Inside Asian Gaming

inside asian gaming May 2014 20 Macau authorities dropped hints that LVS should find another partner and opened a period for applicants to “marry” or merge proposals. Again, LVS didn’t get it. Finally, with CDIB’a bid facing certain rejection, a pre-dawn phone call summoned William Weidner, then LVS’ president and chief operating officer, to Macau. What happened after that remains somewhat murky. Mr Weidner testified at the Suen trial that the tip led to Macau Chief Executive Edmund Ho suggesting a partnership with Galaxy Casino Ltd. But a knowledgeable source doubts Edmund Ho played matchmaker and suggests that a broker seeking a cut of the deal led LVS to believe the recommendation came from Mr Ho. In any case, it seemed like a good match. Galaxy was a subsidiary of Hong Kong-listed construction and property giant K Wah International, led by Lui Chee Woo and five of his children. The Luis also were in hospitality through San Francisco-based Stanford Hotels. LVS knew casinos and conventions, Galaxy knew construction, and they both knew hotels. By that point, the tender deadline had passed, but Macau authorities allowed Galaxy to modify its bid to include LVS as its management company. Within days, Galaxy and LVS agreed to terms— Mr Weidner testified the lawyers mainly changed the names on the CDIB documents—with LVS reportedly due a 2% fee on gross gaming revenue for operating the casino and holding an option to purchase up to 30% of the project’s equity. On 8th February 2002, a week after the hastily arranged meeting of LVS and Galaxy, its bid was awarded a concession, along with Stanley Ho’s Sociedade de Jogos de Macau and Steve Wynn’s Wynn Resorts, despite consultant Arthur Andersen’s ranking of Galaxy, even with LVS, below several other contenders. The Tender Commission may have selected Galaxy because, unlike other bidders such as MGM Mirage partner New World Development, it had no links to Stanley Ho or Macau gaming. The commission may have also liked the idea, after decades of Macau being overshadowed by Stanley Ho’s vast empire, of two small players that seemingly needed Macau more than Macau needed them. But soon it became clear that LVS and Galaxy didn’t need each other. An Unhappy Marriage When Galaxy signed its formal concession contract with Macau that June, a clause was inserted that LVS and Galaxy had to conclude a formal management arrangement within six months. Sources say the companies’ draft agreement seemed to put a final contract within easy reach. However, LVS and Galaxy clashed on several issues. Galaxy tired of US disclosure demands and LVS’ growing enthusiasm for spending more than the US$1.1 billion Galaxy had pledged to build a grander downtown casino and a Venetian bigger than the Las Vegas Strip original. LVS was worried that Galaxy’s junket relationships could endanger its regulatory standing in the US. “They didn’t care who they dealt with and we cared,” LVS Chairman and Chief Executive Sheldon Adelson testified at the first Suen trial, referring to Galaxy and the VIP gaming promoters that LVS originally contended it wouldn’t use. “I won’t say they were [triad] connected. They were a reputable family, but they were willing to do business the way that Macau had been doing business for decades, and we couldn’t do that.” Of course, LVS now relies on junkets for most of its market- million, 64% of Macau’s total of 29.3 million visitors, with more than 8 million arriving under IVS. Many cite the IVS as the single biggest factor in the explosive growth of gaming in Macau. Whatever the cause, Sands Macao’s success reverberated widely in Macau and beyond. “Macau was, and to some extent still is, thought of as a somewhat backward ex-colonial enclave, but Sands made investors, operators and regulators globally sit up and take notice that something was afoot to change those perceptions,” Mr Green observes. “Macau still hasn’t been accorded the respect due to it as the world’s largest gaming jurisdiction, but with the presence of world class developers/operators and more of the flagship structures they have brought to fruition, that will change.” Aaron Fischer, who heads consumer and gaming research for CLSA Asia Pacific Markets, says, “Sands Macao gave all the companies an indication that if they invested in quality facilities then they would generate even higher returns. Sands Macao showed that people were ready to upgrade their experience. We’ve seen that over the past 10 years as a key trend: Chinese consumers have upgraded their tastes and their entertainment experiences.” Operators elsewhere have joined the bandwagon, Mr Gallaway notes, with Las Vegas now celebrating Chinese New Year and other Asian jurisdictions introducing or expanding gaming, inspired by Sands Macao’s success. “It showed that by providing high-quality gaming environments to regional populations, overall tourism, along with gaming revenue, would grow.” Last year, mainland visitors totaled 18.6 million, 64% of Macau’s total of 29.3 million visitors, with more than 8 million arriving under the Individual Visitor Scheme. Many cite the IVS as the single biggest factor in the explosive growth of gaming in Macau. Mr Godinho says, “Sands Macao helped turn the page from a murky past and a relatively closed environment into the MBA executive era of professional gaming management and gaming as entertainment.” “It made employment in the industry a desirable and well-paid Cover Story