World gaming titans are building up the new Macau

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Macau
Part one
DEPENDENCY STATUS
Special
Administrative
Region of China
CURRENCY
Pataca (MOP)
EXCHANGE RATE
Patacas per US$ –
8.0015 (2006)
POPULATION
456,989
LABOR FORCE
248,000
INDUSTRIES
Tourism, gaming,
clothing textiles,
electronics,
footwear, toys
GDP (purchasing
power parity)
$10 billion
(2004)
GDP (official
exchange rate)
$11.56 billion
(2005)
GDP (real
growth rate)
6.7% (2005)
GDP (per capita)
$24,300 (2005)
INFLATION RATE
(consumer prices)
4.1% (2005)
LANGUAGES
Cantonese 87.9%,
Hokkien 4.4%,
Mandarin 1.6%,
other Chinese
dialects 3.1%,
other 3%
Source: CIA
The World Factbook
World gaming titans are building up
the new Macau
A small, Chinese fishing village, five hundred years under colonial Portuguese rule somewhat isolated from the modern twentieth century world, awakes in 1999 when handed back to China and the seeds sown for an amazing future. Macau’s transformation from a sleepy town where Hong Kong and mainland
Chinese tourists escaped to the legalised gaming town to play
their beloved baccarat and mahjong, has been reborn as the
gaming capital of the world.
Macau’s Chief Executive Edmund Ho made the historic announcement to liberalise the gaming market in 2001, effectively opening the city up to the world and
changing the lives of its half a million citizens. After a 40-year monopoly by Stanley Ho’s Sociedade de Turismo Diversoes
(STDM) that operated the legendary Casino Lisboa, three gaming licences as well
as three sub-concessions were issued.
The world’s casino legends Las Vegas
Sands, Wynn, Galaxy Star World, MGM, as
well as Australian James Packer’s PBL and
local Lawrence Ho’s Melco, joining forces
to create Crown Macau and City of Dreams,
as well as billionaire Richard Branson (reportedly waiting for the right partner),
scrambling to build the biggest and the best,
creating a brand new city in record time.
Steve Wynn opened his signature resort in 2006 on the Macau
peninsula and is said to be considering making his own mark
on the Cotai Strip also.
Revenue figures have been extraordinary with US$5.7 billion taken in 2005 and US$6.95 billion in 2006, outstripping
legendary Las Vegas, and again, this figure is expected to rise.
Sands Corporation’s Sheldon Adelson said he recouped his
US$260 million investment in Macau within eight months, which
appeared to give the green light to other foreign investors who
are jostling for their own lucrative market positions.
L O C A L P R O S P E R I T Y. Macau’s population of half a million has also reaped the
benefit of a more prosperous society. Locals make up the majority of casino staff
and commanding decent salaries, with some
properties said to poach trained staff at
every opportunity. Government labour laws
state that operators must have a certain
percentage of Macau citizens in their workforce. But the sheer numbers needed with
tens of thousands of hotel rooms to open
at the year-end mean that foreign human
resources are urgently required. Macau
Government Tourist Office Director, Joao
Manuel Costa Antunes said recently that new
labour import policies especially for the
A L L A B O U T E N T E R T A I N M E N T. Much
service industry will be announced in midof the activity on Macau’s peninsula is fo2007 to address staffing shortfalls. Mr Ancused on a portion of reclaimed land be- Edmund Ho
tunes also emphasised the importance that
tween the adjoining island of Coloane and Chief Executive of Macau
needs to be placed on quality, not just
Taipa. Appropriately named the Cotai Strip,
quantity, and is working with educational
entertainment combines with luxury resorts and retail outlets,
institutions to this end.
along with some of the largest convention facilities in the world,
Another concern is that visitors will remain in the many casiand of course, high-class gaming. Macau’s future gaming marnos and not experience the real Macau, which is a tantalising
ket has been intensely analysed and investors are betting on
product in itself. In his policy address for 2007, Edmund Ho highevery type of client: VIP, mass, table and slot player. The biggest
lighted the government’s desire for Macau to develop into “a
attraction is the 1.3 billion Chinese just across the border and
multi-dimensional economy”. With such rapid growth comes new
with the Chinese government relaxing regulations on individinfrastructural needs. Roads, health, education and accountaual travel visas, visitor numbers to Macau have soared.
bility have become issues that the government has rapidly needDecember 2006 saw a record 22 million visitors, a 17%
ed to acknowledge. In his policy address, Mr Ho said the govsurge over 2005, the majority of which were from the mainernment would establish a transportation affairs bureau to coland. With Venetian Sands, Mr Ho’s new flagship the Grand Lisordinate infrastructure projects and step up the construction of
boa, Crown Macau and Galaxy Mega Resort all due to open in
a harbour tunnel, as well as ensure consultative bodies ade2007/08, the figure is only expected to get higher. Billionaire
quately represent the public and the government. ●
THIS SUPPLEMENT HAS BEEN PRODUCED AND SPONSORED BY PRESS TRIBUNE. IT DID NOT INVOLVE THE REPORTING
OR EDITING STAFF OF THE ECONOMIST AND NO ENDORSEMENT IS IMPLIED.
Macau
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2
MELCO INTERNATIONAL
will create synergies that will enable us to capture the
immense opportunities in the Macau leisure and gaming market.”
Amid intense competition
In less than four years, Melco has found its
in the gaming market, MPEL
niche and gone from a US$9 million to a US$2
succeeded in securing
billion company, while more plans are in
Macau’s last casino subplace for this dynamic conglomerate
concession. Through its subsidiary Melco PBL Gaming
(Macau) Limited, MPEL is
At the age of thirty, Lawrence Ho is the chairman and
the holder of one of only six
CEO of Hong Kong-listed Melco International Develgaming concessions and
opment Limited (“Melco”) and co-chairman and CEO
subconcessions to own and
of NASDAQ-listed Melco PBL Entertainment (Macau)
operate gaming businesses
Limited (“MPEL”). He shows a high level of determiin Macau. “That gives us
nation and vigour that are unparalleled by many othgreater flexibility in tapping
ers at his age.
the lucrative opportunities
Mr Ho took over Melco in 2001, when the comin Macau’s fast-growing gampany was a distressed asset. “Melco was a HK$70
ing market,” Mr Ho says. The
million (US$9 million) company when I took over. I
equity market expressed imbrought in my own team and for one year we only
mense interest in the gamhad 12 people in Melco. This team managed to turn
ing company when it was listthat into a US$2 billion conglomerate,” he says. In
ed on NASDAQ in December
fact, Melco reported a substantial increase in net prof- Lawrence Ho, Chairman and CEO of Hong Kong-listed Melco
it for two consecutive years. Melco’s net profit expe- International and Co-Chairman and CEO of NASDAQ-listed Melco PBL 2006. “We raised US$1.32
billion when MPEL was listrienced an eight-fold surge in 2005 and a quadru- Entertainment
ed,” says Mr Ho. The listing
ple growth in 2006. “All divisions of the group reported encouraging results. We’re glad to have com- rise to a lot of opportunities,” he says of Macau’s was the largest IPO ever launched by an Asian committed employees who help us achieve this solid evolution. To capture these arising opportunities, pany on NASDAQ and the fourth largest IPO in the
Mocha Clubs were launched with a focus on the leisure US in 2006.
growth,” he says.
MPEL’s projects in Macau now include Crown Macau,
It has not been an easy ride turning around a los- grind market. The widely recognized Mocha brand
ing company. Many cast doubts on Mr Ho’s ability to name connotes an innovative spin of slot machine a luxurious casino hotel on Taipa Island just opened
do so, but criticism served as a source of motivation clubs in a trendy, cafe-styled setting and soon be- in May 2007; Mocha Clubs, the highly successful
chain of slot machine clubs; City of Dreams,
for his work. “We are happy to prove people wrong,” came a highly successful chain that is
an integrated urban entertainment resort
he says. Mr Ho’s strategic vision and determination renowned as the showcase for electronic
on the Cotai Strip; as well as a planned
has turned a stagnant company into a successful and gaming in the world. Mr Ho says, “At the The listing of
third property on the Macau peninsula.
profitable one in less than four years. Today, Melco time when Mocha was launched, there MPEL was the
is a dynamic conglomerate operating three main lines were only about 800 machines in all of largest IPO ever Together, all projects will be able to capture all segments of the gaming market
of business with a major focus in leisure, gaming and Macau. Today, Mocha operates over launched by an
of Macau.
entertainment. Apart from having a brilliant man- 1,000 machines in various locations, Asian company
Under the leadership of its energetic
agement team, Melco’s success is also attributed to capturing around 20% market share of
CEO Lawrence Ho, both Melco and MPEL
the company finding its niche in the city of Macau, all electronic gaming positions in Macau.” on NASDAQ
are set to flourish in the competitive marMr Ho is a man of vision and global
with which Melco has a traditional link.
In 2002, Macau underwent a liberalisation of its perspective. Building on Mocha’s success, he came ket. “We continue to see tremendous opportunities
gaming market in what Mr Ho calls “an absolutely up with the plans to create an international enter- in the Macau market and are fully committed to enbrilliant move” by chief executive Edmund Ho (no re- tainment resort and embarked on a two-year search suring that MPEL plays a central role in its developlation). “The liberalisation transformed Macau’s gam- for a viable partner. “We need to bring in interna- ment. We believe that our properties and our imaging industry into an international marketplace and gave tional expertise and experience in order to succeed inative offerings will further enhance the appeal of
in a competitive market,” he com- Macau to visitors from China and around the world,”
says Mr Ho. He hopes that MPEL will become the biggest
ments.
“I needed a partner that had ex- conglomerate focusing on the gaming and enterperience in operating in a competitive tainment industry in Asia, particularly in the Greater
and global environment,” says Mr Ho. China region, in five years’ time.
It should be made clear that Melco was not part
The ideal partner was found with Publishing & Broadcasting Limited (PBL) of Shun Tak, SJM or STDM – Stanley Ho’s related comfrom Australia, who owns and oper- panies – when Mr Ho took over. “Melco is completeates the Crown Entertainment Complex ly independent and we are very proud of the fact that
in Melbourne and Burswood Casino in we managed to do all this our way,” says Mr Ho.
At the age of 30, Lawrence Ho has achieved a conPerth. “A partnership between Melco
and PBL will bring together local ex- siderable track record and is determined to expand
pertise, world-class management and it further in the future. “A strong will is what it takes
superior branding,” says Mr Ho. “I am to succeed,” he adds. “In my view the difference beconvinced that the pan-Asia exclusive tween successful people and others is not a lack of
Inaugurated in May 2007, Crown Macau is a luxurious and contemjoint venture between Melco and PBL knowledge but rather a lack of will.”●
porary hotel and casino that offers a unique six-star experience
Birth of a new-age gaming titan
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This report can also be read online: www.press-tribune.com/macaupartone
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Macau
3
Macau
4
HOLIDAY INN
A familiar friend
Interview with Calvin Chu, General
Manager of Holiday Inn, Macau
As Macau spins headlong into its title of gaming capital of Asia, if not the world, one hotel has enjoyed long time loyalty and service to Macau’s business and leisure traveller
– the Holiday Inn. General Manager Calvin
Chu believes the hotel has been a major international contributor to the city’s branding since 1993.
Mr Chu says numbers of “sophisticated travellers” are increasing. “Around 20 to 30% of
our clients are from the corporate sector,”
he says. Pampering and calming those corporate nerves, the Holiday Inn’s signature Tea
Tree Spa offers an “experience of pure relaxtion” says Mr Chu. A full range of services
is provided by professional therapists.
As for the Cotai Strip, Mr Chu says, “Our
corporate office is giving serious consideration to opening one or two hotels in Cotai.” Around 50% of guests are from mainland China, the rest Hong Kong, Taiwan,
Japan, Australia, Europe and the United
States. “Our brand name speaks for itself,
people want to check in and not worry about
anything. What we offer is service, convenience and experience,” adds Mr Chu.●
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as a risk, we saw it as an opportunity” asserts Mr Lui.
The Galaxy
Their numerous CityClubs,
along with flagship StarWorld,
story
have given them a 19% market
share in less than four years, with
Interview with Francis Lui,
minimal capital risk. “Our apVice Chairman of the Galaxy
proach is to have multiple casiEntertainment Group (HK
nos and retain a significant land0027 stock code)
bank to meet future demand,” Mr
From construction supplies to
Lui says.
property development to gamMr Lui is understandably
ing and entertainment – a natpleased: “I personally think it is
ural progression? Probably not,
amazing. In the history of gambut that’s exactly how Galaxy
ing who else has opened five
Enter tainment Group began
casinos in such a short time span
back in 1955, with K. Wah, a famand is heading towards a 25%
ily business that has turned in- Francis Lui,
market share in the largest gamto an empire.
Vice Chairman, Galaxy
ing market in the world?”
Vice-chairman Francis Lui’s fa- Entertainment Group
The company’s construction
ther began it all and today Galaxy
operates the giant StarWorld hotel and casino, experience has helped. Mr Lui explains, “We
along with other smaller properties, CityClubs dot- completed StarWorld for about 30-35% of what
ted around the Macau peninsula – with the our neighbours claimed that they had to spend.”
Covering mass-market and day trippers with
Galaxy Mega Resort scheduled to open in 2008
StarWorld, VIP’s and high rollers with the Cityadding its own flavour to the Cotai Strip.
Galaxy has a different approach to gaming in Clubs, and the entertainment resort experience
Macau, based on their local knowledge and the with Cotai’s Galaxy Mega Resort, the group has
tastes of Chinese patrons. “We talked to people covered all their bases.
Mr Lui concludes, “We are for real, we’ve
and studied Macau, decided that this is where
the future is and made the bold decision to come shown what we can do, and people need to know
in before anybody else – where people saw it that we are a force to be reckoned with.”●
A LOCAL ADVANTAGE
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WYNN MACAU
Wynn Resort, committed to a better
future for Macau
Wynn Macau is set to transform the
face of casino resorts in Macao.
Styled on the Las Vegas Mirage,
Steve Wynn has invested a deal of time
finding out what Chinese casino-goers want
With an obvious pioneering spirit, Steve Wynn left
no-one in any doubt of what he can achieve after opening The Mirage in 1989; a hint of things
to come in Vegas. Mr Wynn is credited with raising the bar on luxury hotel/casino operations and
removing the dark mantled “sin city” tag, replacing
it with entertainment capital of the world.
It’s not surprising then that Mr Wynn noticed
the dawning of a new era in the Chinese Special
Administrative Region of Macau. “It is an extraordinary transformation – there has never been
anything like this in modern history like the
changes that the government under the mandate
of Edmund Ho has managed to achieve,” says
Mr Wynn, clearly exhilarated. “It is quite breathtaking and I don’t know if everybody realizes the
enormity of what is going to happen out there.”
Steve Wynn opened his 600-room luxury integrated resort in Macau in September 2006 accompanied by significant fireworks and fanfare.
With additional projects already planned Mr Wynn
insists he is “just getting started in Macau” and
is actually taking mandarin lessons every day.
With other big name developers Venetian
Sands, Galaxy, Melco and PBL, MR Wynn is positive about the outcome. “Everybody is going to
contribute to a remarkable transformation of
this region,” he says.
The Chinese have always loved to gamble,
however today the market itself is undergoing
significant changes. Higher economic freedom
has led to more sophisticated consumption and
a new desire for entertainment and choice, which
goes hand in hand with Macau’s new attraction
as a complete entertainment destination.
Steve Wynn, Chairman of Wynn Resorts
Mr Wynn explains, “We have a rapid escalation of sophisticated supply and a steady increase in demand from the PRC economy, Macau
is an extension of this phenomenon.”
Success brings choice, a “fundamental truth”
according to Mr Wynn and with over a billion Chinese just across the border, “expanding Macau’s
menu” is the key.
Basing Wynn Macau on his successful Vegas
model, Mr Wynn believes that the market will be
supply driven, thanks to healthy competition, but
to be successful you must be well acquainted with
your product.
“It comes down to knowing who we are as a
company and making choices about the kind of
offerings we make, the sure way to fail is to be
confused on who you are in any business”, Mr
Wynn emphasises. Wynn Macau “is a place with
its own identity, offering the finest of everything
in China and the pacific region. This is who we
are, the niche that we fill.”
The eye-catching Wynn Macau has
600 deluxe suites and rooms and
100,000 sq ft of gaming floor
PASSION, STYLE AND A
L O T O F R E S E A R C H. Don’t
let his dynamic personality fool
you into thinking he is complacent; this is a man who
spent much time studying the
Asian market before jumping
in, avoiding the mistakes of
many western counterparts.
Macau
5
Designing every detail down to the cutlery, Mr
Wynn is passionate about his resorts’ style and
very familiar with the Asian market.
“I first opened the Mirage in 1995, and my
hotels have always been leaders in terms of Asian
clientele. We understood our Chinese customers,
and I had personal relationships with them so
from the development process in 2002 and the
opening, I asked my customers’ opinion about
what I was planning in Macau,” he says.
Mr Wynn watched the Chinese customers in
Macau’s local casinos and noticed their preference for smaller spaces.
“I wanted the efficiency of a casino with big
capacity without sacrificing intimacy and I came
up with a design solution that was definitely affected by my observations of Macau and its
smaller gaming areas,” says Mr Wynn referring
to his casino’s dividing columns creating intimate chambers fringed with rich drapery, quite
paradoxical to the expansive Las Vegas type auditorium.
Traditionally the market has been segmented between high rollers and the mass market,
debate rages over which are more profitable.
Mr Wynn has his own take on the matter.
“There is a tendency in the press to draw a
line between the high and low rollers, but no
such line exists. It is a perfectly shaded piece
of art, graphic black to
“Wynn Macau
pure white with every
offers choice to
shade of grey and silver
people seeking a in between – people in
that radius keep switchdestination of
ing and are not simply
refined taste and controlled by economic
high class
reach.”
discretion”
After 40 years in the
business, Mr Wynn’s aim
was “to build a place that is lovely, immaculately
clean, fun, and open to everybody with the highest level of service and food quality, then people will pay at all levels of the spectrum. Someone might spend $HK200 on gaming and then
spend HK$40,000 at Louis Vuitton,” he exclaims. “So I don’t talk high rollers and mass
market, we have been successful at doing everything.”
The most successful businesses in this world
are those who value their staff, an adage Mr Wynn
lives by.
“The asset is the people, not the building. We
want to be good neighbours in Macau which inevitably results in a good business return, and
results in a tomorrow that is better than today,”
he says seriously.
The much anticipated expansion of Wynn
Macau is on its way. The Diamond Suites Hotel
and Diamond Casino will integrate the existing
Wynn tower into a substantial Macau landmark.
A thousand rooms and additional gaming facilities will be added, with a slightly more European touch. The final property will allow the visitor to move through different and consistent
spaces and write their own story. Another way
to live the Macau experience, having at the same
time a level of quality which is consistent with
the needs of the global traveller. ●
Macau
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6
BANCO NACIONAL ULTRAMARINO
Banking on the neon lights
A reassuring presence in the Macanese
financial arena since 1902, Banco
Nacional Ultramarino has invested a
century into the people and infrastructure of
the Special Administrative Region
It all had to begin somewhere, and a whole lot of
money is a good place to start. Before Macau could
don the crown of gaming capital of Asia, the locally established Banco Nacional Ultramarino (BNU)
played a pivotal and courageous role in providing
western gaming operators with guarantees to secure a much sought-after concession and enter Asia’s
fastest growing city.
BNU began operations in Macau in 1902 and in
2001 it became a wholly owned subsidiary of Caixa
Geral de Depósitos (CGD), the largest state-owned
financial services group in Portugal. In 2002, one
century after its creation, BNU bore witness to a
changing economic landscape so dramatic it was
almost unimaginable.
“We could not anticipate what was to come, but
we had a fair idea, a knowledge that international
banks did not have,” says Herculano De Sousa, chief
executive officer of BNU.
BNU saw the potential and convinced their head
office to share their vision and provide the backup to secure what would become a very profitable
future.
To gain approval for a gaming licence, western
interests were required to provide a bank guarantee to a government still cautious about what
might occur as a result of their landmark tender
invitations.
Mr De Sousa explains, “The tender was designed to require the winners of each concessionaire to invest at least $500 million in the next
five years and a bank guarantee to secure this intention. If the obligation was not met, the government would execute the bank guarantee, about
$100 million.”
Finding a bank that would agree to such a gamble was another story. “Nobody was prepared to
issue the guarantee because nothing was on the
ground yet,” says Mr. De Sousa. “So that is where
we stepped in, and it proved to be the beginning
of a huge success.”
Extensive risk evaluation was undertaken on a
future potentially fraught with obstacles, but BNU
assessed it differently. With over 20 parties vigorously bidding for only three concessions, it was obvious this was serious business.
Mr De Sousa explains: “Even if one had to withdraw, I did not believe that it was in the best interests of the government to execute the bank guarantee. There were sixteen bidders waiting in line.”
T H E P E N N Y D R O P S. Macau today is booming
with development; however, without BNU’s guarantee,
contracts could not have been signed, hence the
government and the operators found themselves
grateful to the bank for facilitating the process.
“We have built a reputation as we were the only note-issuing bank until 1995,” says Herculano
De Sousa, CEO of BNU. Mr De Sousa is in no doubt
“We could not
anticipate what was
to come, but we had
a fair idea,
knowledge that
international banks
did not have”
Banco Nacional Ultramarino has offices across the world and a wealth of
experience under its belt.
that “this institutional presence
in Macau naturally encourages
people to come to us for big
things.”
BNU’s assistance has paid off.
“People understood the importance of what we had done, so
when they were putting the finance together, we were invited
to par ticipate,” says Mr De
Sousa.
And participate they did, “taking big chunks of those deals”
in Mr De Sousa’s words, “because we had the muscle of CGD
behind us.”
When the casinos opened BNU
were there with tailored banking
services. “They opened their accounts with us because we had
developed the relationship from
the beginning,” he says. The first
Herculano De Sousa,
Chief Executive Officer of BNU
casino, Las Vegas Sands, needed ATMs and salary
accounts for over 3,500 employees. As time progressed, BNU learnt much about their new sophisticated customers and their high expectations.
When Sands repaid their debt – as well as their
own capital – in the first 12 months of operation,
the banking industry clamoured for a piece of the
action. “The Sands was really the market study for
everybody else,” says Mr De Sousa.
CGD were of course pleased with their faith in
their subsidiary. “It reflected nicely on the banks
bottom line. From 2004 to 2005, our profits grew
by 42%. From 2005 to 2006 they grew by 156%.
In 2006 we grew by 52%. If you add all that together, in three years we have more than doubled
in size,” says Mr De Sousa says happily.
However, BNU are prepared for the inevitability
of sharing the massive financial requirements of a
large, growing city with others. “We compete and
will slow down to a more sustainable speed, but I
am confident that the bank will do well,” says Mr
De Sousa.
Opening three new branches on the same day
in December, BNU are clear about their objectives.
“We are positioning ourselves with the employees,
the thousands of people who work for these properties who will bring good consumer business to
our counters,” he adds.
Just imagining the multitudes of cash that fly about
Macau each day is mind-boggling. Mr De Sousa
says that BNU has opened a second vault in anticipation of the future. “We will be ready to cope
with growth. It is just warming up. Just wait for the
real thing, wait for Cotai!” he says.
Reflecting on the new Macau and its benefit
to local society, Mr De Sousa says that when he
arrived eight years ago the city was in a poor
economic situation. “It was a very quiet place
but you cannot have it both ways, you cannot
have growth and better paid jobs without some
hardships.”
A fine line exists between pleasure and pain,
but the optimistic climate of confidence in Macau
today points to the former winning out. ●
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