-hectare site on which to build its development. Border Casinos Decimated The number of foreign casinos operating near China’s border fell from 149 in 2005 to 28 in 2006 as China stepped up efforts to prevent peo- ple going abroad to gamble, as part of its anti-gambling campaign. According to the Ministry of Public Security, the measures imple- mented by China include harsher penalties, the closing of represen- tative offices of foreign casinos in China, and the closure of under- ground institutions used to transfer money overseas for gambling. The ministry worked in conjunction with local police in border areas in Yunnan, Guangxi, Heilongjiang and Jilin to carry out surveil- lance of nearby casinos and their customers. Chinese officials claim to have carried out 347,000 actions involving 1.1 million people in its anti-gambling drive in 2006. China says it also retrieved Rmb3.56 bil- lion (US$445 million) of illegal betting money last year. Earlier reports estimated a total of Rmb600 billion (US$75 billion) was gambled away annually by Chinese overseas – 15 times greater than the amount spent each year on China’s state-run lottery. Hard Rock Coming to Macau MelcoPBLEntertainment,adeveloperandownerofcasinogamingand entertainmentresortfacilitiesfocusedexclusivelyonMacau,announced it had agreed with Hard Rock International to build a Hard Rock Hotel Casino in the City of Dreams, which is currently being built in Macau. According to a statement from the companies, the City of Dreams complex, which is to open in two phases starting in 2008, in- cludes four hotels (the Hard Rock Hotel, Grand Hyatt, Hyatt Re- gency and Crown Towers). Hard Rock will have 380 rooms and other facilities that are common to the group as well as a casino in the first complex of its kind for Hard Rock in Asia. Hard Rock International operates hotels/casinos in London,Las Vegas, Hollywood and Tampa in Florida, with one in Biloxi, Mississippi due to open this summer. Meanwhile, Melco PBL announced that Garry Saunders, 55, has been appointed as its Executive Vice President and Chief Operating Officer. Prior to joining Melco PBL Entertainment, Mr Saunders served as Vice President of International Operations at Las Vegas Sands Corp, with principal responsibility for its Macau operations. This role in- cluded overseeing the operations of Sands Macau and the pre-de- velopment activities of certain properties on the Cotai Strip in Ma- cau. Previously, Mr. Saunders served ITT Corporation as Executive Vice President for the gaming activities in both its Sheraton and Caesars World Divisions, and Playboy Enterprises as the President of its Gam- ing Division. In these roles, he was responsible for the development and operations of properties throughout the US and Canada and var- ious international locations in Europe, South America, Australia, Asia and Africa. His responsibilities included the development and open- ing of numerous hotel casino properties. Nepal’s Casino King Asked to Quit Rakesh Wadhwa, a charatered accountant from New Delhi who be- came known as Nepal’s casino king, has been asked to relinquish his post, according to a report in Nepal’s Ghatana R Bichar weekly. US expatriate Rirchard D.Tuttle has a monopoly on casino opera- tion in Nepal, with a network of seven casinos run under his Nepal Recreation Centre.The casinos rely on tourists from India for the bulk of their revenue. Three of the casinos are operated by Mr Wadhwa under an agreement with Mr Tuttle, including the Shangri-La Casino, which opened recently with a lavish ceremony hosted by Bollywood starlet Urmila Matondkar. Mr Wadhwa also has gaming interests in Sri Lanka and Kazakhstan. Accordingly to the report, Mr Wadhwa is the victim of a power struggle between the royal family and Maoists. A big chunk of Nepal’s casino revenues are paid to the Narayanhity royal palace, but the pay- ments have dipped lately after King Gyanendra lost his place as head of government due to a mass uprising. The Maoist insurgents reached an agreement with the new mul- tiparty government, and joined the parliament on January 15 with a mandate to abolish the monarchy and transform Nepal into a re- public. When the Maoists examined the profits and expenses of Nepal’s casinos, they discovered the sizeable payments to the royal palace every month. Pressure from the rebel union has led to the casino de- creasing those payments. The King, in turn, put pressure on Mr Tuttle – who has close links to the royal family – to raise payments, and according to the report, in an effort to find a scapegoat, Mr Tuttle attempted to relieve Wadhwa of his responsibilities and take over one of his casinos. Mr Wadhwa is now mulling legal action against Mr Tuttle. Hengqin Approval Still Pending Las Vegas Sands Corp (LVS) announced it had not yet received Chi- nese government approval for its proposed project on mainland China’s Hengqin Island, which lies just off Macau’s Cotai Strip, where LVS is spearheading the development of “Asia’s Las Vegas.” Rumours that LVS had already received final approval for the project had sent its stock price surging. LVS clarified that it has merely received a letter saying that the Zhuhai government established a project coordination committee for the proposed resort. The committee acts as the government liai- son empowered to work directly with the developer to advance the development of a project. LVS said that while the formation of the committee was a positive step, “the project remains subject to gov- ernmental approvals customary for projects of this scale in China.” LVS’ planned Hengqin Island Resort development will occupy over 1,300 acres of land and feature a diversified mix of leisure, tour- ism and convention amenities including top-rate hotels and villas, convention facilities, a marina and yacht club, outdoor amphitheatre, and golf, tennis, fishing, and other leisure and recreational activities. Funds Sought for Ponte 16 Hong Kong-listed cruise and travel services operator Macau Success is seeking to raise HK$1.6 billion (US$205 million) to fund develop- ment of its flagship Ponte 16 integrated resort in Macau. Macau Suc- cess operates the cruise ship MV Macau Success and is also involved in gaming and entertainment. Ponte 16, a joint venture on the bank of the inner harbour in Ma- cau, will include, subject to government approval, the five-star hotel Sofitel Macau@Ponte 16 offering 404 rooms and 19 VIP mansions; a 50,000 sq m shopping arcade and a casino. Macau Success will own 49% of the project once it completes the acquisition of a 12.25% stake from Joy Idea, while Stanley Ho’s Socie- dade de Jogos de Macau will hold 51%.“Ponte 16 should be earnings accretive in 2007,” according to Macau Success. Total investment is HK$2.43 billion, with Macau Success committing HK$1.2 billion. The 27,000 sq m casino at Ponte 16, scheduled for completion in June 2006, will provide 150 ordinary tables, 24 VIP tables and 300 slot machines. The ordinary tables will be operated and managed by the joint-venture company, while Macau Success is responsible for the 24 VIP tables, executive director Marco Lee Siu-cheung said. Macau Casinos Risk Credit Rating Cuts Las Vegas Sands Corp (LVS), Galaxy Entertainment Group and other Macau casino operators risk cuts to their credit ratings because of their “aggressive” investment in the city, according to credit rating agency Standard & Poor’s Ratings Services. While casino companies’“heavy gamble on Macau may be paying off,” an S&P report said, ratings volatility is likely over the next few years.” Increased competition in the Asian gambling industry also poses risks, it said. Las Vegas Sands’credit ratings may be reduced after the company was awarded a casino license in Singapore and Galaxy’s may be cut following a US$240 million convertible bond sale in December, the report said. Both companies “have been stretched by their heavy in- vestments in Macau,” S&P said. The company rates Las Vegas Sands’ long-term debt at BB- and Galaxy’s bonds at B+. Competition Brings Seoul Casino Boom Seoul’s second casino targeted at foreigners, Seven Luck, opened for business last year, ending the domination of Paradise Walkerhill Ca- sino, which had dominated the market in Seoul for the past 38 years. The compeition is credited with having led to a boom in Seoul’s casino market, with the number of foreign visitors to Seoul’s casino in 2006 exceeding 700,000, from around 330,000 in 2005. The Seven Luck casino is operated by Grand Korea Leisure, which recordedW120 billion (US$128million) in revenue from the operation in its first year, compared to initial expectations of half that figure. Han Seung-ho, an analyst with Shinyoung Securities, said “The growth rate of Seoul’s casino market for foreigners hovered at 4.2% between 2002 and 2005. But since the market opened to competi- tion, the figure is expected to soar to 16.8% on average for the next three years.” According to research by Lee Chung-ki, a professor at Korea’s Kyunghui University, the per capita revenue derived from foreigners visiting casinos is equivalent to exporting 76 semiconductors or four colour TVs. He points out that if 11 foreigners visit a casino, they will bring revenue equivalent to one exported car. All but one of Korea’s casinos are restricted to foreigners and draw business from China and Japan. Last year, Chinese visitors to Paradise Walkerhill equalled those from Japan, with each group making up 33% of the total.This year, the Chinese figure is expected to grow to 40%.