Inside Asian Gaming

45 44 Regional Briefs Crown Macau Update Melco PBL Entertainment (Macau) Limited announced its Crown Ma- cau Hotel Casino will open on a trial basis on April 28, before formally opening to the public on May 9. The grand opening ceremony will be held on May 12. Crown Macau has 36 floors, with 183,000 sq. ft of gaming space,which will feature 220 gaming tables and over 500 slot machines at opening. Construction of Crown Macau began in December 2004. Melco PBL’s initial public offering prospectus, filed on December 19, 2006, estimated that the total cost for Crown Macau would be US$512.6 million, including the value of land for the project. In March, the company announced that the cost will now be ap- proximately US$71 million, or 14% higher.The cost increase is in three principal areas: pre-opening and property marketing expenses; furni- ture, fixtures and equipment expenses for the casino operations; and design and fit-out expenses for the hotel and casino areas. Star Raises Macau Casino Stake Star Cruises announced in March that it was increasing its stake in a Macau casino project linked to Stanley Ho. Star said in a statement it will raise its stake in the project from 56.25% to 75% after gaining full control of a joint- venture company from its sister company Genting International.Following the HK$58.5 million acqui- sition, Star Cruises’ investment in the Macau project will increase by HK$875 million to reach HK$3.5 billion (US$450 million). Star Cruises also said it will sell its 25% stake in the project to de- velop an integrated casino resort on the Singapore resort-island of Sentosa. Star was part of a consortium headed by Genting Interna- tional that in December was awarded the bid for the second of Sin- gapore’s two planned integrated resorts. Genting will acquire Star’s entire stake in the project to gain a 100% share. Genting’s withdrawal fromtheMacau project is likely to have been prompted by the Singapore government’s announcement that both Genting and Star Cruises would need to undergo “suitability checks” before being awarded the casino license.The pro-government Singa- pore-daily Straits Times earlier reported that the deal with Stanley Ho had “raised a red flag” with Singapore authorities. Dr Ho has been al- leged to have links to organised crime groups, although no evidence has ever been provided to support the allegations. Stanley Ho’s Interest in Sydney Stanley Ho has donated A$109,000 to Australia’s Labour Party, which is contesting theNSWstateelection inMarch.Of the total,A$48,000bought Dr Ho the chance to have lunch with NSWpremier Morris Iemma. Dr Ho’s interest in NSW is considered to be related to the partner- ship between his son Lawrence’s Melco International Development and Sydney-based James Packer’s Publishing and Broadcasting Ltd. Packer’s company owns and operates the only casinos in Mel- bourne and Perth, and has long coveted a casino license in Sydney. The exclusive license for Star City Casino in Sydney was awarded for 12 years in 1995, and will run out after five months. The Iemma government has not ruled out a second casino for Sydney but is unlikely to pursue the issue until after the election, as- suming it wins. It was a Labour government led by former Premier Neville Wran that awarded the original license in December 1994 to a consortium headed by Las Vegas-based Showboat, and Sydney- based Leighton Properties. The Packer group was an unsuccessful bidder and appealed the decision. Keeping Minors Out in Macau Macau’s casinos could face stiffer penalties if they permit minors onto their premises after a 16-year-old girl won a US$120,000 jackpot at Las Vegas Sands Corp’s Sands Macau. Sands had originally refused to pay the girl the winnings, since it is against the law for anyone under 18 to gamble in Macau.The city’s gaming board intervened, however, making Sands pay the winnings to the girl’s mother. Observers welcomed the proposed tougher regulations.“Macau’s casino regulatory environment will continue to increase in its level of sophistication as the jurisdiction experiences higher levels of gross gaming revenue,” said Jonathon Galaviz of Las Vegas-based gaming and tourism sector analysts Globalysis. “As Macau becomes one of the leading centres in the world for casino gaming activity, the regulatory environment will continue to evolve to address these new and upcoming challenges,” Mr Galaviz added. Oversupply Concerns Macau law currently allows the city’s six official casino license holders to negotiate deals to run casinos in properties paid for and developed by partners.For instance,Melco PBL will run the casino in the planned US$2.6 billion Macau Studio City project, being developed by a con- sortium including Hong Kong-listed e-Sun Holdings, Las Vegas casino operator David Friedman and Singapore’s CapitaLand. Macau casino mogul Stanley Ho, meanwhile, recently negotiated a deal to run the casino at the US$1 billion Resorts World Macau, to be developed by Star Cruises. Dr Ho’s SJM runs revenue sharing agreements with several other partners, who provide the venues for the SJM casinos in exchange for a share of the casino revenues. The revenue sharing model was pio- neered by Dr Ho, and sees the casino licensee receive a share of rev- enue without having to assume any financial risk. Such arrangements could result in a drastic increase in casino supply, with Deutsche Bank’s Karen Tang pointing to potential oversupply as one of the top risks facing the Macau casino sector. In response to the latest announcement that Richard Branson’s Virgin Group was negotiating with Macau casino licensees to develop a casino resort in the city, Ms Tang noted: “The news highlights in- dustry supply risks as non-licence holders can relatively easily enter the market via forming revenue-sharing arrangements with conces- sionaires.” She added:“These deals highlight supply-side risks and in- crease competition for the six licence holders.” In a report in the March issue of Macau Business magazine, how- ever, an anonymous local government official said such deals could soon be halted, and both the Virgin and Star Cruises projects may not be allowed to proceed. MGM-Pansy Ho JV Wins Nevada Approval Stanley Ho’s daughter Pansy won initial approval from Nevada gam- ing regulators to go ahead with her joint venture partnership with MGM Mirage to open a US$1.1 billion casino in Macau – scheduled for completion in the fourth quarter of this year. MGM Grand Macau, located on a waterfront site on the Macau peninsula, will have about 600 rooms, suites and villas, 345 gaming tables and 1,035 slot ma- chines. MGM Mirage has said the JV is already in talks to build its sec- ond casino resort in the city on the Cotai Strip. Nevada gambling authorities have spent more than two years in- vestigating Pansy Ho’s background because of suspicions her father had ties to the organized crime gangs that allegedly ranVIP gambling rooms in his Macau casinos when the territory was still under Portu- guese control. Although Nevada regulators have accepted Ms Ho, they remain suspicious of her father.“There are volumes of controversy surround- ing Dr Stanley Ho, both historic and present,” said Nevada Gaming Control Board member Randall Sayre.“Frommy perspective, he oper- ates in an environment that is less transparent than I am comfortable with.” “But Mr. Stanley Ho is not in front of me today,” added Mr Sayre. “The joint venture participants must be measured on their own mer- its.”After some five hours of testimony and questions that delved into Pansy and her sister Daisy’s sources of income,and their numerous in- terests in other Macau business ventures with their father, the three- member board gave its unanimous approval. Their recommendation must be confirmed by the Nevada Gaming Commission, which is ex- pected to meet in March. The Mississippi Gaming Commission approved the JV between MGM and Pansy Ho in February 2005. The New Jersey Attorney Gen- eral’s Division of Gaming Enforcement, however, is still investigating the partnership. Under Nevada gambling laws, holders of state licenses such as MGM Mirage must not violate any gambling laws abroad. They are also forbidden to enter into “unsuitable” associations that would “re- flect discredit or disrepute upon this state.” MGM pursued Pansy Ho as a partner for her local market exper- tise and as the key link to buying a Macau casino sub-concession from Stanley Ho’s company, SJM, for US$200 million. After that transaction, the partners were able to sever official ties with SJM. StarWorld Snatches Market Share Galaxy Entertainment Group claimed it had clinched a 22% share of Macau’s casino revenue in January, as its table supply soared.“At the end of January, we were operating 607 tables, compared to 63 for the same month last year,”said senior vice president John Au,adding that Galaxy hopes to increase its market share to 25% by the end of the year. Mr Au said net earnings per table at Galaxy’s StarWorld Hotel and Casino, which opened in October 2006, has reached HK$70,000, com- pared to the market average of HK$40,000. StarWorld operates 36 VIP tables and aims to increase this to more than 50 “in the near future.” The VIP rooms generated HK$10.9 billion (US$1.4 billion) in revenue in January alone. Galaxy also announced the hotel tower for the Galaxy Mega Re- sort at Cotai has been topped out and the hotel is expected to open in the third quarter of 2008.