The promotion this week of Ted Chan to a co-COO of Gaming job at Melco Crown Entertainment (MPEL) means—in marketing terms at least—that three out of Macau’s six gaming concessionaires are now made in the image of Stanley Ho’s SJM.
The rise of Mr Chan is a great example of how Macau’s market liberalisation ‘big bang’ has in some cases imploded into a ‘let’s copy SJM’ panic. The current fashion, even among some Western operators, is to sideline Western executives and recruit Chinese ones—especially ones with Ho family connections—because of the quite reasonable belief they’ll be better at bringing in the Chinese VIP business so vital to Macau’s business model.
The latest example was the departure this week of Greg Hawkins as President of MPEL’s City of Dreams (CoD). The property has generally lagged behind the underlying growth in the VIP segment, with MPEL’s second quarter EBITDA of USD73 million missing analysts’ consensus by 13 percent.
Mr Chan’s ascent up the Macau management pole began as General Manager of Mocha Clubs. Mocha, the locals-focused slot chain, was started by Lawrence Ho in 2003 when he took over as boss of Melco. Having caught Mr Ho’s eye at Mocha, Mr Chan was recruited by Hong Kong-listed gaming operator Amax Holdings as Chief Executive. Some industry analysts found the relationship between MPEL and Amax suspiciously symbiotic. It didn’t stop Macau’s gaming regulators from approving a deal in December 2007 whereby junket consolidator AMA, a subsidiary of Amax, brought in lots of high rollers to the struggling MPEL property Crown Macau (now Altira) in exchange for a record 1.35 percent rolling chip commission deal.
The symbiotic relationship continued when Mr Chan left Amax and crossed the floor again to become President of Altira, before coming to rest in his new job as “co-Chief Operating Officer of Gaming” for the whole of MPEL.
The tag ‘COO of Gaming’—an apparent conflation of Chief Operating Officer and SVP functions—sounds like the sort of mish mash title people are given when they’ve been parachuted in over someone’s head to sort out a mess, but don’t want to make the displaced persons feel too bad. Let’s be generous and assume the ‘co’ prefix on the COO part is to reflect the joint venture between Melco and Crown.
Talking of displaced persons, something similar has been going on at MGM Macau, with some of the Western marketing executives taking a long walk off a short plank. In their stead has come a Chinese casino marketing executive who has worked closely with Dr Ho and who was also involved in helping shake up Crown’s VIP business before the arrival of Amax. MGM Macau certainly needed something.
In mid-July, analyst estimates indicated MGM Macau was heading for its lowest-ever market share of gross gaming revenue—down to a possible six percent in the first 18 days of July. Hence the decision to call in the SJM-style marketing cavalry.
Does this mean there’s some kind of SJM conspiracy to take over the Macau market? No, but it does mean that after three years of trying, neither MPEL nor MGM Macau have come up with better ways to make money here than Stanley Ho discovered about 40 years ago. That’s namely to go light on the mass entertainment side and instead have a giant pyramid marketing scheme of Chinese gambling agents and sub agents feeding VIP players to your casinos.
Neither MPEL nor MGM Macau need have spent USD3.65 billion between them on infrastructure in Macau to come up with that plan. They could have spent only half that amount and each acquired a Grand Lisboa-style property. Now they are stuck with properties that arguably are neither distinctively boutique (like, say, Wynn Macau) nor distinctively mass tourism and conference destinations (like The Venetian Macao).
Such a strategic about face in such a short amount of time by MPEL and MGM Macau strongly suggests that not enough thought went into these companies’ Macau strategies in the first place. It wasn’t even as sophisticated as ‘Build it and they will come’. It was ‘Build it and then we’ll think about who’s coming’. When MGM Macau opened in December 2007 it only had one junket deal in place, according to industry insiders.
What will the current shake up mean in practical terms on the casino floors at City of Dreams and MGM Macau? What will it do to all those shiny dreams of creating a Las Vegas of the East and all those promises of breaking the mould of traditional Macau gaming?
Don’t be surprised to see the elegant sight lines of the main floors at both properties turned into a rabbit warren of roped off or partitioned off junket areas like in the old monopoly days. It’s already starting to happen at CoD. According to AGI sources, an American would-be junket operator has negotiated some space on the main floor near the Korean restaurant and hired a few dozen glamorous Chinese marketing girls to drum up business. Good luck with that.
One thing seems clear. The main casino floors at CoD and MGM Macau won’t look the way the architects and designers first envisaged them by the time the process of Chinesification has finished. They were conceived as aircraft hangars. Now they’re likely to be sub-divided into family smallholdings. There’s nothing wrong with localisation. We’re in China after all. But no one should confuse this about-face with excellence in planning and execution.
Steve Wynn, by contrast, was able to achieve the same basic process—localisation of product through distinct zones on the floor at Wynn Macau for junkets, poker players, etc—in a far more elegant and integrated way. That’s because pillars were integral to the design of his floor. Dare we suggest this was because Mr Wynn and his team had actually thought things through in depth before they started, rather than having a ‘vision’ (one of the most dangerous six-letter words in the English language) and then trying to force market reality to correspond to it?
Does this mean the new management people at CoD and MGM Macau are going to abandon the mass market? Not necessarily. But it does suggest that in the foreseeable future, the idea of diversifying Macau’s tourism market will be honoured more in the breach than the observance.
