Stanley Ho remains on top

Le-Min Lim

Tuesday, May 10, 2005 | 9:39 a.m.

Stanley Ho, the billionaire who lost his four-decade Macau gaming monopoly in 2002, hasn't let new competitors such as Las Vegas Sands Corp. shake his dominance of a gambling market forecast to match Las Vegas's by 2008.

The 25-year-old Casino Lisboa, Ho's flagship, has averaged HK$50 million ($6.4 million) in daily gross gaming revenue since Sands opened Macau's first Vegas-style casino in May 2004, said Manuel Joaquim das Neves, director of the Chinese city's Gaming Control Board. Daily spending has averaged HK$20 million at the $265 million Sands, which has 30 percent more gaming tables and four times more slot machines than the Lisboa.

Ho, 83, is staying ahead because of his lock on Macau's so-called VIP market, which consists of about 4,000 gamblers -- mostly from mainland China -- who bet an average $1 million per visit, Neves said. They accounted for 70 percent of Macau's $5.1 billion in gaming revenue last year, he estimated.

"Stanley Ho dominates the VIP market," Neves, 45, said in an interview. "He has the contacts, and he has a huge head start in the business."

At the Lisboa's 36 VIP rooms, which bear names such as Golden Palace and Gold Court, bets start at HK$1,000 and there's no upper limit, said Cheong Kong Fai, a manager at the casino. Gamblers wagering at least HK$100,000 per bet get perks such as free gaming chips and nights at Ho's adjoining Hotel Lisboa.

Ho faces a new wave of competition from casino and hotel operators targeting a broader clientele as Macau, a former Portuguese enclave and the only place in China where casinos are legal, opens its gaming market.

Tourist arrivals to the city, an hour from Hong Kong by ferry, rose 45 percent to a record 16.7 million last year, and gaming revenue rose 43 percent, according to government figures. The city's economy expanded a record 28 percent.

Macau casinos generate more cash than their Las Vegas counterparts. Sands's flagship Venetian Casino Resort in Las Vegas earned $321 million in gross gaming revenue in 2004, according to the company. That's an average $879,452 a day -- one-seventh the Lisboa's $6.4 million daily revenue and about one-third the Sands Macau's $2.6 million, according to the figures provided by Neves.

So far, Ho's 13 casinos have two competitors: Sands and Galaxy Casino SA, a privately held casino operator controlled by Hong Kong construction tycoon Lui Che-woo that opened a $62 million Macau casino in July.

Competitors are expanding. Sands said in February 2002 after it won a concession license from Galaxy that it would build a second Macau casino replicating its Venetian-themed Las Vegas resort. The $1.8 billion Macau Venetian Casino Resort, scheduled to open in the first quarter of 2007, will feature 3,000 suites, 850,000 square feet of retail space and artificial canals and gondoliers.

Sands is targeting Macau high rollers with the invitation-only Paiza Club, where customers who bet more than HK$10,000 a hand get free use of private jets, limousines and cigar bars, according to the casino's Web site. The Sands Macao led a 69 percent gain in Sands's first-quarter revenue, the company said on May 3.

Sands is joining with hotel operators including InterContinental Hotels Group Plc and Four Seasons Hotels Inc. to develop a $12 billion Las Vegas-themed gambling strip in Macau, Chief Executive Sheldon Adelson, 71, told a Macau press conference on March 18.

"It took 75 years for Las Vegas to emerge as an international destination," Sands President William Weidner, 60, said in a press release the same day. "Our intention is to replicate that feat in less than three years."

Las Vegas casino operator Wynn Resorts Ltd., led by Steve Wynn, also plans to build a Macau resort. The company said in a May 4 statement it would add a $345 million wing to the $700 million Macau casino it plans to open in 2006, almost doubling casino space and adding two restaurants and a theater. Wynn has its own license and does not operate on a concession.

Rising competition may erode Ho's share of Macau's casino market in coming years.

Sociedade de Jogos de Macau, which controls the Ho family's gaming assets, will account for about 60 percent of the city's gambling revenue in 2009, down from 86 percent in 2004, Andes Cheng, an analyst at Hong Kong-based South China Finance & Management Ltd., estimates.

Las Vegas casino operators are better able to attract visitors seeking an overall tourist experience, said Karen Tang, a Hong Kong-based analyst at Deutsche Securities Asia Ltd.

"Ho has to adapt or lose his lead," Tang said. "He's losing out on Macau's fast-growing mass-market gaming segment."

To meet the challenge of Vegas-style casinos, Ho is building one of his own.

Sociedade de Jogos de Macau, known as SJM -- controlled by Ho's 42-year-old daughter, Pansy Ho -- last year formed a 50-50 venture with Las Vegas-based MGM Mirage to build the $975 million MGM Grand Macau, due to open in 2007. MGM Mirage said in a statement that the waterfront casino will boast private villas, a spa and 1,000 slot machines.

Pansy Ho declined a request for an interview, according to Janet Tong, a spokeswoman for Shun Tak Holdings Ltd., the Ho family's Hong Kong-listed transportation and property company. Janet Wong, a spokeswoman for Stanley Ho, didn't reply to a request for comment from him.

To cement its lead in the high-roller market, the Ho family is investing in Macau's first six-star casino resort. Melco International Development Ltd., headed by Ho's son Lawrence, 28, is building the HK$1.45 billion Park Hyatt resort on Macau's Taipa island with Australian billionaire Kerry Packer's Publishing & Broadcasting Ltd.

"We are combining their international management skills with our local connections," Lawrence Ho said in an e-mailed response to questions. "We understand the Chinese people and the culture of the Chinese market."

The waterfront resort, which will be managed by Chicago-based Hyatt Hotels Corp. and is set to open next year, will feature "hyper luxury decor" to attract VIP gamblers, Lawrence Ho said in an April 8 statement.

Even as the Ho family's stranglehold on the Macau gaming market comes under threat in coming years, its stakes in Macau businesses spanning from ferries to department stores ensure that he'll profit from the city's boom.

Stanley Ho's flagship company -- privately held Sociedade de Turismo e Diversoes de Macau SARL -- owns assets including Macau's only television station, its No. 2 bank, a stake in its international airport and the Macau Tower, the city's tallest building.

Shun Tak Holdings, whose high-speed Hong Kong-Macau ferry controls 90 percent of the market, reported a 54 percent gain in 2004 profit as travel to Macau surged. Shun Tak's Hong Kong- listed shares have more than doubled in the past year.

SJM plans to spend HK$6.2 billion to build a shopping, residential and commercial complex near Macau's ferry pier, the Hong Kong Economic Times reported on May 4, citing Ho. The project, called Oceanus, will be shaped like a ship's foredeck and feature 800 serviced apartments, office space and a 1 million- square-foot entertainment area.

"Stanley Ho's non-casino gaming assets in Macau will continue to perform regardless of what happens to his gaming business," said Jonathan Galaviz, a partner at Galaviz Ong & Co. in Las Vegas, which tracks the gaming industry. He forecasts that Macau's gaming revenue will match that of Las Vegas, the world's No. 1 gambling destination, by 2008.

Some Macau casinos catering to VIPs are used by criminal gangs to launder money, the U.S. State Department said in a March 1 report to Congress.