Inside Asian Gaming

September 2009 | INSIDE ASIAN GAMING 17 14 (7) Winfried Engelbrecht- Bresges CEO, Hong Kong Jockey Club 13 (-) Steve Jacobs President, Macao, Las Vegas Sands Corp The CEO of the Hong Kong Jockey Club (HKJC) drops seven places to number 14 on this year’s list after presiding over a 30% year-on-year fall in club profits for 2008 to HK$700 million on a turnover only 1.5% down from 2007. The deterioration in the results for the club—the horse racing, lottery and sports betting monopoly in Hong Kong—cannot be laid entirely or even mainly at the CEO’s door. The Jockey Club, which donates all its operating surplus to charity, is often asked by the Hong Kong government to subsidise public spending. An example is when, in 2007, the government asked the HKJC to bear the full HK$1.3 billion cost of a suggested new MTR (Mass Transit Railway) station next to the club’s Happy Valley race course on the eastern side of Hong Kong Island. At the time, Mr Engelbrecht-Bresges, a diplomatic-minded and highly-able administrator who is also one of the world’ leading authorities on commercial horse racing, signalled (in a very mild way) his frustration with the government’s position on his personal blog. The fact that the MTR station didn’t Steve Jacobs had one of the toughest jobs in Asian gaming when he took up his new post in May 2009. That was to reduce costs in Las Vegas Sands Corp’s Macau operation by cutting jobs, while at the same time maintaining the morale of the remaining staff and positioning the business to take advantage of better trading conditions when they arrived. Mr Jacobswas arguablywell suited to the task. His previous job was as President and CEO of VGI, a management services group specialising in turning around and building companies in the travel, transportation and hospitality sectors. Revenue generation was never the problem for Las Vegas Sands Corp (LVS) in Macau. The problem was keeping down operational costs on the huge Venetian Macao and generating profitability in order to help pay off project debt on that property as quickly as possible. Given the billions of dollars of capital expenditure committed to Macau by LVS, Mr Jacobs’ operational cuts were, relatively more aggressive marketing tactics over the coming years, rather than merely being provided with an Internet fire wall against overseas online betting sites. Standing still could risk erosion of the player base with the core horse racing product as older race goers die off and the sport is increasingly forced to compete for consumers’ dollars with electronic and casino entertainment in Macau and beyond. That’s especially the case if Macau Jockey Club’s product offer continues to improve and if Macau casinos are allowed to run sports betting books from their premises, as was mooted last year, or if Macau ever gets round to licensing online betting. happen might be connected to the fact the HKJC was also asked by the city authorities —and agreed—to spendHK$1.2 billion plus on facilities for the equestrian events at the Beijing Olympics last year. These included: air-conditioned stables for 200 horses; a world-class equine veterinary clinic; farrier services; 13 training arenas (including a large air-conditioned indoor arena); various galloping tracks on the infield of the Sha Tin racecourse and a 5km Olympic cross- country course and temporary stabling facilities at the Hong Kong Golf Club and the Jockey Club’s Beas River Country Club. The cost of those facilities amortised over several years may well account for some or all of the 30% fall in operating profit recorded by the Club in 2008. When the Olympic funding deal was first struck back in 2005, the HKJC was told the government would review the tax position of the Club. The fact that Jockey Club chairman John Chan went public this July complaining about the Club’s tax burden suggests those talks have not yet been concluded to the mutual satisfaction of both sides. The government currently imposes a 72.5% levy on net stake receipts for horse racing, and a 50% levy on net stake receipts for soccer betting. The HKJC may need to be given more autonomy to pursue new product lines and speaking, a drop in the ocean. Politically, however, in terms of helping to maintain investor confidence, they were vital. LVS had to send out the message to investors that it was aggressively managing its costs in order to turn LVS Macau very quickly from a cash- eating machine to a profit-generating one. Some of Mr Jacobs’ decisions were made for him after the Macau government indicated it expected casinos to cut non- residents’ jobs before those of the locals. After his appointment, Mr Jacobs met the local media and explained that despite a likely cut of 4,000 posts, it was a temporary measure and that the company expected to hire again as soon as practically possible. He said the government was mandating some of cuts by withdrawing 1,500 foreign worker permits. Another 600 or so hires were moved over to Singapore. In August 2009, Mr Jacobs assumed the role of President and CEO for Sands China Limited, a wholly owned subsidiary of LVS. In this role, he is responsible for overseeing and integrating all aspects of the company’s strategy, financing, operations and development efforts for LVS interests in Macau. They include the Sands Macao Hotel, The Venetian Macao-Resort-Hotel, and the Four Seasons Hotel Macao, Cotai Strip® and The Plaza Casino. LVS Chairman Sheldon Adelson indicated recently that he expected construction work on suspended Cotai plots five and six to begin by Christmas. A number of analysts, meanwhile, have indicated that Venetian Macao Ltd, the unit that manages The Venetian Macao complex, could generate US$1 billion in EBITDA (earnings before interest, taxation, depreciation and amortisation) over the next 12 months. If that happens, expect to see Mr Jacobs smiling more often during company press conferences.