Inside Asian Gaming

inside asian gaming September 2014 16 That said, SJM may have a unique advantage over the rest of the market. As the parent licensor for 14 third-party-owned casinos, conceivably it can spread the pain around. On the other hand, it relies on its three wholly owned casinos for 50% of its revenues, and well more than one-third of them come from its flagship Grand Lisboa. It’s a capacity-constrained operating environment that finds the company hard-pressed to grow at a pace commensurate with the massive expansion that Cotai is bringing to bear. What SJM has in its favor is a strong gaming brand, arguably the strongest in town still, a loyal customer base, and an iron- clad balance sheet, and Mr So and his team are making the most of all of it. Cash flow from operations is expected to exceed HK$9 billion (US$1.15 billion) this year, and the company ended the first half atop the market in terms of gaming revenue share, squeezing past its much larger rival Sands China thanks to a 4.7% increase to HK$44.44 billion (US$5.69 billion). EBITDA was up a corresponding 4.7% despite a fall-off in VIP revenue—a trend that’s afflicted the entire market—and an 11% increase in staff costs. This was because the biggest part of the H1 story was a robust performance on the mass side, which soared 29% in revenue terms as the company moved with the agility of a boxer to shift more of Grand Lisboa’s precious live tables toward the upper ranges of its cash business, the so-called premium mass, where the yields are much higher, renovating interior spaces to make room and simultaneously adding more live-dealer e-tables at the Grand and the older Casino Lisboa to scoop up more market share at the lower end. Results should get an additional lift next year when a remodeling of the wholly owned Casino Jai Alai is complete. The prospects embodied by Lisboa Palace are of course longer- term but exciting nonetheless. Plans call for an elaborate “East- Meets-West” theme centered around three luxury hotels designed in a grand style reminiscent of the palace of Versailles. Versace and Karl Lagerfeld are lending their brands to two of them. There will be rooftop gardens, indoor swimming pools, a spa, 34,000 square meters of high-end retail and 36,000 square meters of restaurant and entertainment space. The location is relatively far from the main action on Cotai, and the developable area is the smallest of the new resorts coming on line, although this could change pending the outcome of negotiations with SJM Executive Director Angela Leong to expand onto some or all of a much larger adjoining property she controls As for the staffing needs, you can be sure Mr So is thinking hard on them. The land grant for Lisboa Palace was the last to be approved by the government, so it will be the last of the new resorts to open. This may not be a bad thing from the standpoint of the labor shortage if it means the government and the industry will have been able to use the additional time to come up with a viable solution. The casino is slated to include 700 live table games, which it’s not likely to get under the government’s annual cap on new supply. This may not be a bad thing either as it implies its front-line needs will be more manageable. Still, even an allotment of 300-400 tables means something like 1,800 to 2,400 dealers will have to be found. Currently, SJM estimates Lisboa Palace’s total staff needs at 8,000. Alvin Chau Chairman Suncity Group The undisputed leader among Macau’s 200-plus junket operators is Suncity Group. Despite the recent weakness in Macau’s VIP sector, Suncity keeps growing. The company now handles more than HK$150 billion (US$19 billion) in average monthly rolling chip turnover, up from about HK$135 billion at this time last year. Suncity has grown significantly its share of a shrinking pie, and that achievement can largely be credited to the canny leadership and vision of its 40-year-old chairman, Alvin Chau, who balances an aggressive appetite for growth with an emphasis on caution in extending credit, enabling Suncity to avoid the liquidity problems that have plagued some of its less prudent rivals. Suncity’s humble beginnings in 2007 saw 30 employees running a small-scale VIP operation at StarWorld Hotel. It now has 20 VIP clubs around the city, controls more than 310 baccarat tables and employs 1,860, 70% of whom are involved in its gaming activities. Suncity strives to distinguish itself from other junkets by providing its clients the most complete and highest-quality range of supporting amenities and services, and to that end has invested heavily in businesses outside the gaming realm. The group’s related activities now include finance, real estate, entertainment, natural resources, F&B, tourism, media and luxury products and services. Suncity promotes its brand heavily by sponsoring big-name