Ho counting on Chinese recipe in Macau

Le-Min Lim

Monday, Aug. 22, 2005 | 9:11 a.m.

Lawrence Ho, son of gaming billionaire Stanley Ho, is betting that his understanding of Chinese gamblers will help a planned HK$8 billion ($1 billion) underwater casino fend off new entrants in Macau such as Las Vegas Sands Corp.

"Macau is China's domestic market," said Ho, managing director at Melco International Development Ltd., which builds the casino. Vegas operators "don't care if you are Chinese, Indian, European, you are supposed to go to the buffet."

The planned City of Dreams will be the family's first effort to gain a share of the growing market of tourists that spend less than $100,000 a visit, compared with the $1 million-a-trip high rollers that are the mainstay of Stanley Ho's 13 casinos.

The new resort, featuring an acrylic-and-glass gambling hall from which guests can view marine life, will vie with the neighboring $1.8 billion Venetian from Sands, a resort eight times its size, as well as at least eight other casinos being built to attract tourists to the city.

"The most successful people will be the Ho family because they know the market so well," said John Bruce, Hong Kong-based vice president at consultancy Hill & Associates Inc. "The Chinese, even the casual gamblers, take their game very seriously. When the time comes for them to gamble the gold, they would go where they know, where they are known and where their preferences are known."

Stanley Ho, who ran mainly VIP operations during his 42-year monopoly of Macau's gaming business, is trying to fend off entrants including Sands and Wynn Resorts Ltd. that plan to spend a total of $12 billion on new casinos for the mass market.

"The trend is changing," said Lawrence Ho, 28, in an interview. More Chinese are "coming to Macau with their family, and want to go to the restaurants, to watch the shows, visit the tourist sites, not hide in the rooms and gamble nonstop."

Macau's VIP market, the handful of mainly Chinese gamblers that bet an average $1 million a visit, accounted for 70 percent of Macau's $5.1 billion gambling market last year, according to the government. Macau's gaming revenue rose 19 percent in the first half to 21.9 billion patacas ($2.74 billion), said Manuel Joaquim das Neves, director of Macau's gaming control board. The mass-market segment grew at twice the pace of the VIP market, mainly because Sands Macao drew more patrons, said Lawrence Ho.

The mass-market segment, comprising gamblers who bet as little as $15 a hand, accounted for about 20 percent of the market after Sands opened the Sands Macao, the city's first Vegas-style casino in May 2004. These visitors may account for half of Macau's gaming revenue by 2010, said Macau government.

Lawrence Ho said his knowledge of Chinese gaming and cultural mores may help him snare a new group of middle-class mainland gamblers. The successful operator in Macau must "adapt his product to local Chinese preferences," said Ho.

Wynn, opening its $1 billion Macau casino in the third quarter next year, said the Chinese have a keener appreciation of and desire for sophisticated entertainment than most imagine.

"I think it's fairly glib to say we don't understand what the Chinese want because we are not Chinese," said Grant Bowie, president of Wynn Macau, in an interview. "We are going for China's new rich, the more 'worldly' people, those who are typically university-educated, who either work or aspire to work in a global company."

Ron Reese, Sands's Las Vegas-based spokesman declined to comment.

Analysts including Karen Tang said it's unclear how well the Ho family will compete with Vegas operators like Sands and Wynn Resorts because of the difference in the mass market.

"VIP and mass-market gaming are two different ballgames," said Hong Kong-based Tang at Deutsche Securities Asia Ltd. "A VIP client looks for credit provision, the mass-market one looks for a nice environment, spas, entertainment."

City of Dreams will be 60 percent-owned by Stanley Ho's Melco International Development Ltd. and 40 percent by Kerry Packer's Publishing & Broadcasting Ltd., or PBL.

A visitor to the resort can expect the sort of "tailor- made" service provided by PBL's Crown Casino in Melbourne where staff speak Mandarin to a Chinese guest and provide the latest Hong Kong movie DVDs in his room, said Lawrence Ho.

The Vegas operators believe "whatever works in the U.S. always works elsewhere," said Ho.

Aside from City of Dreams, the Melco-PBL venture is also building the Park Hyatt, a $190 million six-star casino hotel in Macau slated to open at the end of next year. Both projects are 35 percent funded by equity and the rest by debt, Ho said.