Inside Asian Gaming

INSIDE ASIAN GAMING | June 2011 10 Editorial Inside Asian Gaming is published by Must Read Publications Ltd 8J Ed. Comercial Si Toi 619 Avenida da Praia Grande Macau Tel: (853) 2832 9980 For subscription enquiries, please email subs@asgam.com For advertising enquiries, please email ads@asgam.com or call: (853) 6680 9419 www.asgam.com Inside Asian Gaming is an official media partner of: http://www.gamingstandards.com Publisher Kareem Jalal Director João Costeira Varela Editor Michael Grimes Business Development Manager José Ho Contributors Desmond Lam, Steve Karoul I. Nelson Rose, Richard Marcus James Rutherford, Sudhir Kale James J. Hodl, Jack Regan William R. Eadington Graphic Designer Brenda Chao Photography Ike ,Alice Kok, James Leong Michael Grimes We crave your feedback. Please email your comments tomichael@asgam.com Risky Business In late May, the Chinese-language press in Macau ran a story saying a visitor from Shanghai was demanding compensation from the newly-opened Galaxy Macau. The tourist alleged a light fitting fell on his head while he was at the resort. But the story added that after the management had reviewed security footage they concluded the complainant had not been hit on the head at all, but may possibly have been lightly grazed on his hand. Welcome to the compensation culture that Las Vegas and other Western casino operators have been battling for years. While it’s unfortunate when gravity takes hold of any fixture or fitting at an inappropriate time, the incident does throw into sharp contrast the different attitudes of mass market consumers in East and West. Inflated claims of personal injury and suffering are the norm in the West, as if the court system there were a kind of giant lottery game—but with much better odds of winning a prize at the end. In Asia, such litigious attitudes are currently rare, for a complex range of reasons, including a tendency to assume that those in authority are also in the right. In Asia, respect for authority extends to the retail end of the investment market, which in Greater China is a very big market indeed. Most Chinese people don’t have access to the kind of generous state or private pension provision still available to many in the West. As a result, saving and investment for the future are virtually written into their DNA. This self- reliance is a laudable trait when contrasted to the average mollycoddled Westerner with his addictions to personal debt, instant consumer gratification, and the double whammy of untrammelled public spending combined with low personal taxation. But the investment hunger of Chinese and other Asians does make them vulnerable on occasions to the blandishments of plausible salespeople. Even with respected and well-regulated companies with unimpeachable records, there is a tendency when selling investments into Asian markets to gloss over certain issues in ways that would simply not be possible when dealing with more cynical and more bolshie consumers back in the West. An example is a recent press conference in Hong Kong for MGM Resorts International’s and Pansy Ho’s initial public offering for MGM China Holdings. The prospectus for the IPO filed with the Hong Kong Stock Exchange contained no fewer than 11 pages on Pansy Ho’s relationship with MGM Resorts. Those pages spelled out the fact that after the IPO she would occupy a unique position in the history of Macau gaming—namely being a director and shareholder of one casino operator while simultaneously being a director and shareholder for the parent company of a rival casino operator. (Those companies are MGM China and STDM, the investment vehicle started by her father Dr Stanley Ho and the parent company of SJM Holdings.) And yet at the IPO press conference by MGM Resorts’ management, not a single question was allowed on the topic of the MGM China-Pansy Ho-STDM love triangle. As one prominent Hong Kong journalist put it when he found this line of questioning closed down: “It was in the prospectus—so I thought it was fair game”. Any Asian investors subscribing to the MGM China Holdings share issue might like to ask themselves what they’ve actually bought into. One answer seems to be Pansy Ho’s retirement fund, given that a significant portion of the money raised by the IPO is going towards buying out nearly half of the 50% stake that Ms Ho had in the MGM Macau joint venture. (Only US$5 million of the Ho family’s original US$80 million equity in the MGM JV actually came directly from Pansy Ho’s pocket, according to a 2009 report by the New Jersey Division of Gaming Enforcement in the US. Her sister Daisy put in US$3 million and their father Dr Ho chipped in US$72 million, according to the report.) So the rich get richer, the IPO arrangers take their fees and everyone goes home happy. But watch out—in China the days of relying on smooth talking if gravity takes hold of fixtures and fittings may be over.