Inside Asian Gaming

INSIDE ASIAN GAMING | Oct 2007 6 tal providers like though is a clear exit strat- egy. They are willing to offer discounts on debt or structure deals more favourably for companies that present them with a clear timeline for exit—whether that comes by the operator paying down debt or provid- ing returns on equity—hence the attrac- tions of monetisation. With globalisation, the major Las Vegas operators are more or less obliged to seek capital returns in the higher yield Asian mar- kets or risk being left behind in the race to add investor value. Failure to keep up could have potential long-term negative conse- quences for their core domestic businesses. Harrah’s—which doesn’t have a Macau li- cence and is itself being taken private in a US$17.1 billion deal—is so keen to have a presence, any presence, in Macau, that last month it reportedly paid US$3 billion for a 175 acre plot on the Cotai Strip™ currently designated as a golf course. One wag com- mented that having paid so much, the firm would need to charge golfers US$2,700 a round, though Michael Chen, Harrah’s Presi- dent for the Asia-Pacific region, claimed the reported figure was “nowhere near” the mark. Morgan Stanley analyst Celeste Mellet Brown said the plan was obviously to turn it into a casino or—if blocked by the Macau government—sit on it or sell it to an existing player in the market. Mr Chen maintains Harrah’s is not trying to parlay the golf course into a casino pres- ence in Macau, saying “people have specu- lated about our intentions, but it should be made clear that we intend to make improve- ments to this course to make it a terrific at- traction for Macau. That is all we are entitled to do.”He adds:“We have quite a substantial golf business with 6 courses in the US and 4 more courses in the planning stages in the Bahamas and in Spain.” Still he does admit that the purchase was made in order to get Harrah’s“a presence in the market,”although “there does not exist any legal framework for us to participate in gaming.” Unexpected scepticism The only real surprise in this scramble for markets and for capital to service them, is that there should still be scepticism from capital markets regarding Asian gaming re- sorts. Gaming, shopping and dining—unlike the cinema or music—are truly cross-cultural experiences, loved by consumers in Shang- hai and Mumbai as much as those in Las Vegas and Atlantic City. Casino resorts com- bining games of fortune and luxury shop- ping are probably the best way yet invented for brand owners to harvest revenues from Asians’ rising consumer spending. Cover Story Tee 14 on the Cascata course, operated by Harrah’s, half an hour from the Las Vegas Strip The Venetian Macao