Dr Stanley Ho’s recent hospital stay has focused minds on a Macau without the ‘King’ of gambling
What a difference a week makes. Only days after Dr Stanley Ho was declared the new chairman of what in effect is a cartel of the Macau casino operators designed to tone down competition and see them though the chill of recession, he was out of the game through ill health.
It’s been reported that Dr Ho underwent surgery at Hong Kong Adventist Hospital for a blood clot on the brain.
Some of the more lurid media speculation has suggested that Dr Ho’s removal (albeit one hopes on a temporary basis) from the Macau gaming scene could see a reprise of the triad turf wars that broke out in the territory prior to the handover to Chinese administration in 1999.
What the basis is for this speculation—other than some vague notion (recycled at regular intervals by United States law enforcement agencies) that shady characters are associated with VIP gaming rooms in Dr Ho’s properties—is anyone’s guess.
Succession planning
What does seem clear is that the health scare has focused attention on the leadership succession at SJM Holdings, Dr Ho’s Hong Kong-listed casino operating company, as never before.
Depending on what you read and whom you believe, SJM is either a top down, command and control organisation, or operated on a ‘divide and rule’ basis. In the latter analysis, SJM is said to have parallel and often overlapping management structures reporting respectively to Dr Ambrose So, the Executive Director, or to Angela Leong, Dr Ho’s fourth consort and mother of his youngest children.
The primogeniture model favoured by European feudal aristocracies (i.e., inheritance by the first-born son) is typically found in business dynasties in China and the rest of Asia.
But in a business ‘reign’ as long as Dr Ho’s, with 17 children born over the course of more than four decades, a succession style more akin to the Ottoman Empire seems to have emerged over the years. Under the Ottoman system, individual wives would manoeuvre to try and ensure their own (male) children were the last ones standing in the race to the throne.
Lawrence Ho, Chairman of Melco International Development and Co-Chairman of Melco Crown Entertainment (Nasdaq: MPEL), the operator of City of Dreams, and his sister Pansy, a joint venture partner with MGM MIRAGE in the MGM Grand Macau, as well as managing director of Dr Ho’s investment companies Shun Tak and STDM, are the names that usually come up in connection with the succession issue.
Grounds for dispute
That rather supposes, though, that Ms Leong and Dr So would simply stand aside and let one or both of those relatively ‘senior’ offspring run things. That is by no means guaranteed, especially in Ms Leong’s case. The Ho family has shown over the years that it is not afraid of litigation and has the funds to pursue it. That was proven by the drawn out attempts by Dr Ho’s sister Winnie to block the flotation of SJM last year.
It also assumes SJM would be kept whole, rather than being broken up into composite parts for absorption into the existing gaming operations of Lawrence and Pansy, as a sort of ‘living will’, or sold off in chunks to any other interested party willing to pay for the privilege.
Assuming SJM were kept whole—at least in the immediate period of succession—it could prove an awfully juicy bone for any dogged litigants to chew on. The potential for such goings on when the stakes are that high was shown last year, regarding the fortune of Hong Kong heiress Nina Wang, also known as ‘Little Sweetie’. Ms Wang, who died two years ago at (by modern Chinese standards) the relatively girlish age of 69, was estimated by Forbes to be worth US$4.2 billion in 2007.
Fatal distraction
Any power struggle within or about SJM in a post-Dr Ho world would at the very least be a major distraction for the company in a very challenging and competitive era in Macau gaming.
Both Pansy and Lawrence have proven themselves to be very competent business people. But arguably a significant part of the brand value of SJM lies in Dr Ho’s personal relationships with powerful people in Macau, Hong Kong, and Mainland China, as well as the wider world, and his ability to broker deals with them to SJM’s competitive advantage.
Were SJM to be run on less idiosyncratic and more corporate identikit lines, as just another listed gaming company, it could lose some of the very qualities that have allowed the company to maintain a healthy share of a growing ‘pie’ in terms of gaming revenues.
To say Dr Ho has seen it all and done it all in Macau gaming may not quite be accurate because his reign isn’t over just yet. But he does have an ability to bring disparate groups together for the benefit of the gaming industry and its shareholders—as well as for the wider community through philanthropy.
A recent example of Dr Ho as both fixer and mediator came in late July when he was named the inaugural chairman of the Chamber of Macau Casino Gaming Concessionaires and Sub-concessionaires.
‘Cartel’ is not a word you will hear being used by the chamber or its individual members. But if it walks like a price-fixing duck and it quacks like a price-fixing duck, then—Inside Asian Gaming would maintain—it’s a cartel duck. Casino operators who might otherwise be at each other’s corporate throats in a red meat capitalistic system such as the United States, seem happy to sit down as meekly as lambs once Dr Ho gets them together for dim sum.
Peace breaks out
Las Vegas Sands Corp’s The Venetian Macao and MPEL’s City of Dreams have in effect kissed and made up regarding competition on VIP commission at their neighbouring sites on the Cotai Strip™. There could be more operator love-ins to come.
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As Stephen Weaver, Asian regional president of LVS, told IAG after the inauguration of the operators’ Chamber at the Grand Lisboa Casino in relation to the bilateral deal on commissions: “We’re neighbours, we’re on friendly terms, so it didn’t make sense to enter into [commission] agreements that might have to be amended later at the behest of the government.”
Dr Ho is no softie and has been known to use some choice terms when he wishes. But he does have the experience, the diplomatic skills and ultimately the pragmatism to make people see, as the Italians say, that ‘one hand washes the other’. For the Macau operators to tear each other apart now might benefit some consumers for some of the time. Ultimately, though, the chances are that a price war would merely strangle at birth any aspirations Macau has to be a quality tourism destination, and instead create a world of product piled high and sold cheaply.
For the sake of Dr Ho in particular and Macau in general, we must all hope he can get back to his desk as quickly as possible.
