Inside Asian Gaming

inside asian gaming January 2016 34 Much of the new Macau and the Cotai Strip in particular has been built on the prospect that mass-market retail spending patterns would mirror the Las Vegas Strip’s recent experience, and would be complementary to a substantial gaming spend. There is little doubt that some of the high-end retail offerings in Macau are doing exceptionally well, based on reported sales; various high-end retailers have indicated that their Macau-based retail stores now rank among their top 10 outlets globally, based on sales revenue performance. However, there remains a concern that the mass-market gaming customers are not purchasingmuch frommid-level retail outlets that have recently opened. In other words, it might be the case that themass-market visitors to Macau are — and will remain — far more gaming-centric in their motivations to visit Macau than their Las Vegas counterparts. While some of the mid-level retail stores may benefit from initially favorable lease terms in the short term, they will face challenges in the long term if mid-level retail consumption does not increase. Many of the business models for integrated resort casinos in Macau are predicated on selling off retail assets into trusts. However, with Cotai Constriction The explosive growth of the Macau gaming industry will be halted, at least for a while, after pressure from Beijing apparently forced the hand of Macau Chief Executive Edmund Ho. Social tensions have been on the rise in the former Portuguese colony in recent years as locals began to feel the impact of gaming growth. While stipulations for local employment have been met, a booming market has raised the prices for everything from housing to food. After hearing from the Chinese government, Ho told the Macau legislature, “It is time to take these policy measures. We must continue to preserve the positive trend of our economic development Macau leader bows to pressure and stops growth of world’s leading gaming jurisdiction By Roger Gros and solve problems that may have arisen as a result, to ensure long- term social stability.” Somehadexpected theMacanesegovernment toexpand thenumber of gaming licenses allowed in 2009, when the current regulations expire, but Ho said nothing would change in the near future. “We decided not to issue any new casino concessions, including casino sub-concessions,” Ho said. “The current gaming system consisting of three concessions and another three sub-concessions will likely be maintained for a long time.” Ongoing casino projects and planned casinos with existing licenses and approvals will not be affected, but no new plans can be drawn up without additional licenses. In addition, the existing casinos will be limited to the number of slots and tables already in operation. The 40-year monopoly held by Stanley Ho’s SJM was ended in 2002 when bids were issued for new licenses. In addition to Ho (who is no relation to CE Edmund Ho), Sheldon Adelson and Las Vegas Sands, and Wynn Resorts won the concessions. Other major players include Australia’s Publishing and Broadcasting Ltd., operators of Crown Macau (along with Melco International, controlled by Stanley’s son Lawrence Ho), and MGM Grand (in partnership with Ho’s daughter Pansy Ho). The big losers in the new direction are Harrah’s Entertainment, which owns a golf course near the Cotai Strip, which it had hoped to transform to a casino resort if licenses had opened up, and Richard Branson’s Virgin Entertainment, which has been searching for a Macau venue for several years. Discontent with casinos has been spreading in Macau. “This society has no balance anymore and the casinos are getting more and more powerful. It just isn’t sustainable,” Daniel Fong, an 18-year-old student at the University of Macau, told Reuters. “Most the disappointing consumer demand for retail, along with the soft capital markets of 2008, such strategies are now being questioned, and plans for listed trust offerings are being deferred into the future. The capital crunch that is sweeping the world has resulted in a number of projects in Las Vegas being postponed or cancelled. No projects in Macau have so far come into direct question, but investor uncertainty has once again led to a postponement of the planned IPO of SJM. It will also be interesting to see if any of the planned projects outside of the hands of the six direct concessionaires will continue to move forward. Changing sentiment around Macau may indeed bring some of these projects into question over the near term. The financial assumptions on which these projects were sold to the market in many cases will need to be reassessed in light of the realities brought about by recent changes in Macau. The Big C Finally, there is the big “C” — CHINA. The authorities in Beijing have overseen the growth of Macau and the success of its Blast from the Past June 2008