Inside Asian Gaming

INSIDE ASIAN GAMING | June 2010 16 S tanley Ho still controls the largest single share of the Macau gaming market (31.9% of the gross in the first quarter of 2010) even eight years after the formal end of his monopoly and six years after the opening of the first foreign owned casino, Sands Macao. It’s easy to read too much into SJM’s and Dr Ho’s continuing ascendancy in the Macau gaming market. It could be as much to do with his competitors’ mistakes (such as their initial determination to try to cut out the junkets) as his own good judgement. And SJM has suffered self-inflicted wounds along the way, such as the intra family litigation linked to SJM’s flotation on the Hong Kong Stock Exchange. Dr Ho is a mortal just like the rest of us, as his recent unfortunately extended stay in hospital illustrated. Like a good general or a good chess player, however, Dr Ho and his management team do seem to have the ability to see several moves ahead in the game. This means that when SJM acts in the Macau market, it may not be doing so in a strictly linear ‘stimulus and response,’ ‘cause and effect’ way. It may be positioning itself for an opportunity as yet unseen by the market as a whole or in order to counter a threat several steps down the track. In order to get that overview, you either need a high vantage point, or good intelligence. SJM has both. Commission war An example of staying several steps ahead in the market is the way that SJM- linked interests were able to head off the Western operators’ attempts to gang up against SJM on junket commission rates. That commission battle started in late 2006 with the opening ofWynnMacau and heated up after the opening of The Venetian Macao in August 2007 andMGMGrandMacau (now MGM Macau) in December of that year. Dr Ho went on record in September 2006 complaining that ‘cutthroat’ competition on junket commissions risked tipping a third of his junket operator partners into bankruptcy. He had a point. In 2002, before outside competition arrived, the average commission rate on VIP chips in Macau was 0.7%. By 2008, it had crept up to an average of 1%. But was Dr Ho’s hand wringing merely a feint to buy time while he developed a new method of attack? “ Hold out baits to entice the enemy. Feign disorder, and crush him ,” as Sun Tzu puts it. Stanley Ho and the Art of War SJM’s market rivals could do worse than read Sun Tzu’s treatise on how to win a battle In Focus “The art of war teaches us to rely not on the likelihood of the enemy’s not coming, but on our own readiness to receive him; not on the chance of his not attacking, but rather on the fact that we have made our position unassailable.” Sun Tzu ‘The Art of War’ Sheldon Adelson—challenge to SJM