U.S. casinos jockey for Macau slots
By Cathy Chan
Bloomberg News Service
Caesars Palace owner Park Place Entertainment Corp. and Wynn Resorts, owned by billionaire Steve Wynn, are among firms promising to build hotels, shops, theme parks and convention centers if they win one of three casino licenses that Macau will award by early February.
For the companies, the prize is entry to a $2 billion industry that has been monopolized for four decades by local tycoon Stanley Ho.
Macau, returned to China in 1999, hopes also to be a winner. Fresh investment could lift its economy from a six-year slump and leverage its niche as the only legal casino venue in south China.
"Macau could easily step forth and become one of the major tourist destinations in China," said Alan Feldman, a spokesman for Las Vegas-based MGM Mirage Inc. "What they have right now is basically gaming. It could be much more. There's a significantly bigger audience that isn't being tapped."
MGM Mirage may spend up to $1 billion building hotel rooms and tourism facilities if it gets a license, Feldman said. With other bidders also pledging large sums, Macau's $6.6 billion economy is set for a spending boom.
"I wouldn't be surprised if we have the highest investment since World War II," said Alexandre Correia da Silva, a local lawyer who represents a joint bid by Wynn Resorts and other investors.
Macau could use the help. The economy shrank in the five years through 1999 as property prices slumped in the wake of Asia's 1997-98 financial crisis. Though it rebounded in 2000, the economy isn't likely to have grown by much last year, the government said.
What makes Macau, a city of just 438,000 people, attractive to firms like Park Place and MGM Mirage is the rising wealth of 1.3 billion people next door in China.
Casinos are banned in both mainland China and Hong Kong Macau's two main sources of visitors.
While Hong Kong, 45 minutes away by jetfoil, accounted for half of the city's 10.3 million visitors last year, China's share is growing faster.
Buoyed by 7.3 percent growth, the fastest among major nations, 3 million mainlanders visited the city in 2001 up by 32 percent, compared with 5 percent growth in arrivals from Hong Kong.
Nine of the original 21 bidders had further meetings with Macau's bid committee last week, suggesting the government is narrowing its choice. It has promised to announce the winners before the Chinese New Year holiday, which starts Feb. 12.
Those making the second-round presentations included Park Place, the world's biggest casino company, which is bidding jointly with Mandalay Resort Group as MP Entertainment.
If it makes the final cut "we would offer a full suite of entertainment, dining and hotel amenities," said Park Place spokesman Rob Stewart.
For its part, Wynn Resorts plans to build a resort on one of two islands linked to the city by bridges and causeways. Initially costing about $500 million, it would include 800 hotel rooms, a casino and a convention center, creating about 3,500 jobs, lawyer da Silva said.
One of the 20-year licenses is widely expected to go to tycoon Ho's Sociedade de Turismo e Diversoes de Macau, or STDM, which has had a casino monopoly since 1961. Its 11 casinos, led by the Hotel Lisboa, a gaudy, beehive-like structure on the waterfront, paid nearly $750 million in gaming taxes last year, Ho says. That equals two-thirds of government revenue in 2000.
Ho hasn't said exactly how much he will invest to upgrade his casinos if he wins. Earlier this month, he touched on the most sensitive issue of all the job security of STDM's 10,000 workers by guaranteeing none will lose their jobs if his bid succeeds.
The 80-year-old tycoon is also promising to raise salaries, invest in an amusement park and a fishing and cultural village, and preserve an old district of the city as a tourist attraction.
Some bidders reckon Macau could attract more tourists from other parts of Asia. Casinos are banned in Japan, and South Koreans are allowed into only one of the nation's casinos the rest are reserved for foreigners.
"In our business, we have to go where gaming is legal," said MGM Mirage's Feldman.
Las Vegas companies also have another reason to look overseas: Business has slid since the Sept. 11 terrorist attacks in the United States discouraged air travelers worldwide. The companies' winnings on baccarat, the card game favored by gamblers who wager large sums of money, slumped 81 percent in November.
And Macau's single airport runaway, built over water on concrete pillars, could use extra business. It now handles only 40 flights a day.
Whoever gets the new licenses, the real winners may be gamblers themselves whether or not they beat the bank. Given the amount of money gaming generates in Macau, said lawyer da Silva, "the people who are gambling deserve top-quality service."