Editor and Publisher Kareem Jalal Director João Costeira Varela Business Development Manager Matt Phillips Operations Manager José Abecasis Contributors Karen Tang, Mike Grimes, Octo Chang, Steve Marlin, Patricia A.McQueen, James Rutherford Photography Ike Graphic Designers Brenda Chao Inside Asian Gaming is published by Must Read Publications Ltd Suite 1907, AIA Tower, 215A-301 Av. Comercial de Macau - Macau Tel: (853) 6646 0795 For subscription enquiries, please email
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[email protected] or call: (853) 6646 0795 www.asgam.com 5 Editorial It’s been over three decades since Billboard magazine named Diana Ross “female entertainer of the century”in 1976, but her rendition of“Ain’t No Mountain High Enough”was perhaps a fitting anthem tomark the open- ing of the sprawling Venetian Macao-Resort-Hotel on August 28. Macau continues ascending new heights in gaming revenue and tourism arrivals, and the dawn of the mega resorts is expected to ac- celerate the climb by lengthening the average visitor stay in the city. The Venetian—reportedly the world’s second largest building—is a veritable mountain in Macau. It is staffed by 16,000 workers, equiva- lent to over 5% of the local labour force. It consumes as much power as 300,000 homes, in a city with a population of just over half a million. It cost US$2.4 billion, which the South China Morning Post pointed out is more than the Macau government’s total infrastructure investment over the past five years. There are concerns that tiny Macau will be unable to cope under the strain of the mega resorts. More than half the city’s electricity is now imported from southern China, up from 15% two years ago, and ener- gy imports will only rise further following the Venetian opening. The Venetian wisely procured a fleet of buses to shuttle customers be- tween the property and the ferry terminal and border with mainland China, but the wait for taxis on the weekend was still painfully long. Limited air connectivity will hinder the arrival of convention visitors. The list of potential infrastructure bottlenecks goes on. Las Vegas Sands Corp (LVS) and Macau’s other casino operators ex- press confidence that the government will rise to the infrastructure challenge, but it is unlikely they would publicly acknowledge fears over the sustainability of their massive investments—LVS alone faces a total investment bill of US$12 billion in the city. The throngs at the Venetian opening, however, allayed fears that there will be insuffi- cient demand to meet the surge in capacity. Competing visions Several other visions are emerging across Asia. LVS is building Sin- gapore’s first casino-centred integrated resort, due for completion in 2009. The company recently announced that the original US$3.6 bil- lion budget for its Marina Bay Sands project could be exceeded by 20-40%. Malaysian-based Genting will follow with a similarly pricey resort on Singapore’s Sentosa island. Not all visions carry such exorbitant price tags. NagaCorp is complet- ing the 503-room NagaWorld hotel casino in the Cambodian capital of Phnom Penh for a mere US$100. NagaWorld has seen a steady growth in junket revenue, and wins per junket table, and once the hotel rooms are up and running, could increasingly draw mid- to low- end junket players from across the region, as discussed in “Emerging Value” on page 19. Asia’s other emerging casino destinations could give Macau a run for its money. Macau has a 40% effective tax on gross gaming rev- enue, which, along with intensifying competition for high-rollers, has decimated margins in its VIP market. Singapore will have a 5% tax on “incentivised play” (i.e. junket revenue), further pressuring Macau’s operators. Cambodia, meanwhile, has no fixed gaming tax, with op- erators only having to pay a license fee every month (which, in 2007, was equivalent to 5% of revenue at NagaWorld). Infinite demand? Although Singapore, Cambodia and other regional destinations likely to legalize casino gaming soon—including Japan and Taiwan—could draw away gaming revenue, Macau will raise its non-gaming reve- nues from the current 2% of the mix to closer to the Las Vegas model, where over half of revenue now derives from non-gaming sources. The Venetian opening was preceded by regular reports in the Hong Kong media about Macau’s emerging threat to Hong Kong’s conven- tion and exhibition and retail industries, discussed in depth in “The Anchor Drops”on page 7 and“LookWho’s Coming to Dinner”on page 14. The 1.2m sq. ft of expo space at the Venetian dwarfs the Hong Kong Convention and Exhibitions Centre, and the Venetian’s mall is larger than any of Hong Kong’s major malls. Continued addition to Macau’s retail and convention capacity, in addition to the coming pipeline of cheaper quality accommodation and a more diversified entertainment offering could lead to greater competition for Hong Kong’s business and leisure tourism industries. LVS Chairman Sheldon Adelson scoffs at the idea that demand for his products is finite and static, and his supply-creates-demand thesis has found a wide following among analysts covering Macau. Mr Adel- son is fond of claiming that even several Las Vegases would not meet Asia’s demand. Still, results at the Hong Kong Convention and Exhibi- tion Centre over the next few years may paint a different picture. Kareem Jalal We crave your feedback. Please send your comments to
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