Inside Asian Gaming

INSIDE ASIAN GAMING | March 2009 24 In Focus T he global financial crisis has forced cash-strapped casino developers to scrap, scale back or suspend various high-profile projects around the world. Until last year, Macau’s nascent Cotai Strip was the darling of gaming analysts touting the idea that supply creates demand in Macau. Now, lifeless shells of sprawling resorts at various stages of completion dot the abandoned construction sites of Cotai, offering a tantalising glimpse of the glittering critical mass that was supposed to arrive this year. Much of the critical mass on Cotai was being single-handedly built by Las Vegas Sands Corp (LVS), which, in November, placed an indefinite moratorium on billions of investment in developing casino resorts in Macau until its liquidity position improves. Macau’s casino resort opening pipeline had suffered considerable delays even before the capital markets tuned sour. Melco Crown Entertainment’s US$2.1bn City of Dreams, for example, was originally to have opened in the middle of 2008, but is now set to be the only new addition to Cotai this year. LVS has not offered revised schedules for several properties originally slated to be ready in 2009 or shortly after. Instead, it has suspended them indefinitely. They include Shangri-La/Traders on Cotai parcel 5, Sheraton/St. Regis on parcel 6, Hilton and Conrad hotels on parcel 7, and Fairmont/Raffles on parcel 8. Whereas the announcement of a delayed casino opening schedule merely causes concern for an operator’s cash flow, the issuance of an indefinite suspension raises the spectre of bankruptcy risk. Cotai interruptus Other properties removed from the 2009 Cotai opening pipeline include a HK$10bn (US$1.3bn) mega resort from Galaxy Entertainment Group (GEG) and the US$2.5bn Macao Studio City (MSC). Galaxy now says it will open its mega resort in 2010, and though it has yet to set an exact date, work on the external structure will continue this year. In “On Standby” on page 7, GEG Vice Chairman Francis Lui and Group CFO Robert Drake explain the benefits the company will realise from the delay, and Taxing Vice Funding shortfalls faced by national and local governments around the world will lead to increasing calls for higher taxes on gaming and other so-called vice industries. Jurisdictions where casinos are currently banned or restricted will also reconsider long-standing proposals to legalise or expand their gaming industries in a bid to generate much-needed income Macao Studio City