Inside Asian Gaming

INSIDE ASIAN GAMING | September 2013 12 the Lui family. The concession was granted prior to the conclusion of their management agreement, however, and although Sands and Galaxy gave assurances that it would be finalized within six months, it never was, and the government, eager not to delay the development of Cotai, decided the best solution was to disband the consortium, give Galaxy the concession and issue an independent sub-concession to Sands. The government eventually allowed the other two concessionaires to grant sub- concessions, perhaps partly to prevent them crying foul, but also to open the door to more operators to hasten Macau’s tourism development. So, inadvertently, Galaxy got a chance to cut its teeth as an operator. In July 2004, the company started running the Waldo, a third-party-owned venue, one of the four casinos of the City Clubs brand that Galaxy now operates. Waldo was the second casino to open following the end of Stanley Ho’s decades-long monopoly. Two months earlier, Sands had unveiled the glittering Sands Macao, which featured a crowd- pulling interior design unlike anything the city had ever seen. Waldo, on the other hand, had been hastily converted from an office building, and its most notable feature was the garish neon sign out front. Still, Waldo’s concentration on the VIP market enabled it initially to out-gross the much- hyped Sands. Armed with that experience, Mr Lui unveiled his first flagship, StarWorld Hotel and Casino, in 2006, and it was then that GEG’s brand identity began to emerge. Owing to the relatively small footprint and limited amenities at StarWorld, that brand-building was initially defined by a strong service mindset and an ability to forge lasting relationships with players and junkets. That changed with the unveiling of the US$2.1 billion Galaxy Macau, which was shaped by the company’s determination not only to “give our customers what they want,” according to Mr Lui, “but also anticipate what they may want in the future.” Mr Lui has a particular affinity for his clientele. A civil and structural engineer by training, he started his career in the late ’70s in the quarries of Hong Kong with his family’s construction materials business, and in 1985 started doing business directly in mainland China. “If there is a person in Macau who understands what the Chinese customer will look like in the next five or 10 years it is probably somebody like me, who has been there doing business in China, seeing them evolving,” he says. Then there’s the corporate culture. Mr Lui has been able to assemble an executive team that’s not only good at what it does but seems to be happy in the job. It begins with the humility that Mr Lui himself conveys and which stands as a key component of GEG’s success in a part of the world where personal relationships and social and familial networks are paramount in facilitating business and other dealings. Galaxy also has capacity on its side. By October, 12 VIP gaming tables will be added at Galaxy Macau—the company has approval to add 50 tables this year under the government’s 3% cap on annual table growth market-wide. Beyond that, in addition to Galaxy Macau’s US$2.5 billion second-phase expansion, GEG plans to spend as much as $7.7 billion to begin its third and fourth phases as early as the end of this year, with operations commencing in 2016. The company earlier this year also completed the HK$3.25 billion ($417 million) purchase of the Grand Waldo casino hotel located near Galaxy Macau and has taken the property off the market for several months of refurbishments. The Singapore government’s decision to legalize casinos in 2005 was arguably the impetus for Genting Group to embark on its ongoing global expansion frenzy. Prior to that, since 1970, the company had been content to earn monopoly profits from Genting Highlands, recently renamed Resorts World Genting, which continues to enjoy an exclusive casino license in Malaysia. The catchment area for RWG covers Malaysia and Singapore, so Genting’s decision to vie for one of the two new licenses on offer in the neighboring city-state was viewed by many at the time as a defensive maneuver to hedge against expected cannibalization of its Malaysia operations. Genting, led by billionaire Lim Kok Thay, pressed on with that bid even as other major operators, including Wynn Resorts, 3 Lim Kok Thay Executive Chairman and CEO Genting Berhad Melco Crown Entertainment and Caesars Entertainment, dropped out, saying the required investment was too high. The steep outlays demanded by the Singapore government eventually proved justified, of course, as the Lion City’s two IRs have gone on to become perhaps the most profitable casinos in the world. Although revenue growth in Singapore appears to have plateaued and Genting’s property there, Resorts World Sentosa, saw revenue contract year on year in the first half of2013,thereturnsstillprobablycomfortably exceed Genting’s initial expectations and Sentosa has superseded Resorts World Genting as the group’s flagship, booking the equivalent of US$440 million in adjusted EBITDA in the first half against the Malaysia operation’s $291 million. The outsized returns from Singapore have inspired an aggressive plan of global expansion funded by a US$7 billion war chest and interests in five publicly traded entities with a combined market capitalization of $46 billion and a portfolio of gaming, leisure and hospitality assets stretching from Singapore to the UK to the Bahamas, including perhaps the most lucrative slot floor in the US right now at Resorts World New York City. The group also is looking at opportunities in Australia, where listed subsidiary Genting Hong Kong has applied to regulators in New South Wales and Queensland to increase its holding in Echo Entertainment, operator of Sydney’s only casino. The company may want to raise its stake in Echo to 25% and is “patiently waiting” for the go-ahead, says Mr Lim. “My guess is it will go on for a while.” The Asian Gaming 50 – 2013