David Chow knows how to time his reappearances in public. The boss of the Landmark and Fisherman’s Wharf, plus the Legendale Hotel in Beijing, has been low-key for some time. But yesterday, just as the Land Secretary was making his point in the Legislative Assembly chamber (where Chow should have been), an interview with him appeared in the Oumun Yatbo (Macao Daily), in which he announced that his own redevelopment plan, for Fisherman’s Wharf, had been approved. Not a peep was made about the casino, of course. It was all about how he’s going to build new hotels, one four-star and one six-star.

Because there will be no new hotel projects in 2012 on the Cotai strip, besides the three on Lot 5&6, Chow said, he would be willing to speed up construction of his project to get it completed by the end of next year. How gracious of him, we thought. But that’s not all. He’s going to have a “dinosaur pavilion” which will display artifacts from the mainland worth, get this, 3 billion yuan. And Nam Kwong, the first state-owned enterprise ever established outside China by the Party, will hold a “yacht exhibition” at his wharf this October.

Now there’s someone who gets the message loud and clear from up north. Used with permission & copyright IntelMacau.com

Nelson Rose, a visiting professor at Macau University and an apparent expert in gaming regulation, gave an extensive interview to the Macau Daily Times in today’s edition. In a nutshell, Rose seemed to be saying that Macau’s gaming industry is not very well regulated and the junkets are a historical accident that the casinos would rather do without.

Now, before anyone falls off their seat laughing, we would caution that none of what Rose says is necessarily untrue. He might be mistaken in his assessment of the pros and cons of having junkets in Macau indeed, we chuckled especially hard at the part where he says he cannot see any advantage to having junkets now that the casinos have the ability to grant credit themselves but the facts are pretty indisputable. It’s true the government could have gotten rid of the third-party casino operators under the SJM banner in 1999. It’s also true that it would have been very difficult.

The only historical timeline where we think Rose may have done readers a disservice by stopping a bit short was when he was asked about the similarity of the Macau and Nevada gaming regulatory systems. Saying they are both very old and new, he reckons Macau’s dates back “at least” to the beginning of the 20th century and the imposition of the monopoly (the original one under the Fu family). We would argue that it goes way back beyond that, to the founding of certain organizations that have always played a vital role in maintaining the peace and stability of this territory. They might bicker among themselves now and then, but without them, Macau would simply not be what it is today. Stay tuned. Used with permission & copyright IntelMacau.com

The bill raising the minimum age of people allowed into casinos staff and patrons alike passed its first reading at the Legislative Assembly yesterday, as reported by the Macau Daily Times today. It seems inevitable that, despite objections from lawmakers who usually object to the government's bills, anyone under the age of 18 will not be allowed onto the casino floors. How do we come up with such a confident prediction? 

Well, for a simple reason. It makes legislators like Angela Leong and Chan Chak-mo look benevolent. To whit: There are more and more youngsters entering casinos and becoming pathological gamblers, Leong said. This law is inevitable and it's urgent to regulate this issue. It will be good to protect our youth, so they have less opportunity to be in touch with gaming. And Chan: "Do we want all of our kids to end up as card dealers?" These are the same people, keep in mind, who watered down the anti-smoking legislation. So protecting frontline 18-21-year-olds from the dangers of second-hand smoke is clearly not as big a concern for them. 

But this legislation also will keep 18-21-year-olds from outside Macau out of their casinos, too, so we suppose they ought to be lauded for their self-sacrifice to a certain extent, too. This will hit their revenues. Naturally, we can hear the question on your minds, dear readers: if 18-21s are going to be banned from gambling, which concessionaire will this affect most? Our colleagues at Market Insights Macau are on the case, and will provide an update on this before the bill is passed, so stay tuned.  Use with permission & copyright IntelMacau.com

Never mind the ocean of red on the trading screens this morning, dear readers, as Hong Kong-listed gaming stocks continue to be hammered after Friday’s selloff. If it is the persistence of a silly rumor that more visa restrictions are on the way, then whomever started it ought to be taken out and shot. Seriously. If it is just profit-taking after the recent runup, then fine. If it is because of fears for the global economy, then we would suggest investors brush up on the link between Macau gaming revenues and US unemployment figures. We will keep focusing on our target of US$100bn for this market by end-2015.

Anyway, back to more cheerful topics. It was Dragon Boat festival in this part of the world yesterday, which was why you didn’t hear from us. It was a day of fun in the sun on Nam Wan Lake, as Galaxy Macau rubbed salt into the wounds of its competitors: after taking so much of their market share in two weeks after opening, the plucky concessionaire whacked them all at the Dragon Boat competition too, taking home no fewer than nine trophies from the three-day event that finished yesterday.

It was also, naturally, a good time for executives to schmooze the media. Though she wouldn’t have been caught dead in the sun, Angela Leong, aka No. 4, took the opportunity yesterday to tell local media that SJM believes the peninsula’s gaming market is “saturated” and Cotai is the future. She would like it very much, therefore, if the government would grant her company its land out there so it can get on with doing what it does best – building casinos that cater to the needs of a Chinese visitor.

Now, given that the lady does not have much experience being a public spokesperson for the group – a job usually handled by CEO Ambrose So – we have to cut her some slack and not ask the obvious question, which is: “Which SJM parcel are you referring to, m’dear? The one that will be part-owned by you and run under the SJM flag, or the one (or two) owned by SJM Holdings, the Hong Kong-listed entity?” We assume she means the latter.

But this would be to miss the bigger point, which is that she is having to go through the media to voice her frustration (dare we call it that?) with the government over the approval process for land in Cotai. OK, so it may not come out sounding like frustration, as she actually said she believed SJM would get the land before the end of the year. It is, however, unprecedented for SJM to have to say something like this in a hopeful, rather than declarative, manner through the media.

We may be reading too much into these tea leaves. But it does strike us as odd that everyone seems to be pushing so hard for the land grants to be awarded in Cotai, and are being met by a resounding silence from the government. Used with permission & copyright IntelMacau.com

Photos used with permission of Galaxy Entertainment Group Limited.

Once again, we are honored to have Mr Big Eye Guy shares more of his “Macau Method” that his group uses.Lesson 30 is entitled “Jùniǎo”, literally “Big Bird” or “Gigantic Bird”. It features an exquisite and truly amazing shoe for student of Baccarat Great Learning. What better way to refresh what you have learn so far and apply the necessary skill to be a player and not gambler!

Photos used with permission of Galaxy Entertainment Group Limited.

We told you all how much we liked the hardware of Galaxy Macau the day before it opened. We were still, however, reserved in our expectations for the actual opening, mainly due to the inexperience of the management team in the mass market. We were again surprised on the upside.

Indeed, in our humble opinion, this was the smoothest, most efficient opening of a mass-market property since Wynn Macau opened in September 2006. Don’t even mention COD, which was plagued on opening day by dealer mishaps that required repeated surveillance reviews. Nor even Venetian, which caused such chaos outside the property on day one that people ended up walking all the way back to Taipa in the scorching summer heat. Grand Lisboa? Not bad, but the paint was still drying when the doors opened. Crown Macau? It still provides the template for properties opened several months too early.

Galaxy Macau’s opening wasn’t perfect. The cage was inundated – we ourselves were unable to cash in the Lui family’s generous donation to our family’s college education fund from their blackjack tables, and so will have to return today in hope of shorter queues. Some of the dealers were extremely nervous, and many of the pit bosses seemed a year or two out of high school.

But it was damn close. Here is what we liked the best:

1) Traffic management. As mentioned by numerous analysts already, GM is a very well-designed property. Foot traffic flows easily and sensibly. All the way in, through, and out again. The buses were particularly well-managed. But what really got us were all the extra hands on deck to ensure safety and ease of movement of people. Someone thought this all through very carefully, right down to having porta-potties available for those people who queued up outside hours before the doors opened.

2) Restaurant and drink service.
We went to the noodle bar closest to the front of the casino. The staff were courteous and very efficient. This was clearly a place that had been going through serious drilling for days, perhaps weeks, prior to opening. Before that, we had ordered some beers at the blackjack table and they were delivered quite promptly, which was surprising given that most Chinese gamblers don’t mix alcohol with business. The only place where we heard whining about slow drink delivery was the Macallan Bar, but we discounted that because the room was full of executives from other casinos.

Photos used with permission of Galaxy Entertainment Group Limited.

3) Loyalty-card promotions.
At every table, the dealers and pit bosses were well-trained to push the Galaxy loyalty-club cards. We don’t see the same energy put into marketing  cards at the dealer level by established casinos around town. Maybe it was opening day, but still …

4) The guest list.
It says a lot about the efficiency of a property when you go to its opening party and see who else is there. Never mind Ho Hau-wah and Tung Chee-hwa flanking Chui Sai-on up on the main stage (though that did get our Portuguese lawyer friends cracking some funny speculative jokes). Galaxy didn’t need a Tony Leung-type celebrity this time around because they could pull on the strength of their own guanxi. That showed us how good the people are running PR, government and community relations.

Now, one might argue that perhaps we shouldn’t have been so surprised about some of it. Dennis Andreaci is obviously the go-to guy for opening big casinos, having done so many of them now. He should offer a diploma course in how it’s done. Heinz Roelz is a master of hospitality, and he has some talented guys running the hotels and food and beverage outlets, including Paul Town, who opened the COD hotels, and Michael Au, who was the longtime lieutenant of Allan Ho, king of the Michelin-starred restaurants in Macau.

But the guys who we think deserve to take a really big bow today are those who made this all possible by hiring the talent in the first place. Yes, they were fortunate in having a boss who knows, like Steve Wynn, the importance of getting it right on opening day even if you have to wait a bit longer to open the doors – he could have forced his frontline staff to open before the May 1 Golden Week. Nevertheless, this was a major human-resource effort in the middle of the tightest labor market on record and one that, to be frank, we were raining on a few months ago by listening to silly gossip that suggested they were way behind on the recruitment goals and schedule. So Trevor Martin and Liviano Lacchia, please accept our humble apologies and take the credit you are due.

Now let’s wait and see how Lady Luck treats Galaxy Macau. Used with permission & copyright to IntelMacau.com

Photos used with permission of Galaxy Entertainment Group Limited.

We don’t usually write on the weekends, but we will make an exception today for Galaxy Macau, because we can’t remember the last time we felt so excited about a new property opening in Macau.

Oh, wait, yes we can: when the Venetian opened almost four years ago. The newest addition to the Taipa Strip opens its doors officially only tomorrow at 5pm Macau time (GMT+0800). But media have been given a sneak peek these past two days, and we sneaked in with them. Yesterday was spent touring the property and listening to briefings; today was spent shaking off the cobwebs after a night around the pool deck and in the Macallan Bar.

We have been trying to come up with clever, witty descriptions of the place. Unfortunately, all we can produce is this: If we had to imagine a perfect product being brought to market in Macau right now, this would be very, very close to it. Let us count the ways.

1) It makes even the Venetian look tired in the gee-whiz stakes. First impressions are everything in this business, which is something the Venetian did brilliantly when it opened in August 2007 and City of Dreams did terribly in June 2009. Galaxy Macau knocks both of them out of the park the minute you roll up to the massive front doors. The chandeliers, the marble, the glass, the colors, the design — everything about the place reminds you of other properties in Macau, only bolder and better.

2) It has learned well from the success and failures of others. Everywhere you walk in this property, you see glimpses of its competitors. Wynn is in the music and the chairs. Grand Lisboa is in the pragmatic use of space and the chandeliers. Venetian is in the vast expanse of the gaming floor and the photo-op backdrops. City of Dreams is in the boulevards that house the restaurants and a few shops around the casino. But at each turn and in each instance, you get the feeling that the developers of this property had time on their hands, and they used it well. The entrance is more gob-smacking. The layout of the floors is more varied, both vertically and horizontally. The mixture of restaurants is cleverer. The size is large but not overwhelming or disorientating. Everything seems to have been put together in just the right portions and proportions. And there is new stuff where the owners clearly went out and asked their prospective customers what they like and dislike before deciding to do it.

3) It’s an integrated resort. There is so much variety under the roof here that we have to wonder why anyone would want to go elsewhere once they walk in the door. The ladies in kimonos at Okura. The pool villas at Banyan Tree. The Starworld-templated rooms at the Galaxy Hotel. The top deck, which looks like something right out of Bali rather than a few sandpits and pools in among airconditioning vents. The 52 restaurants, covering everything from McDonald’s to the finest of fine dining, which absolutely blow their neighbors away for choice and quality. The high-limit table and slot areas on the main gaming floor, which are raised a few feet above the rest in order to seem like exclusive alcoves. The Macallan Bar, which has a whisky list as long as the Lisboa’s wine directory. The China Rouge, a high-end nightclub that will open in another month or two. The 3D cineplex that will open later this year. And so on. There appears to be something for every segment of the market above the HK$100 minimum bet entry point.

4) It has just enough for now. There is no concert hall, no mammoth shopping mall, and no cavernous exhibition center. But there is a huge piece of land out back where such things could be built once the market has shown it can support them for more than three or four days a month. Now that the Venetian’s malls are doing so well, we are hearing noises about Phase 2 having a mall. As the Lui family has always made clear, since the very first time we interviewed Francis, this is not a build-in-and-they-will-come company. The US$2bn they spent on this property is about two-thirds of what COD cost and about half of what the Venetian-Four Seasons complex cost. We think it will do more in revenues than either of them in its first 12 months. (Ebitda remains to be seen.)

5) The VIP facilities will take Galaxy’s junket partners to a new level. Forget Paiza. Seriously. Sun City has a room right off the main lobby, with an ascending staircase that leads to a well-signposted entrance. All the big operators in Macau are here, in rooms that were designed to help them gain face with the high-rollers who like to play at a variety of places. Unlike at Wynn, where the Dawei room looks like a Wynn room and the Dore room looks like a Wynn room, these rooms look like Neptune Galaxy rooms and Sun City Galaxy rooms and …. you get the drift. Some of them have private spa facilities next to the baccarat tables. Indeed, Macau has a new must-play attraction for anyone who considers themselves a big shot. Master designers might quibble with comparisons to Encore on the quality of finish in these rooms, but it’s close, and the luxury of the accommodation at Banyan Tree and Okura will be hard to beat for its Cotai rivals.

Who to credit for this achievement? Well, there were obviously a lot of hands that went into creating this product. But the name that keeps coming up is that of the boss. To call Francis Lui a hard-driving micro-manager would be an understatement, and we can certainly say from first-hand experience that the man seems tireless. But what clearly stands out in this product, as compared to StarWorld, is that he has come a long way in evolving his own understanding of what an integrated resort needs in order to be successful in this market. From the color of the table tops to the shape of the walkways through the main floor, his fingerprints are everywhere, staff assure us. We find it easy to believe. Asia’s Steve Wynn? It might well be a moniker that sticks after this resort opens. And he’s just getting started on the biggest single piece of real estate in Cotai. Stay tuned for more. Used with permission & copyright IntelMacau.com

We have to admire the Macau Daily Times sometimes: it knows how to write up a controversial story better than anyone we know. Today’s article about MGM Macau is a case in point. The first few paragraphs go into detail about an announcement to the stock exchange that the company had identified a piece of land in Cotai it would like to develop, without saying where it is. The report provides no speculation from analysts about how this project is going to be financed, when every last dollar of the proceeds from the pending IPO for MGM China is going into the pocket of one of its shareholders. There is also no mention of the fact that MGM is easily last in the queue for labor quotas and table allocations out there, behind Lot 5&6, Wynn, Equestrian Theme Park, and SJM 2, yet its concession expires two years before Sands’ and Wynn’s do (2020). Why is none of this included by the reporter? Because you don’t need to add all these details in order to write a fair, balanced story. Indeed, we tip our hat to MDT for its sensibility.

But then, perhaps just to be be a bit more risque, the second part of the story begins with a sub-headline, “New investigations”. It goes on to point out that the same SFC filing from MGM also happens to mention that … wait for it … the company has signed a non-compete agreement with Pansy Ho that … wait for it … allows her to continue serving on the board of the company’s competitor, STDM (parent of SJM). Apparently, she will step out of the room whenever any subject comes up that could affect her interests in MGM.

Oh, wait, hang on, it doesn’t say that. It says she “does not intend to participate in STDM board decisions which concern her competing interests”. So, unless we have got this completely wrong, this means she can listen in to what’s being discussed, she just will restrain herself from voting on it. Phew. If we were being offered shares in the MGM China IPO, we would be mightily relieved to learn that they had forced her to sign this terribly restrictive contract.

Anyway, back to the real subject of that sub-headline. The very last line of the article says this: Gaming authorities in Mississippi and Michigan have stated that they are reviewing MGM Resort Internationals [MGM China's major shareholder] association with Pansy Ho and the gaming authority in Illinois has opened an investigation into this association.

Now, we are sure there’s nothing to worry about with this, and we can understand why the newspaper put it at the end. After all, Nevada found Pansy suitable to be partnering with MGM, despite the fact that New Jersey did not. And if Michigan and Mississippi think there is a problem with her being too close to her father, well, we can always just send them a tape of her appearances with him recently on television in Hong Kong to dispel any such notions.
Enough said. Good luck with the IPO, Pansy. We hope you get 20X Ebitda. Used with permission & copyright to IntelMacau.com

Talk about a rough crowd. Las Vegas Sands Corp. disappointed the street by posting results for Q1 that were heavily affected by poor win-hold in Singapore and Las Vegas and the shares were beaten down by nearly 10% in overnight trade in New York. There is just no pleasing some people.

OK, so we understand the disappointment in the numbers if taken at face value. But when you readjust for win-hold, is it really all that bad? We can understand hammering the stock a few months ago when the company disclosed the SEC investigations. But now, just because Lady Luck turned against it?

Indeed, while we don’t have much insight into Singapore beyond continuing to note how Marina Bay Sands is fighting an unfair battle there a battle that cannot be expected to continue this way much longer before the ref steps in we are quite impressed by the place that is still the biggest driver of growth for LVS. Sands China president Ed Tracy may not be a financial architect like some of his peers in Las Vegas, but the man clearly knows how to wring every last dollar out of an operation. To have widened his company’s Ebitda margin in the quarter to 33.4% is a very respectable achievement.

Yes, we can do the math and understand that the QoQ recovery in win-hold at Four Seasons (Plaza) was a godsend, contributing most of the gain from Q4 so that Sands China could take US$373m to the bank. But how the heck did Tracy manage to get 35.8 cents of every dollar spent at the Venetian to flow through to the bottom line? On a win-hold in the VIP rooms of just 2.69%?! And Sands, too: Ebitda margin widened again to 28.7% despite a win-hold of just 2.75% in VIP play.

The answer, we suspect, is in the “reinvestment” side of the business. Tracy knows that he’s in a market where everyone around him wants to take a swing at the champ, especially ahead of the opening of Galaxy Macau. And so he is boxing very cleverly, keeping his gloves up but not throwing too many punches, waiting for his opponents to tire. Those Ebitda margins are making all the difference in the world right now, when win-hold is not in his favor. The minute Lady Luck casts her charms on Venetian and Sands again, and his opponents have depleted energy levels, it will be a different story. He is going to have a lot left in the tank. Reinvestment will become a nice word again in the halls of the Venetian, and we can see some roundhouses being thrown.

There are still some challenges ahead. We don’t see the top line growing the way it should be in the VIP business. US$3.5bn in rolling-chip volume at Four Seasons is nice, but compares to US$4.7bn in Q3 last year. Mass revenues at the Venetian appear to have plateaued, whereas the Grand Lisboa and Casino Lisboa on the peninsula, let alone Wynn Macau, are surging by comparison. On the development front, meanwhile, we positively chortled at the line in the company’s press release that said it was looking forward to opening Lot 5&6, which will be “the only major property to open in Cotai for the next three years”. Really? Putting aside the wisdom of making a statement that should be left to Francis Tam in the first place, we can’t see that property itself being finished in the next three years at the pace it is going.

But we have a feeling that the situation will not last like this for too much longer. Like that chapter in the Godfather, Part II, where the reader starts to realize that Don Corleone has been building up an army out of sight, we think there is room for upside surprise in this company’s Macau operations. As long as the Feds stay out of Sheldon Adelson’s hair a big question, of course it is certainly hard to imagine how much potential downside there is left for Sands China. Win-hold shifts, new VIP rooms open, marketing programs get aggressive again, and the numbers start to look radically different. Adelson zips his lip, blue cards get issued, buildings get completed, and suddenly it’s a new picture again in Cotai. Would we bet our kids’ college tuition on any of this happening? Not just yet. But stranger things have occurred in this place. Stay tuned. Used with permission & copyright IntelMacau.com