The Asian Gaming 50 – 2014: 1-9

Back in February in a conference room at a plush hotel in Tokyo’s upscale Roppongi district, a couple hundred dark-suited Japanese business types had turned out for a weeklong investment forum sponsored by CLSA. The ink was barely dry on a bill in the National Diet to legalize casinos in the world’s third-largest economy and they were there to size up the opportunities.

Asia’s US Big Three—Las Vegas Sands, Wynn Resorts, MGM Resorts International—were presenting.

And then it happened: the inevitable Adelson moment. Addressing a media briefing on the forum’s first day, the chairman and chief executive of Las Vegas Sands scored his headline. “We will spend whatever it takes,” he said. “Would I put in $10 billion? Yes.”

The cab driver’s son who at last glance occupied 14th place on the Forbes “World’s Billionaires” list had stood the week’s proceedings on their ear.

He wasn’t finished either. “We could pay all cash,” he said. “We don’t have to, but we will borrow money in a typical mortgage-tovalue ratio.”

The point, he said, is that “We can spend $10 billion without borrowing money,” and he didn’t forget to mention his competition, which happens to include just about every heavyweight casino corporation on the planet, adding with aplomb—“They can’t.”

“Whatever it takes”—it became the phrase that would dominate the news coverage of that conference for the rest of the week, and that of a simultaneous gathering at another Tokyo hotel of the Japan Academy of Integrated Resort and Gaming Studies.

As for the “$10 billion,” much of the latest analyses of Japan’s potential suggest an investment of even half that isn’t likely to return the 20% that is the oft-stated litmus for LVS in any market that looks good to it. You have to think Sheldon Adelson is familiar with those studies. But what he wanted his audience to know (and to believe, better yet) is that he’s the man to beat in Japan.

Which is debatable, of course. He’s got a brilliant lineup of rivals, A-list all the way, and what they’ll also offer to win a license in a market that is conservatively forecast to be worth $7 billion a year out of the gate in gaming alone (some say as high as $15 billion) will be exciting, and as the banks will be eager to buy into such a promising market, capital isn’t going to pose a major obstacle for any of them.

What cannot be disputed, though, what the Japanese will not fail to consider, is that Sheldon Adelson has created the greatest money-making machine the gaming industry has ever seen, bigger in terms of market capitalization than the rest of the US-listed industry combined, four times bigger in US dollar terms than Genting Singapore, five times bigger than Crown Resorts. If you’d bought LVS at its recession-era bottom in the spring of 2009—when Mr Adelson anted up $1 billion from his own pocket to keep the bondholders at bay—as of this writing you’d have made back your money 46 times over. Last year, he walked away from his $30 billion EuroVegas plan in Madrid and Wall Street didn’t bat an eye.

LVS is also the Asian industry’s pre-eminent money-making machine. The company generated US$13.77 billion in revenue in 2013, and more than 86% of it was made in Macau and Singapore, together with 89.8% of its world-leading EBITDA of $4.76 billion. This was accomplished principally by virtue of its dominance in Macau, the largest casino revenue market in the world—and we can quibble all we want over VIP share—it dominates. It dominates with more hotel rooms, more gaming floor space, more retail shops and restaurants and entertainment and MICE facilities than everybody else. In The Venetian Macao it operates the city’s most recognized and most visited destination. Macau as it exists today is largely an outgrowth of the vision that went into its creation. Now all the others are pouring everything they’ve got into Cotai, the reclaimed swamp they once shunned, to try to replicate its success.

But it’s about more than earnings statements. It’s the hold Sheldon Adelson exerts on the Asian imagination in the form of The Venetian and in Singapore with Marina Bay Sands, icons that have set the standard against which anyone desiring to play in his game must measure up. His $2.7 billion, 3,000-room Parisian Macao will feature a half-scale replica of the Eiffel Tower. The copy on the Las Vegas Strip will pale in comparison. And the vision continues to range far and wide. He still likes the prospects in some of Europe’s capitals. Vietnam appeals to him as well, he’s visited the country, and given the chance, he’ll do something fabulous in Ho Chi Minh City if the government rescinds its longstanding ban on domestic play, a prospect that’s looking increasingly likely. Seoul beckons, too, if a locals market there were similarly allowed.

In his home country he particularly likes Miami. He’s been battling the Disney empire in Florida for three years over it and he’s not giving up. The US Internet gambling lobby took heart earlier this year when reports surfaced that at 80 he might consider retiring. They’ve been reeling from the multimillion-dollar lobbying and public relations campaign he’s launched to secure a federal law to ban the sector. A prominent contingent of corporate Las Vegas wouldn’t be sad to see him go for the same reason. But he’s left them all disappointed. “As the supposed Mark Twain quote goes, the rumors of my demise have been greatly exaggerated,” he said in May. “I am as bullish about this company as I’ve ever been, and I have no plans of slowing down or passing the CEO title or job to anyone. … We have taken an important leadership position in the gaming and hospitality industry, and I plan on spending year after year building on that success.”

He’s 81 now and as driven and combative as ever.

On an earnings call last October, he stated that everyone agrees on LVS’ front-runner status in Japan. Not long after, he hosted a presentation for Hiroyuki Hosoda, a prominent member of Japan’s governing Liberal Democratic Party, which at the time was putting the finishing touches on the legalization bill it would introduce in the Diet in December. The presentation (Reuters described it as “spirited”) included a flurry of slides and a scale model of what the company would erect on Tokyo Bay. At the end, according to Reuters’ account, which came from a person it cited as familiar with the event, the lawmaker quietly mentioned that Tokyo’s is a unique culture and that planting a Marina Bay Sands-style mega-complex there might not work.

It was a gentle nudge, one that perhaps speaks to a certain concern over the bluster and the go-it-alone attitude. As Reuters’ source put it, “Many lawmakers in the casino group want Japanese companies to have the opportunity to invest. They want to make sure some money stays in Japan.”

Mr Adelson hasn’t gone out of his way to dispel these concerns. He said at the CLSA news conference in February that while he was “willing to embrace Japanese partners,” he wonders how many share his appetite and capacity for risk. (Interestingly, he tossed out the name of Softbank founder and CEO Masayoshi Son as someone he’d be interested in tying up with. The Internet and telecommunications giant had no comment.)

But to see him as some kind of bull in a china shop, as many have, is to miss the elaborate theater he’d conjured that day. It’s a thing that dances very close to the essence of the man. Forget the “$10 billion”. It wasn’t a real number. It was better. It was a magic number.

He was saying that Las Vegas Sands has more than wherewithal— it has the willingness—to gamble on Tokyo at a level the others can’t, or won’t, to gift an iconic city with an icon worthy of it. He was, after all, in Tokyo, talking to the heirs of the largest metropolitan area in the world, the people who flourish in the enduring allure of it and the enormity of its wealth. He had the spotlight and it was no time for demurring. This was one epic ego to another. Heady stuff.

That’s Sheldon Adelson.

2 Francis Lui

Deputy Chairman
Galaxy Entertainment Group

This time next year, Galaxy Entertainment Group will likely stand at the top of the casino revenue-share league table in Macau.

As of Q2 2014, it actually stood third among the city’s six operators, with a 20.8% share of gaming revenue, behind Sands China’s 22.1% share. In first place was SJM with a 24.8% share, though that figure is inflated by revenue earned at 14 third-party-owned casinos to which it lends its license in exchange for a portion of the takings.

Capacity is one of the major determinants of Macau market share. Following the May 2011 opening of its Galaxy Macau megaresort on Cotai, GEG moved ahead of Sands before the latter reclaimed its position a year later with the opening of Sands Cotai Central. But come mid-2015, GEG is set to not only once again overtake Sands, but probably also unseat SJM, with the unveiling of Phase 2 of Galaxy Macau, which is set to kick off the much-anticipated “second wave” of Cotai resort development. From there, the company, holder of the biggest land bank on Cotai at 2 million square meters, is set to continue adding capacity.

“They’re the best-positioned for long-term growth and are focused on becoming the dominant player in Macau,” observes Union Gaming Research Macau’s Grant Govertsen.

Although Macau’s gaming industry appears to be taking a breather right now, particularly in the VIP segment, few would bet against the mass market’s inexorable rise over the coming years and decades, especially following the impetus to renewed visitor growth promised by Cotai’s second wave.

“If you believe in the China consumer story you have to believe in Macau,” says GEG Deputy Chairman Francis Lui, who has a particular affinity for those consumers.

A civil and structural engineer by training, he started his career in the late ’70s in the quarries of Hong Kong with his family’s construction materials business and in 1985 started doing business directly in mainland China.

“If there is a person in Macau who understands what the Chinese customer will look like in the next five or 10 years it is probably somebody like me, who has been there doing business in China, seeing them evolving,” he says.

His father, Lui family patriarch and GEG Chairman Lui Che Woo, is ranked the second-richest man in Asia, according to Forbes, thanks largely to the family’s 51% stake in GEG, which even after recent sharp sell-downs in Macau casino stocks has a market capitalization of more than US$30 billion, ranking it the world’s No. 2 gaming company by market cap behind Las Vegas Sands.

The elder Mr Lui confirmed publicly in 2012 what was already widely known in the market—his son is in charge of the business.

Earlier this year, GEG celebrated the 10th anniversary of its operations in Macau. Francis Lui has done so well holding his own against SJM, the legendary Stanley Ho’s former monopoly, and international stalwarts Sands, Wynn Resorts and MGM Resorts International that it’s easy to forget that prior to 2004 he had no gaming experience at all.

Galaxy began operations in Macau in July 2004, at the Waldo, a third-party-owned venue, one of the three casinos of the City Clubs brand that Galaxy now operates (after assuming direct ownership of a fourth, Grand Waldo, last year). But it was only in 2006, with the opening of StarWorld Hotel, that GEG’s brand identity began to emerge. Owing to the relatively small footprint and limited amenities at StarWorld, that brand-building was initially defined by a strong service mindset and an ability to forge lasting relationships with players and junkets. Those qualities, which continue to drive StarWorld’s success in a challenging marketplace, were carried through to the sprawling US$2.1 billion Galaxy Macau, which finally gave Mr Lui a platform worthy of fulfilling his vision of providing an experience imbued with a distinctively Asian flavor rather than merely transplanting the Las Vegas megaresort model to Macau.

He defines his management philosophy as a mix of his Chinese upbringing and Western education. Forbes said of him: “When Lui Che Woo first won the Macau gambling license, Francis was taking business courses at Stanford University and found the casino industry in Las Vegas impressive. He noticed that the American model added entertainment elements besides traditional gambling in order to attract tourists. And during his global travels he found Southeast Asian-style service the best. It dawned on him that he could combine the two.”

The US$2.5 billion Phase 2 expansion of Galaxy Macau will expand Mr Lui’s vision, growing the property from three hotels to five, widening the retail selection from 35 stores to more than 200, expanding the popular rooftop resort deck, and adding more F&B outlets and entertainment offerings.

The company is also finalizing plans for phases 3 and 4 and says construction could begin as early as the end of this year, with a further investment of US$7.7 billion, focused on non-gaming facilities. Meanwhile, Grand Waldo, located near Galaxy Macau on Cotai and purchased last year for $417 million, is undergoing an extensive refurbishment and expected to reopen early next year with an assortment of all-new leisure and entertainment attractions.

3 Lim Kok Thay

Executive Chairman and CEO
Genting Berhad

A decade ago, few would have pictured a Malaysia-based monopoly operator embarking on an unrivaled global casino development frenzy—a frenzy that was arguably kicked off by the Singapore government’s decision in 2005 to legalize casinos.

Prior to that, since 1970, Genting had been content to earn healthy profits from Genting Highlands, recently rebranded Resorts World Genting, which continues to enjoy an exclusive casino license in Malaysia. The catchment area for RWG covers Malaysia and Singapore, so Genting’s decision to vie for one of the two new licenses that went up for bid in the neighboring city-state was viewed by many at the time as a defensive maneuver to hedge against expected cannibalization of its Malaysia operations. The company, led by billionaire Lim Kok Thay, pressed on with its bid even as other major operators, including Wynn Resorts, Melco Crown Entertainment and Caesars Entertainment, dropped out owing to the steep investment outlays demanded by the Singapore government. The cost eventually proved justified, of course, as the Lion City’s two IRs have gone on to become perhaps the most profitable casinos in the world.

Although gaming revenue growth in Singapore appears to have plateaued, the returns there have no doubt comfortably exceeded Genting’s initial expectations, and Resorts World Sentosa, which Genting controls through a majority stake in Singapore-listed Genting Singapore, has superseded Resorts World Genting as the group’s flagship, booking the equivalent of US$517 million in adjusted EBITDA in the first half against the Malaysia operation’s $298 million.

The outsized returns from Singapore have inspired an aggressive plan of international expansion under the aegis of Malaysia-listed parent Genting Berhad, which can bring to bear cash reserves equivalent at the end of 2013 to US$5.6 billion and whose leverage at 21% net gearing is more than comfortable for a company whose cash flow from operations—derived mainly from its three independently traded resort operators, Genting Singapore, Genting Malaysia and Genting Hong Kong—exceeded $1.4 billion last year. Berhad’s A-minus credit standing is the best among Fitch-rated global gaming companies, and Fitch says it doesn’t expect that to change when net debt levels start to rise—and they inevitably will as the company pushes boldly into the US.

The most ambitious of its plans is on the Las Vegas Strip, where the group is developing under the Berhad umbrella a US$4 billion destination called Resorts World Las Vegas. Scheduled to open in 2017, it will feature 3,000 hotel rooms, a rooftop sky park and an observation deck and water rides and is conceived from the ground up with the Strip’s increasingly influential Chinese market in mind.

Genting has a further $6 billion in proposed gaming investments in the US, including a megaresort proposed for Miami and bids on two resorts in Orange County, NY, targeting the massive New York City market. Under Genting Malaysia, which trades separately in Kuala Lumpur, the company already operates the most successful machine gaming operation in the US at Resorts World New York City, opened in 2011 at a cost of $800 million. It also has a small casino (10,00 square feet) at Resorts World Bimini in the Bahamas about 50 miles from Miami, opened last summer as part of a joint venture and which is being expanded with a hotel and docking facilities for cruise ships.

Following the 2006 takeover of British operator Stanley Leisure, Genting Malaysia created Genting Casinos UK, the country’s largest operator with 41 casinos and a 42nd under development in Birmingham that will be the UK’s largest.

In the Philippines, Travellers International Hotel Group, a partnership between Genting Hong Kong and Philippine property giant Alliance Global Group, is spending US$650 million on a phased expansion of its Resorts World Manila—the country’s highest-grossing casino— to be completed by 2017. Travellers also is licensed to build the fourth and final IR at Manila’s Entertainment City about five miles to the west on Manila Bay, though the company is focused on RWM for the time being.

In Australia, Genting Hong Kong is waiting for New South Wales regulators to approve its 2012 application to increase its 6.6% holding in Echo Entertainment to more than 10%.

Meanwhile, the groundbreaking for Genting Singapore’s planned mixed-use resort with a casino on South Korea’s resort island of Jeju, a joint venture with Chinese property developer Landing International Development, has been postponed by the island’s new governor whose administration is toughening its stance on growing Chinese investments on Jeju because of fears of speculation.

Genting is also eyeing opportunities from Japan to Sri Lanka, and a 3 billion ringgit (US$943 million) revamp and expansion is in the works in and around its Malaysia casino.

Sixty-three-year-old Lim Kok Thay inherited control of the Genting conglomerate from his father, Lim Goh Tong, who founded it. He joined the company—whose far-flung holdings also include palm oil production, utilities, oil and gas exploration and non-gaming hospitality—in 1976. He has been a director since 1986. He became chairman in 1993 and executive chairman in 2005.

The Lim family is ranked third on Forbes’ list of Malaysia’s richest, with an estimated net worth of US$6.5 billion.

4 Lawrence Ho

Co-Chairman and CEO
Melco Crown Entertainment

By Forbes’ count there are 1,645 billionaires in the world. Only 32 of them are under 40 years old. Lawrence Ho is one.

Of course, there are distinct advantages if like Mr Ho you entered the world the eldest son of a billionaire. But those do come trailing a train of expectations, all the weightier when dad is a living legend besides. Perhaps it’s what drove Lawrence Ho and James Packer to partner up in the first place. Both had big shadows to step out from. Macau provided them an opportunity. With Melco Crown Entertainment they’ve made the most of it. The opening later this year of the first phase of the US$1.5 billion City of Dreams Manila will be their joint venture’s first foray beyond the Chinese casino enclave. It’s only the beginning for them. Their fathers never envisioned anything like the global expansion they’re pursuing with determination, together and separately.

Melco Crown, in which they hold equal stakes of 33.5%—Mr Ho through his Melco Leisure and Entertainment conglomerate, Mr Packer through a subsidiary of his Melbourne-based, PSX-listed Crown Resorts—generated US$1.38 billion in EBITDA last year on $5.1 billion in net revenue, a 24.7% increase over 2012. The company will be challenged to beat that top line this year in a market that’s reeling from a slump in VIP play and slowing mass-market growth. MCE’s revenue fell 7% in the second quarter, the toughest 12 weeks for Macau’s six operators in a while. Still, the company came through the first half with aggregate year-on-year gains across all its gaming and non-gaming segments and was on a pace to surpass last year’s EBITDA total of $1.28 billion. As of 30th June, the company was sitting on cash and cash equivalents totaling $2.34 billion.

MCE’s success has enabled Mr Ho to explore gaming developments from Siberia to sunny Spain, mainly through Hong Kong-listed Melco International Development, parent company of his MLE group and his principal investment vehicle. It’s where it all began for him.

The youngest of five children and the only son of Stanley Ho and his second wife, Lucina Laam, he took a degree in commerce from the University of Toronto and returned to Hong Kong, where his eldest sister Pansy, 14 years his senior, was already making her mark, and where he acquired a venerable and money-losing concern called Macau Electric Lighting Co. (the origin of the Melco name). He rebranded it and turned its focus to leisure, hospitality and gaming and has never looked back.

Melco International hooked up with Mr Packer in 2004 to create Melco Crown, then known as Melco PBL Entertainment, which they took public on Nasdaq in 2006. Mr Ho at that point had opened the first of his Mocha Clubs machine gaming venues in Macau (Mocha would be folded into the joint venture), and in December 2007, Melco PBL opened its first casino, the 38-story, VIP-focused Altira Macau (Crown Macau as it was known then), with a sub-concession purchased from Wynn Resorts for a whopping $900 million. But Crown Macau wasn’t the end game. It would be two more years before the sub-concession justified its cost with the June 2009 opening of City of Dreams on Cotai, and it did so in a big way. CoD encompasses 668,000 developable square meters, it cost $2.4 billion to build, and it was critical to Melco Crown’s ability to diversify beyond VIP and into the high-limit, high-margin mass-market and premium-mass

segments that were only beginning to flower at the time. City of Dreams was one of the casinos that nursed them with three global hotel brands—Grand Hyatt, Hard Rock and the Forbes 5-star Crown Towers—and an array of non-gaming attractions that include three pools, 70 retail shops, 20 restaurants and bars, the city’s largest nightclub and its only successful production show to date. Today, City of Dreams drives 75% of MCE’s revenues. It’s the model MCE is taking to Manila, which also will feature a Crown Towers, not to mention Nobu’s first hotel in Asia, and the one Mr Ho and his team will look to refine further on Cotai with the scheduled opening next year of MCE’s $2 billion Studio City. There are also plans to add a unique restaurant and entertainment precinct at City of Dreams, and in 2017 a fifth hotel tower will open at CoD.

Last year, Mr Ho formed a consortium called Summit Ascent Holdings to grab first-mover advantage in Russia’s Far East with a boutique casino near Vladivostok on the Pacific Coast targeting the north China market. Melco International separately holds 5% of the project.

Last month, he served notice of his designs on Europe with an announcement that Melco International subsidiary MelcoLot had bought a stake in a proposed megaresort complex near Barcelona called BCN World. Hong Kong-listed MelcoLot is 43.9% owned by MID and one of the linchpins of the broad strategy of diversification Mr Ho is pursuing under its umbrella. MelcoLot distributes products and systems to China’s Welfare and Sports lotteries and also operates a chain of lottery retailers in the country. MID formed MelcoLot in partnership with Firich Enterprises, a Taiwan technology company that is also a partner with Summit Ascent on the Russian casino. Global lottery giant Intralot is MelcoLot’s second-largest shareholder, and together they’re part of a consortium that also operates South Korea’s National Welfare Lottery.

MID also owns 38% of Nasdaq-listed Entertainment Gaming Asia, which started life as Elixir Gaming Technologies distributing and operating machine games in East and Southeast Asia. It has since opened two small casinos on Cambodia’s border with Thailand (one of them a money-losing venture that was sold off earlier this year) and bought a precision-plastics manufacturer that moved into gaming chips and table game accessories.

Along the way, Mr Ho has piled up the accolades, from FinanceAsia magazine and Corporate Governance Asia magazine, and he enjoys the prestige of a seat on the National Committee of the Chinese People’s Political Consultative Conference. Last October, he shared the stage with Vladimir Putin as a guest speaker at VTB Capital’s fifth annual “Russia Calling!” Investment Forum in Moscow.

Forbes pegs his net worth at US$2.1 billion.

5 Steve Wynn

Chairman and CEO
Wynn Resorts

As of 30th June, Wynn Resorts had plowed more than US$1 billion into the Cotai megaresort that founder and Chairman Steve Wynn has called “the single more important project in the company’s history”.

Wynn Palace, priced at $4 billion and slated to open on Chinese New Year 2016, “represents everything we’ve learned,” he has stated.

That’s saying something coming from the man behind The Mirage, Bellagio, Treasure Island, Wynn Las Vegas and Wynn Macau.

The son of a Maryland bingo parlor operator, a graduate of the famed Wharton School of Business, Steve Wynn parlayed a small stake in a long-gone Las Vegas hotel into the empire that was Mirage Resorts. Like Jay Sarno and Benny Binion before him, like his contemporaries Kirk Kerkorian and Bill Bennett and Anthony Marnell and Sheldon Adelson, he is, and always has been, a showman first and foremost, one with a genius, like theirs, for seeing Las Vegas as more than it could see itself. Dolphins, white tigers, an exploding sidewalk volcano, nightly pirate ship battles, Picassos, Rembrandts, Renoirs, Cirque de Soleil, 100-foot sprays of water dancing under colored lights to the strains of Andrea Bocelli—he’s the man who wove them into the landscape of the Strip and into the way millions of tourists and holidaymakers around the world would come to perceive Las Vegas.

He was a pioneer on the finance side too. The funding of The Mirage was engineered by the famous Michael Milken (or infamous, depending on your point of view), and its success transformed highyield “junk” bonds into the go-to vehicle for a generation of casino developers in the US, for better or worse.

More recently, though, and perhaps above all, he’s been a seminal figure in the commoditization of luxury, which is the heart and soul of the integrated gaming resort as we know it today, and certainly the story of Las Vegas as well.

Such was Steve Wynn’s renown by the turn of the century, even as far away as China, that he would be the only non-Chinese operator to win one of Macau’s three casinos concessions.

It was the vision that seduced them. Mr Wynn’s shareholders, however, know the legend has never been stymied by that. It’s always been carried through into design and execution. The ultimate compliment paid to him are the multiples his companies command, the confidence they inspire with a strategy that refuses to cut corners with a luxury niche that enables Wynn properties to succeed consistently at portraying themselves as “boutique” alternatives in spite of their obvious size and scale. His hotels will play poker on the Strip with three or four percentage points of occupancy in exchange for room rates that run at more than double Strip averages. There  are a lot of moving parts involved in making that profitable, and ittakes operational savvy to pull it off, and Steve Wynn, an old hand at competing in the toughest casino markets in the world, is as savvy as

they come. He’s added more prudent financial management to his arsenal, too, since relinquishing Mirage Resorts to rival Kirk Kerkorian all those years ago, and his skill at identifying and nurturing talented management is more in evidence these days than ever. This is serving him particularly well right now at his Macau hotels at a time when VIP volumes are falling market-wide and growth in high-margin cash play is slowing and competition on the capacity-constrained peninsula is intensifying in response to the Cotai boom. Wynn Macau and Encore at Wynn Macau are consistently Michelin- and Forbes Five Star-rated and neither is going to be budged from its position at the top end of the market. Indeed, he continually reinvests in making them better, shuttering dozens of precious table games and scores of rooms over the last 18 months, and taking the hit in revenues, and Wall Street and Hong Kong are unfazed. They love it when he gets ambitious. When you’ve got lightning in a bottle you don’t look away, and the Wynn Macau complex generates upwards of 70% of Wynn Resorts’ revenues and more than 65% of its EBITDA.

“You know that we are primarily an Asian company,” he told investors at one point last year. “Thank goodness, and God bless that, and we intend to stay an Asian company primarily.

” Wynn Palace is how he plans to do it, and from that standpoint it’s easy to see why he describes it as “the single most important project in the company’s history”.

For all that, though, not much is known about it. It’s a sizable footprint, 51 acres. Corporate filings, however, describe only “a fully integrated resort … containing a 1,700-room hotel, performance lake, meeting space, casino, spa, retail offerings, and food and beverage outlets”. Mr Wynn has colored in some additional detail on earnings calls, describing the overall theme in terms of “flowers, floral things,”

reminiscent of Bellagio, but distinct in their own right, incorporating terraced gardens, floats, sculptures of various shapes and sizes, some as large as 12 meters across.

“Our resorts have always had a special public entertainment piece,” he has said.

Accordingly, the lake at the entrance will be bordered by restaurants and enlivened with fire and lights—also reminiscent of Bellagio, a bit like Wynn Macau, too—but on a more elaborate scale. An amusement ride is envisioned as the centerpiece: an aerial tram with gondolas in the shape of dragons that breathe smoke as they ferry visitors over the lake from the light rail station that will adjoin the complex.

“Even when we came to Macau, we resisted the temptation to build a quickie, smaller place, to get in on it fast,” he has said. “We waited and we took our time. I think that that is exactly the way to go forward in China—very thoughtfully, very patiently, with great attention to detail.”

So Steve Wynn continues to play it coy. He always does that in the run-up to his latest extravaganza, it’s the showman in him. Investors don’t mind. Keep us guessing, they seem to say. Heightens the anticipation.

6 Ambrose So

Executive Director and CEO
SJM Holdings

Chairman
Sociedade de Jogos de Macau

As a boom town the problems Macau faces are those of every boom town whose finite human and physical resources have been overwhelmed and costs are soaring, for everything, housing and labor in particular; and while these are not SJM Holdings’ problems alone, they present SJM and its chief executive, Ambrose So, with challenges the company’s founder, and Mr So’s mentor, the legendary Stanley Ho, never had to contend with.

When thousands of front-line casino workers took to the streets this summer—better pay and benefits and more transparent promotions policies topping their list of demands—it splattered unwanted headlines all over what was to have been the smooth reelection of Fernando Chui Sai On as head of government. SJM, the “home team,” as it were, the successor to the monopoly that used to be Stanley Ho’s and the operator with the deepest roots in Macau, found itself uncomfortably in the spotlight, the target of the first coordinated job action by croupiers in the city’s history.

Worse, the discontent appears to have caught the company unawares. Mr So had gone on record in support of scrapping current government policy prohibiting the employment of foreign workers as dealers. That was back in February at the groundbreaking for the HK$30 billion Lisboa Palace, SJM’s much-anticipated foray onto Cotai, and only a month after the board of directors approved 5% acrossthe- board salary hikes and bonuses. Of course, he was alluding to the obvious solution to a labor shortage that is already acute and will only get worse when the first of the six megaresorts under construction on Cotai open their doors next year. But it struck at the heart of the job protection issue, the most socially and politically sensitive of labor’s concerns, and on the eve of Mr Chui’s re-election he had to backtrack. “Regarding the policy of reserving dealer positions for residents only, I would support it,” he announced late last month after a key meeting between Mr Chui and the committee of local elites that would return

him to office. “In each territory, the government is responsible for overseeing the job opportunities of its residents; and just now the chief executive said some job types should be prioritised for local residents.”

It’s a measure of Mr So’s stature and influence that he is a member of that committee. He also sits on the National Committee of the Chinese People’s Political Consultative Committee and is a consultant to the Beijing Municipal Committee of the CPCC on relations with Macau, Hong Kong and Taiwan. His relationship with Stanley Ho dates back to the mid-1970s, when he joined SJM’s predecessor, STDM, three years out of university. He was a longtime director of Mr Ho’s Shun Tak conglomerate and has been a director and senior manager at SJM since its founding at the end of the monopoly era. He was named an executive director in 2006, and since then the responsibility for overall management and strategic execution has been his, which means that as SJM’s labor costs inevitably rise with the rest of the industry’s, rationalizing the impact on margins is going to be one of his most difficult tasks. Deutsche Bank, for one, forecasts those costs will be soaring market-wide by 10-15% a year through 2017. That’s not considering the wider fallout should things get really ugly and relatively mild job actions morph into full-blown strikes.

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 ironclad 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 longerterm 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.

7 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 concerts and live performances. The group’s media investments

often directly bolster its gaming and tourism businesses. The 2009 movie “Poker King,” starring A-list Hong Kong actors Louis Koo and Lau Ching Wan, was produced to support Suncity’s efforts to develop poker’s following among baccarat-focused Chinese players. High rollers at Suncity’s Poker King Club at StarWorld now play for the biggest pots in the world. Meanwhile, the Suncityowned e.travellers magazine and UO Macau— the leading Web site for Chinese visitors to Macau—aim to lure visitors to the city.

Although many of Mr Chau’s non-gaming investments support Suncity’s core activities, others have larger standalone aspirations. Sun Entertainment Culture Ltd, established in 2011, produces and distributes TV and film productions and organizes live concerts and marketing events.

The sharp-dressed Mr Chau embodies the Suncity high-roller lifestyle, often pictured at elite parties in Chinese-language tabloids.

But he’s known to work harder than he plays, and his professional achievements are widely recognized. Last year, he was appointed to the Guangdong provincial committee of the Chinese People’s Political Consultative Conference.

In early January, International Entertainment Corporation, controlled by Hong Kong’s Cheng family, whose patriarch, Cheng Yu Tung, is Asia’s fourth-richest man, agreed to pay HK$7.35 billion (US$950 million) for a 70% stake in Suncity Group. The deal is pending regulatory approval.

Grant Govertsen, a managing partner at Union Gaming Group in Macau, compared the acquisition favorably with practices in Las Vegas. “[We] are seeing more and more Macau gaming-related entities embrace the concept of having publicly traded equity. We would argue that this should have a longer-term positive impact—at least with respect to the industry’s reputation— as having publicly traded equity requires an increased level of transparency and an increased level of oversight.”

8 James Packer

Executive Chairman, Crown Resorts
Co-Chairman,
Melco Crown Entertainment

Unlike his famous father, James Packer’s net worth—estimated by Australia’s Business Review Weekly earlier this year at A$7.19 billion—ranks him as only the country’s third-richest person. In his desire to fix that he’s found ownership of the continent’s premier casino rather too limiting for his purposes. Indeed, Australia itself has proved too small for him.

He’s unlike his father, too, in that he prefers gambling on casinos to gambling in them, and that’s paid massive dividends in Macau via his Melbourne-based Crown Resorts’ 33% stake in Melco Crown Entertainment. It’s been his best investment to date, the one that’s allowed him to comb the world for opportunities to make another big splash.

There was talk earlier this year he would bid to take over the 2,995-room Cosmopolitan on the Las Vegas Strip, a market that’s burned him in the past but has never ceased to intrigue him. Maybe he was interested in the Cosmo, maybe he wasn’t. In May, the luxury resort, which for all its attractions has never turned a profit, went to private equity giants Blackstone Group for US$1.73 billion.

Then last month he made his splash. Crown laid out $280 million for a majority stake in 34.5 vacant acres of prime Strip real estate just a mile or so to the north, the site once occupied by a venerable casino called the New Frontier. The land will serve as the foundation for a new resort development company combining the resources of Crown and US hedge fund giant Oaktree Capital Management and headed by Andrew Pascal, a former president and chief operating officer of Wynn Las Vegas.

Israeli developer Elad paid $1.2 billion for the site seven years ago, only to see its plans for a $5 billion super-resort crash and burn in the Great Recession. Mr Packer lost around $1 billion in Las Vegas himself back then through a series of investments that unraveled in the global financial crisis, including two abortive Strip resorts. Needless to say, a lot has changed since then. Sin City is on the mend, major capital investment is pouring in, and Crown is a much bigger and stronger company now, thanks principally to Melco Crown. But credit must also go to the decision to plow several hundreds of millions back into Australia to expand the company’s Crown Melbourne, its flagship, and Crown Perth at a time when the national gaming market is struggling to overcome listless domestic demand.

“As we have built Crown Resorts into a thriving international company with successful casino ventures in Australia, Macau and London, we’ve always kept our eye on Las Vegas,” Mr Packer said when the Strip purchase was announced. “You can’t be in the gaming industry and not have a special reverence for Las Vegas—that’s where it all began.”

Crown expects to break ground on its as-yet unnamed Strip resort—news reports have it tentatively priced at $1.9 billion—in the latter part of 2015 and open the doors in 2018, about a year after Genting is slated to open its $4 billion Resorts World Las Vegas just up the street at the site of the old Stardust.

By then, Crown will be even bigger and stronger. Melco Crown is opening its US$1.3 billion City of Dreams Manila later this year with 1,000-plus hotel rooms, 1,900 machine games and 350 table games. Next year will see the opening of MCE’s $2.9 billion Studio City megaresort on Macau’s Cotai Strip with 2,000 rooms, 1,000 EGMs and a hoped-for 400 tables.

Plans for a $350 million resort in the Sri Lankan capital of Colombo have hit political and social headwinds and haven’t gone so well, but not because Mr Packer’s vision of being the first to market with a major casino to serve a potentially explosive South Asia market lacks for boldness and isn’t eminently sound.

His vision for Australia’s potential as a destination for China’s new wealth class is no less bold and is driving him to pursue a winner-take-all strategy in a rivalry with Echo Entertainment stretching from New South Wales to Queensland. In Sydney he’s successfully dismantled Echo’s longstanding monopoly and won approval for a A$1.5 billion luxury hotel and casino on the last significant developable acreage on Darling Harbour. He expects to replicate the feat in Brisbane, where he began lobbying hard against Echo’s exclusive license long before the Queensland government put three new gaming licenses on offer last year. He’s partnered in Brisbane with China state-owned property giant Greenland to counter Echo’s billion-dollar IR bid and he’s likewise prepared to commit to seven figures to win.

9 Edward Tracy

President and CEO
Sands China

The vision was Sheldon Adelson’s, the execution, that’s been Edward Tracy’s, and it’s a tribute to his tenure as CEO, recently extended another three years, that Sands China stands today as not just the largest cash-generating casino operator in the largest casino revenue market in the world, it’s been the market’s foremost innovator, the clear leader in its evolution as an all-around destination for the masses.

It’s also been a strikingly efficient company, a fact that’s less well-known perhaps, but it may well be Mr Tracy’s single greatest contribution, and it’s going to become increasingly important in an operating environment where revenue growth is decelerating and a tight, and restive, labor market is driving up costs.

How efficient is Sands China? In the first six months of 2014, Sands’ operating expense was the lowest of the six gaming concessionaires’ as a percentage of revenue—this despite the fact that its staff costs are higher than everybody else’s because it runs more casino floor space, more hotel rooms, more restaurants, more entertainment and more MICE business than everybody else. Its resulting EBITDA margin of 28.1% was the highest in the market.

Sands posted a record-breaking US$1.74 billion in EBITDA in the first half, a 35.7% increase year on year, and delivered a 45.7% increase in net income on that to $1.37 billion. In a period that ended in Macau’s first monthly decline in gaming revenue year on year in five years (the first of what would be three successive months of YoY declines), gaming revenue was up 25.2%, driven by double- and triple-digit percentage increases in mass-market play, which is where Sands consistently outperforms the market and where Mr Tracy and his team really shine operationally. In the first half, 48.5% of the company’s gaming revenues came from non-VIP play. That’s the most in the market by far. And the period ended with Sands building on its historical dominance of the competition in terms of mass revenue, with 30.4% of the market’s revenue from cash table play and 32% of revenue from slots.

The period was notable as well for a superb ramp-up of the business at Sands Cotai Central, where cash table drop was up 62.7% year on year. Revenue per available room, the principal indicator of hotel profitability, was up 47%. Total revenues grew by 85.2%.

Conversely, Sands tends to rank in the middle of the pack in revenue. But that’s by design. Its 17% of the market during the half was good for third place, which is where it consistently ranks in terms of rolling chip volume. But it’s been astutely managed. company significantly outperformed the market average in hold/rate, which is interesting because it has exceeded the market average over the last five quarters, and in four of those five it exceeded the

rate of every other operator. As brokerage Union Gaming Research Macau recently analyzed it: “SCL, while operating fewer VIP tables is increasing the value of each VIP table by working with a lower number (of higher quality) junkets. As such, we would look for VIP yield/table to continue to increase.” It’s been a sizable benefit on the cost side as well. As a percentage of gross revenue, the company’s VIP commission/promotion allowance is the lowest in the market (20.4% in the first half, in relative terms, less than half of SJM’s, which was the highest).

SCL continues to build on its pre-eminence on the non-gaming side, too, which is the source of about 10% of total revenues, the highest ratio in the market. Here, too, Mr Tracy’s steady hand is evident. The company led the other five operators in non-gaming growth in the first half (+20.1%). Room revenue was up 21.2%; F&B was up 21.5%; the 23.7% increase in retail revenue was second only to gaming in percentage terms, totaling $147.9 million, and it will continue to rise with the build-out of the shopping mall at Cotai Central, which is slated to grow by 70% this year to 400,000 square feet.

Entertainment has grabbed the most attention, though, and since Mr Tracy was appointed chief executive in July 2011, it’s grown into Sands China’s single greatest branding exercise—and for that matter, Macau’s.

His 20 years in the industry up to that point were spent in the United States, where he served as Donald Trump’s CEO in Atlantic City in the early ’90s and later managed a chain of riverboat casinos in the Midwest.

Within months of taking the helm at SCL he shut down a moneylosing Cirque de Soleil production show three years into a planned 10-year run and reoriented the focus at The Venetian Macao’s 15,000-seat Cotai Arena and 1,800-seat Venetian Theatre to Chinese and Hong Kong headliners—sprinkling in global superstars of the likes of Rihanna, Alicia Keys and the Rolling Stones—and working to transform Macau into Asia’s capital of big-time boxing and UFC mixed martial arts, hosting a 2013 title defense by Manny Pacquiao (who’s returning in November) and the professional debut of Olympic gold medalist Zou Shiming, a spectacle reportedly viewed by 100 million Chinese on state broadcaster CCTV.

There have been notable splashes of Hollywood and Bollywood glamour along the way and an innovative foray into family entertainment, a first for Macau’s casino industry, with last year’s opening of The DreamWorks Experience at Cotai Central.

Next on the busy agenda for Tracy & Co. is the romance of Paris and the first Sands resort he is overseeing from the ground up. The Parisian Macao, a $2.7 billion themed extravaganza, will house 3,000 hotel rooms and feature a half-scale replica of the Eiffel Tower and will increase by something like 20-30% the gaming and non-gaming capacity he has managed so ably.