Inside Asian Gaming

INSIDE ASIAN GAMING | November 2009 6 Big Macau To Go Can Las Vegas be franchised across Asia? A nyone wishing to predict the future direction of casino market liberalisation in Asia may be tempted to base his or her analysis on the Macau model. TheMacaumodel involvedamomentous and industry-changingdecision tomatch the financial deal making capability, real estate building skills and venue management ability of the Las Vegas gaming operators to the adrenalin and passion of Asian players. Australians and New Zealanders also had something to do with Macau’s ‘Big Bang’. That’s in terms of heavy investment from Crown Ltd’s partnership with Hong Kong-listed Melco and in terms of the many executives recruited from that part of the world to help set up the new look gaming resorts. We shouldn’t fool ourselves, however, that on the infrastructure front it’s anything other than Las Vegas-style financing and Las Vegas-style packaging that has dominated post-liberalisation Macau. If imitation is the sincerest form of flattery, then Sheldon Adelson, SteveWynn andTerry Lanni should be gratified that their injection of Nevada glamour to the Macau market helped push the incumbent Dr Stanley Ho to up the game of his casino holding company, SJM. He did that by opening new venues and upgrading others, albeit at significantly lower capital cost and with a product offer very tightly focused on Chinese tastes. US standards of product in terms of service and facilities have also proved an inspiration for Galaxy Entertainment Group, the Hong Kong listed company that also joined the liberalisation party. Wider audience So when Singapore announced in 2005 that it too was seeking partners with international experience for its two integrated gaming resorts, the template for Asian casino liberalisation looked to be clearly established. Add to that the fact officials in Taiwan looking at liberalisation have gone on record expressing admiration for Singapore’s approach, then the recipe for success seems even more clear cut. Get a foreign management partner, get foreign money and invite the world to play. Also, let’s not forget MGM MIRAGE’s decision to lend its name to the Ho Tram Strip, the gaming resort in Vietnam planned by Asian Coast Development Ltd. Case closed? Perhaps not. Look more closely at key Asian markets and the Las Vegas-style liberalisation template looks lessmonolithic.Macau itself is not necessarily the best example fromwhich to draw wider conclusions. Its economy and story is an exception, rather than a rule, in the history of Asian gambling. Even though visitors are often surprised to learn that as much as 30% of Macau’s GDP actually comes from outside the casino and tourism industry, no one is in any doubt that without the financial power of its gaming market, Macau would die in its feet overnight. It has been a centre for gambling since at least the mid-19th century, and probably earlier. In that sense, Dr Stanley Ho’s acquisition of the first formal gaming monopoly in 1962 was pushing at an open door, rather than some kind of major cultural and political breakthrough in the social acceptance of casino gaming in Asia. Even allowing for the caveat of oligopoly (i.e., a state monopoly divvied up between a number of different players) which is what Macau post-liberalisation really is, Macau has some distinct elements of exceptionalism. So far, Macau and the Philippines are the only jurisdictions in Asia to have truly liberalised their casinomarkets in the sense that anyone over the legal minimum age (18 in Macau and 21 in the Philippines), from anywhere in the world, can come to play on the same market access terms (subject to them not being on any watch list as a banned person). It may be no accident that the two most free trade-loving jurisdictions in the region were also for hundreds of years major trading centres for colonial powers. No one should confuse the willingness of countries such as South Korea and Japan to engage with the world through exports as evidence they want to operate their domestic markets on anything other than a restricted-access basis if they can get away with it. Local barriers Even free market Singapore has imposed a barrier to entry to the gaming floors of its two resorts for its own citizens, in the form of either a daily or a yearly membership fee. The entrance fee for locals is S$100 (US$71) per 24-hour visit or an annual fee of S$2,000 (US$1,435). In South Korea, only one of the country’s 17 casinos is open to locals, and that’s in Kangwon province, a tedious and torturous three and a half hour, 150-mile road journey to the east of the national capital, Seoul. Taiwan may like Singapore’s liberalisation model, but it has arguably hamstrung its own casino project from the beginning by insisting it must be located on a windswept Cover Story Rendering of the planned Ho Tram Strip resort