Inside Asian Gaming

INSIDE ASIAN GAMING | April 2012 6 Cover Story contemplated back in 1999when concurrent with Macau’s reversion to Chinese rule it was decided to fashion a unique economic identity for the new SAR by opening to international competition a casino market that had been run as the monopoly of one favored company or another since the 1930s. The consequences would prove just as momentous since theoretically the concession holders could develop an unlimited number of properties, subject to government approval, and since the other two concessionaires naturally would expect the same subconcession rights. Which is exactly what happened. In June 2004, a month after LVS opened the first of the new-competition casinos, the US$265 million Sands Macao, SJM sold its subconcession for $200 million to a joint venture between Las Vegas-based MGM Mirage (now MGM Resorts International) and Hong Kong businesswoman Pansy Ho, daughter of the revered tycoon who had held the casino monopoly for 40 years and still dominated the market as SJM’s managing director. The $1.25 billion MGM Grand Macau would open in 2007. By 2006 the market had grown so spectacularly that Wynn’s subconcession would fetch US$900 million. The buyers, Stanley Ho’s son Lawrence Ho and James Packer, head of Australianmedia and gaming empire PBL, would eventually take their joint venturepublicontheNasdaqstockexchange as Melco Crown Entertainment. They would open three casinos, among them the US$2.1 billion City of Dreams on Cotai. LVS would go on to build the US$2.4 billion Venetian Macao on Cotai and invest some $8 billion in the market to date. The growth of the market in the last ten years, as well-documented as it’s been, is no less amazing in the retelling. The pent-up demand unleashed by the 2004 opening of Sands Macao would blow away the most optimistic projections. The doubling of the number of lead developers to six made certain that capital investment would pour in in sufficient quantities to exploit it. Indeed, the building boom that ensued would see US$13 billion invested in the market in the last five years alone. In addition, Melco Crown, SJM, Wynn, LVS, Galaxy and MGM would all list their Macau operations on the Hong Kong Stock Exchange, raising more than US$6 billion from eager investors, their collective market capitalization today topping US$65 billion. The industry would grow from11 casinos in 2002 to 34, an average of two openings a year. The number of table games would increase from 339 to more than 5,300; slots from about 800 to more than 16,000; annual visitation from about 9 million to more than 28 million—spurred by a gradual relaxation of restrictions on individual travel from Mainland China, where disposable income has been growing at an average rate of 10% a year and much higher than that among wealthier segments of the population. The decade would see Macau’s emergence as the largest pure gambling market in the world. Gross gaming revenue would grow more than tenfold, from MOP22.18 billion, about US$2.93 billion at current exchange rates, toMOP267.86 billion last year, the equivalent of $33.5 billion. That’s five times what the Las Vegas Strip took in in 2011. At 28% per year, the annual rate of GGR growth since 2002 has been roughly twice the rate of GDP growth in China. The S&P 500 has delivered an annualized rate of return of 0.38% over the same period. VIP baccarat has been the dominant game throughout. It accounted for 74% of GGR in 2002. It dipped to 63% in 2005, a period when the take from the mass-market The opening day stampede at Sands Macao on 18th May, 2004