AGBriefings Macao 20th Anniversary Edition by Asia Gaming Brief

Jurisdiction Updates December 2019 Edition

In focus

Macau 20th Anniversary issue Policy lags gaming growth pg.12

Operator focus Taking score pg.14

Industry memoirs

The highs, the lows and the changes pg.36

China travel trends pg.28 Transformational technology pg.30 MACAU 20 YEARS TESTIMONIALS pg.48

Asia Gaming Briefings | December 2019

MESSAGE 3

Looking back, moving forward

sia Gaming Brief is publishing this special

How MGM was awarded SJM’s sub-concession. then lost

December edition as our way of sharing in the

Pansy Ho as a majority partner. Or that Steve Wynn was

celebration of an important historical landmark

onto something when he initially ‘expressed’ his need for

in the development of Macau, both politically

the government to allow operators to issue direct credit

and socio-economically.

to clients and cut the middle man out of the mix - before

Macau, as a Special Administrative Region of China, is

anyone in the international industry truly understood what

celebrating its 20th Anniversary. It’s an opportunity to review

the word “Junket” meant.

how far, or not, Macau has come in these two decades.

How Lawrence Ho partnered with Packer and scooped up

Amazement seems to be the common denominator when

Macau’s last sub-concession from Wynn at a ‘measly’ $700

discussing Macau’s stellar growth. Despite an overall

million and now has the strength, plus the balance sheet, to

ineptitude to cope with “too much of a success” on all sides

vie for a license in Japan.

- industry, government, and public society - what Macau

In these pages we take an in-depth look at each operator,

has achieved in these last two decades has been nothing

their commitments and contributions to the industry and

short of extraordinary.

the local community.

Macau has surpassed anyone’s wildest expectations,

Asia Gaming Brief has repeatedly attested that this industry is

including those of the Central Government in Beijing and the

its people. Without their personal contributions, today would

international operators.

look quite different. We have invited a number of executives

Some made their calculations and subtracted that Macau

to recall their early experiences.

wouldn’t be worth it. Others gambled, gambled big, and won.

Looking back is the exercise, moving forward is key. Hence we

Sheldon Adelson raised the stakes twice, if not trice:

invite you to peruse what the people who helped make Macau

first with Sands Macao, which despite the trembling

have envisioned for the future.

chandeliers and rocking escalators on the opening night,

To all our friends and supporters who have believed in Asia

carved the way for everything else that came after,

Gaming Brief, developing relevant, engaging, projects for the

changing the outlook of Macau forever; and buying his

industry in the Region, we take this opportunity to Thank You

own company out of bankruptcy during the financial crisis

for your unwavering support!

to rise up from the ashes.

Until next year, a Merry Christmas and a Happy New Year!

Rosalind Wade

Luis Pereira

It’s important to remember the old days. The challenges, and triumphs, particularly now, at the end of an era, the

On behalf of Asia Gaming Brief

term of the first concessions - and sub concessions - of

Rosalind Wade & Luis Pereira

the Macau SAR.

Publishers

It wasn’t long ago that after breaking up one of the three original concessions with LVS that Galaxy, the newcomer

Connect with us:

to gaming, struggled to the extent it was deemed necessary to sell part of the company to a financier. It had one of the

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hardest investor relations jobs ever, but now operates one of the most profitable properties in the world.

Asia Gaming Brief

www.agbrief.com

DECEMBER 2019 EDITION Series II • Issue XIX

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Asia Gaming Briefings | December 2019

CONTENTS 4

MACAU 20 YEARS

OPERATOR

industry views

OVERview

Intro

david green

CHina travel trends

sjm

ben lee

transformational technology

sands china

glenn mccartney

F & B

galaxy entertainment

jorge godinho

wynn

sudhir kalĂŠ

mgm

peter johns

Melco

testimonials

LAST WORD

17-19 March 2020 Shangri-La at the Fort Manila, Philippines

ORGANIZED BY

Asia Gaming Briefings | December 2019

ENDORSED BY

CONGRATULATIONS ON THE 20TH ANNIVERSARY OF THE ESTABLISHMENT OF THE MACAU SPECIAL ADMINISTRATIVE REGION

Asia Gaming Briefings | December 2019

Congratulations on the 20th Anniversary of the Establishment of the Macau Special Administrative Region

Asia Gaming Briefings | December 2019

MACAU 20 years

Twenty years of Macauâ&#x20AC;&#x2122;s unplanned miracle Six gaming companies have transformed a sleepy colonial outpost into one of the richest cities in the world. But despite the vast wealth, infrastructure and social policies are still lagging. Asia Gaming Briefings | December 2019

s Macau celebrates twenty years since the return to Chinese rule, most observers agree that the gaming industry has produced vast fortunes, but the government’s development goals have not kept pace. “Looking back over the past fifteen years, one can easily see the contributions that the gaming industry have made to Macau’s economy,” said Andrew Klebanow, the principal of Klebanow Consulting. “Starting with the opening of Sands Macau in 2004, followed by Wynn Macau, Grand Lisboa, StarWorld, and MGM Macau on the peninsula, and culminating in the massive developments on what was to become the Cotai Strip, the industry transformed Macau into an international destination for tourism.” Ben Lee, managing partner of IGamiX Management & Consulting, agrees that “the development has been, on the whole, a huge positive for Macau,” and he adds, “Macau was cast from very much a third-world standard country or economy to the first world in the space of the last fifteen years.” With a roughly 40 percent effective tax rate imposed on the gaming industry, an avalanche of funds suddenly became available to the government, raising the per capita income into first-world rankings. Indeed, there was more money available than Macau’s government knew how to spend, collecting fiscal reserves in the neighborhood of US$70 billion. The people of Macau have shared this wealth, with unemployment levels falling close to zero, many of them fast-tracked into middle management positions if they showed a degree of capability, and skill-building training readily available. Although the pace of change has been dizzying, there is another consensus that this pace of development has not been matched by equally impressive strides in government administration and public services. “The problem has always been in Macau on the implementation,” notes Fred Gushin, managing director of the Spectrum Gaming Group. One of the most visible aspects of this deficit can be seen in the lagging pace and quality of infrastructure construction. Glenn McCartney, associate professor of International Integrated Resort Management at the University of Macau, cites the contrasting example of Singapore’s Changi Airport to highlight what he believes Macau has been missing. In the redevelopment of its airport, the Singapore government has created a new entertainment center and a new living space

MACAU 20 years 13

While the operators have been making huge for the city-state. However, in Macau, “No one is going to our ferry terminal to enjoy it.” contributions to government finance, and have “Macau government public policies haven’t been attentive in obeying government orders, kept in tempo with the rate of development of the such as enforcing non-smoking policies, most broad hospitality sector,” McCartney adds. “You of them, are mainly interested in enhancing can say there’s a list of outstanding regulatory and their profitability. Lee points out that the operators’ interests do policy issues that are outdated in many ways.” Observers agree that the Macau government not always line up perfectly with the Macanese has sorely needed an effective development public interest. “When the industry realized the biggest profit came from planning organization, the mainland Chinese, but has never created one. everything was geared Instead, lines of authority towards the mainland within the bureaucracy Macau has China market,” he says. aren’t always clear, and never been able One consequence, there have been many Lee asserts, is that the cases of trying to shift to scenario plan non-gaming facilities responsibility to other itself, and is w it h i n Ma c au’s I R s departments rather than always sort of are underdeveloped in taking charge. comparison with many To make matters fighting the fires other jurisdictions around worse, Macau “has not as they appear. the world. Indeed, some been open to the idea of non-gaming attractions foreign talent to assist it promised to the Macau in its planning,” Lee says. government at the time a And with such a small native population, “The talent pool to staff license was awarded were later quietly dropped. For its part, the Macau government has no and man the government ranks is just not mechanism to ensure that operator designs are great enough.” As a result, there have not been effective implemented in the way they were originally five or ten-year development plans in Macau, approved. “Whatever the new concession even though they are quite obviously needed. winners promise to build and to operate, they “Macau has never been,” McCartney says, should be held to that,” Lee states. There is a general consensus Macau has so “able to scenario plan itself, and is always sort far been much more successful in becoming of fighting the fires as they appear.” This weakness in planning, implementation, a mainland Chinese center of entertainment and collaboration without outside experts may than it has been in its stated objective of have also allowed some bad habits to develop becoming a truly global center for leisure and entertainment. among the gaming concessionaires.

“

”

Asia Gaming Briefings | December 2019

operator 14

Operator focus Macauâ&#x20AC;&#x2122;s six gaming operators have far exceeded the capital commitments made to the government at the time their licenses were issued, though with just two years to go before their permits expire, the companies are still in the dark about the renewal process.

he government carried out an interim review of the industry, which it released in 2016, finding that the six casino operators had invested MOP262 billion ($32.75 billion) in 13 years through to 2014. However, it also made clear that the industry was still over reliant on VIPs and that Macau needed to diversify its economy to include more non-gaming elements. It stressed that it was not interested in further scale and that operators should instead focus on quality and on creating clusters that would facilitate the development of leisure attractions. The report urged operators to make a â&#x20AC;&#x153;concerted effortâ&#x20AC;? to improve upward mobility of locals into

GGR per YEAR and market share

management level positions through better staff training programs and to support the growth of smallto-medium sized enterprises (SMEs). The review gave no indication as to how the license expiry would be handled. At the 20th anniversary of the founding of the Macau Special Administrative Region, we take the opportunity to look at some of the objectives the government had been hoping to achieve with the liberalisation of the gaming industry and to what extent these have been met. We profile each of the six operators, taking a look at their projects, the shift in their market share and gaming to non-gaming revenue over the past five years, as well as their efforts to contribute to the local society through

(units in US$ mn)

(Source: Morgan Stanley)

37,577 32,913 11%

10% 12%

14%

15%

27%

23,042 9% 15%

13,050 0% 4%

11%

9,422

15%

44%

28% 7%

23%

17%

18%

2007 Asia Gaming Briefings | December 2019

14,396 15%

15%

31% 9%

25%

24%

2008

2009

18%

32%

13%

30%

15%

20%

2010

19% 16%

2011

2012

operator 15

SMEs, local charities and the environment. At the government’s nudging operators have made progress in expanding non-gaming revenue, adding more restaurants, nightclubs and shows. Though they have often struggled to make their expensive non-gaming attractions pay in a notoriously gaming-centric market. Non-gaming is hovering at just over 9 percent of total revenue, up from 6.6 percent in 2014, but a far cry from the more than 60 percent level enjoyed in Las Vegas and few expect Macau to generate such a split. Total gross gambling revenue was $37.5 billion in 2018, a gain of 14 percent from the prior year. The industry is expected to see another downturn in 2019 as the slowing Mainland economy takes its toll on the VIP sector, which has been declining in importance over the past decade. “In 2011, VIP was approximately 70 percent of gross revenues (including non-gaming). In 2018, that figure was around 41 percent and by 2022, we forecast VIP GGR to be approximately 34 percent of gross revenues in Macau,” Bernstein forecast recently.

44,623 10% 11%

14%

45,000

10%

37,228

10%

32,844

13%

24%

9% 10% 14%

18%

20%

22%

27,583

21%

10% 15%

25,000

14%

20,000

20%

15,000

15% 16%

19%

23%

22%

23%

30,000

17%

16%

35,000

16%

15%

10,000

23% 23%

40,000 35,936

16%

8% 12%

22%

Despite rising competition around the region, analysts are still optimistic about Macau’s long-term prospects as improved connectivity allows it to reach more cities in China, with the market remaining underpenetrated. Most agree that it’s highly unlikely any of the six current operators will be denied a further license, though clarity would be welcome by all.

43,429

28,483 25%

While this has been in line with government objectives, it has also proved sound business sense for the operators, as the mass market enjoys superior margins and is seen as less volatile. Last year, the territory attracted 35.8 million visitors, with that number rising 17 percent in the nine months through to end-Sept. 2019, helped by improved access, in particular across the Macau, Zhuhai, Hong Kong bridge.

23%

24%

5,000 0

2013

2014

2015

2016

2017

2018

2019 Asia Gaming Briefings | December 2019

operator 16

SJM HOLDINGS

Lisboa Palace delays dent market share Prior to the liberalisation of gaming in Macau, Sociedade de Jogos de Macau (SJM), dominated the market for four decades under the guidance of legendary casino mogul Stanley Ho.

he group operates 20 casinos, including its flagship Grand Lisboa on Peninsula Macau. Sixteen of the properties are known as satellite casinos and are operated under third-party contracts. All but two of these casinos are situated on the Peninsula. SJMâ&#x20AC;&#x2122;s overall share of the Macau gambling market has been declining as newer resorts have opened, dropping to about 13.8 percent in Q3 from 15.3 percent a year earlier. Analysts say it has suffered as it still doesnâ&#x20AC;&#x2122;t have a presence on the Cotai Strip, which has become the focal point for gaming in Macau. Its HK$39 billion ($4.98 billion) Grand Lisboa Palace was scheduled to open in 2017, but has been hit by multiple

Asia Gaming Briefings | August 2019

delays and cost overruns and is now not likely to make its debut before the second half of next year. Construction on the giant resort is near complete, but it will then be required to go through government pre-opening checks. The east meets west-themed IR is situated on 70,468 square metres of land next to the Macau East Asian Games Dome. About 90 percent of the floor space will be dedicated to non-gaming facilities with about 1,900 hotel rooms spread over three hotels, all targeting premium clientele. Itâ&#x20AC;&#x2122;s a marked difference from most of the other operators in Macau, which have pushed to expand their mass market business at their newer properties and in particular the coveted premium mass sector.

operator 17

property snapshot End-Sept, 2019

Gaming tables 1,684

vip tables 294

Hotel rooms 7,107

Slot machines 3,584

Mass tables 1,390 (Source: Deutsche Bank)

Chairman and CEO Ambrose So said he expects the “destination resort will become a hub of luxurious accommodation.” Aside from an in-house branded hotel, the group has signed up Italian haute couture house Versace to design one of the hotels, to be known as the Palazzo Versace Macau with up to 270 rooms, while the late Karl Lagerfeld designed the third, which was a first for the fashion icon. “I am very happy and proud to work on such a great project: An entire hotel designed by me. It’s the first time for me! I think the idea is great!” Lagerfeld, who died in February this

year, said when announcing the project in 2014. The Lisboa Palace will provide up to 700 gaming tables and over 1,200 slot machines across a gaming floor area of approximately 27,000 square metres. Until the Lisboa Palace opens its doors, analysts see few catalysts for further growth. Overall gross gambling revenue in Q3 was HK$9.5 billion, down 13 percent from the prior year, with VIP GGR down 43 percent and mass GGR up 12 percent. Its EBITDA of $950 million missed the consensus forecasts of analysts by about 3 percent.

Still, analysts noted that the group’s margin improved due to a better mix between VIP and mass market revenue. “While there has been some operational improvement, the lack of any strategy to capture the high margin Premium Mass market and the continued delay in opening Cotai are fundamental problems with management direction and focus, which limit any material upside to SJM stock price,” Bernstein Research noted in its Q3 results analysis. The group’s concession to operate in Macau was scheduled to expire in March 2020, although it was recently extended to June 2022, to bring it into line with the end of the other concessions, to facilitate the renewal, or rebidding, process. In its 2016 interim review of the gaming industry, which was designed as a scorecard for the operators’ contribution to Macau, the government noted that all concessionnaires had fulfilled their promises in terms of capital invested. The government also assessed whether the operators were employing locals and to what extent Macau citizens had enjoyed upward mobility into management-level jobs. It also studied the efforts of the casino companies to support small-to-medium-sized businesses in Macau. According to SJM, about 90 percent of its 20,400-strong workforce is local. The interim report found that SJM had a superior level of locals in management-level jobs, or above, with the industry average in 2014 at 82 percent. However, the average annual pay rise given to these employees was below the average of 8 percent. Its pay awards to below management-level staff were also below the industry average, while it was also below average when it came to employee mobility, either through promotion or lateral movements. SJM does have a solid policy to support SMEs, launching the SJM and Macau SME Procurement Partnership Program in conjunction with the Macau Chamber of Commerce in 2016. As of the end of 2018, SJM said some 1,250 local suppliers had enrolled in the program, with total procurement from local SMEs that year at more than MOP900 million. Like its rivals, SJM has been active in the local community, offering a scholarship program to the University of Macau and sponsoring cultural events, such as the Macau Literary Festival and the Macau Food Festival. It’s also the headline sponsor of the Macau Formula 3 Racing Team. It came second to Wynn Resorts when it came to charitable and community donations, in 2014.

Asia Gaming Briefings | December 2019

operator 18

sands china

Upgrades to boost premium share Sands China dominates gaming in Macau and has arguably gone further than most of its peers in satisfying the governmentâ&#x20AC;&#x2122;s demands for a mass-market oriented product offering with substantial non-gaming elements.

ands Macao was the first Vegas-style casino to open in 2004, while The Venetian was the first integrated resort, opening on the Cotai Strip in 2007. Since then the company has gone on to open Sands Cotai Central, the Plaza Macau and most recently its French-themed IR, The Parisian. With more than 11,800 hotel rooms, Sands China dominates supply, accounting for around one third of the total room availability in Macau. In a city notoriously short of hotel space, the advantage of scale has enabled Sands China to maintain lower room rates to attract the higher-margin mass market gambler. Sands has by far the largest segment of the

Asia Gaming Briefings | December 2019

mass market at about 30 percent, compared with 18 percent for Galaxy Entertainment, according to Bernstein Research. Itâ&#x20AC;&#x2122;s forecast to end the year with a 24 percent share of overall gross gambling revenue, compared with 21 percent for Galaxy. Sands, like its rivals, has already far exceeded its capital commitments to the government at the time its license was granted and is now spending a further $2.2 billion on renovations to its existing properties. The upgrades are focused on improving its room quality and VIP facilities with a view to capturing a greater share of the premium mass market. At the Venetian, renovation work began in 2018 to

operator 19

refurbish the VIP and premium mass gaming rooms, which will include more private gaming rooms. Construction is expected to be completed in phases throughout next year. At the Plaza Macau, the company is adding the Four Seasons Tower Suites, which includes 290 premium suites. The project is expected to be completed in the first quarter of 2020. It has already completed renovation of Plaza Level 2 and has now begun concept design work for a full upgrade of Plaza Level 1. At the Parisian, a number of standard rooms have been combined to provide more space, while suites have also been upgraded. The most ambitious renovation work includes a complete revamp of Sands Cotai Central into a London-themed resort, with David Beckham as its brand ambassador. The resort will include scale-replicas of the Houses of Parliament and Big Ben and will add 370 luxury suites. “While Sands China has had quantity in rooms, it has fallen short of having competitively high-quality rooms and highend suites,” Bernstein wrote in a recent note. “However, Sands is now not only adding capacity, but also redeveloping/ upscaling its properties. When the redevelopment is complete, Sands will stand to benefit from the expected growth in premium mass gaming segment in Macau.” Bernstein has said that it expects Sands to

dominate the market in Asia for the next five years at least, as it “dwarfs its competitors” in market share, margins, free cash flow generation and return of capital to investors. When the government released its interim review, Sands had by far the largest level of revenue from non-gaming of all six

“

While Sands China has had quantity in rooms, it has fallen short of having competitively highquality rooms and high-end suites.

”

operators at 21 percent. According to the company’s interim report that ratio has remained stable. The properties feature extensive retail and MICE facilities, while Sands has a consistent roster of big name stars, ranging from Celine Dion to Hacken Lee, performing

in its theatres. For Q3, Sands China saw net revenue fall 2.0 percent, compared to the third quarter of 2018, to US$2.11 billion, while net income remained flat at US$454 million. Adjusted property EBITDA was US$755 million, consistent with the prior year, led by a 9 percent gain in the mass market segment, while VIP rolling volume was down across all of its properties. At the time of the government review, Sands was deemed to be below average in terms of local employees in its management ranks, although its pay awards for both managerial and non-managerial positions was above the average. It scored above average in the potential for upward mobility, but below when it came to lateral movement within the company. Sands, like its peers, also has a program designed to support small-to-medium-sized enterprises in response to the government’s policy prodding IR operators to prioritise local procurement. As of 2017, the company said 79 percent of its procurement spending had been gone to Macau businesses. Last year, the company spent MOP6.7 million on charitable donations in eight fields, including education, low-income families and social rehabilitation. Ten years ago, it set up the Sands Cares Ambassador Program to formalise the work of its staff in volunteering in the community.

property snapshot End-Sept, 2019 Hotel rooms 11,821 Total tables 1,662 Total slots 5,770 VIP tables 253 Mass tables 1,409 (Source: Deutsche Bank)

Asia Gaming Briefings | December 2019

operator 20

galaxy entertainment

Landbank to lead growth From its origins as a local building company, Galaxy Entertainment Group, has expanded into one of the most formidable of Macau’s casino operators, vying with Sands China for top market share.

ne of the three original concessionaires, Galaxy operates the VIP-focused StarWorld Hotel, Galaxy Macau, Broadway Macau and the City Clubs. It opened its first City Club casino, the Casino Waldo, in 2004, just two years after beating out an international field of more seasoned operators for a license. The group then expanded rapidly, rolling out a further three city casinos and its StarWorld complex in 2006, before going on to debut its Galaxy Macau integrated resort in 2011. In land-scarce Macau, Galaxy has the largest undeveloped land bank and is currently planning Phases 3 and 4 of its resort complex. These phases will double its Cotai footprint to more than two million square metres and are expected to focus on non-gaming activities, primarily targeting MICE activities.

Asia Gaming Briefings | November 2019

The expansion will include 4,500 hotel rooms, including family and premium high-end rooms, 400,000 square feet of MICE space, a 500,000 square feet 16,000-seat multi-purpose arena, F&B, retail and casinos. Galaxy is also currently the only operator to be actively developing a project on Hengqin Island, adjacent to Macau. The area has been earmarked by China for entertainment and leisure activities, though no gaming will be permitted. Analysts see development of Hengqin as key to helping to develop Macau’s mass market, providing the space that Macau lacks for the development of more lower-cost hotel rooms. Galaxy says its resort on Hengqin will be on a 2.7 km land parcel and will be a low density IR to “complement” its high-energy resorts in Macau itself. Like its peers in Macau, Galaxy is looking at expansion plans overseas and in 2015 made a strategic

operator 21

property snapshot End-Sept, 2019

Gaming tables 1,304

vip tables 337

Hotel rooms 5,279

Slot machines 1,390

Mass tables 967 (Source: Deutsche Bank)

investment in Monaco’s Societe Anonyme des Bains de Mer for a license bid in Japan. Closer to home, in 2018, Galaxy also bought a 4.9 percent stake in Wynn Resorts, which it said was an investment opportunity. The group saw its market share slip in Q3, as properties with newer product offerings such as Melco Resorts & Entertainment and MGM China, won away business and as an ongoing HK$1.5 billion renovation project at Galaxy and Starworld disrupted operations. Its total share stood at about 19.9 percent at the end of the quarter down from 21.3 percent in the same period the prior year.

Its share of the VIP market was still dominant at 25 percent, down from 26 percent, while its mass share was 17 percent, down from 18 percent a year earlier. Analysts note that the company’s business mix has improved with VIP now at 45 percent of total gross gambling revenue, the lowest level in the group’s history. While non-gaming revenue made up about 11 percent in 2018, up from just 4 percent in 2014, when the government carried out its interim report. Analysts say that the company remains vulnerable in the short term to the slowdown in the VIP market, although its strong

development pipeline put it in a strong position in the longer term. “Over the long run, with the future development of Galaxy Macau Phases 3 and 4, the company stands to have outsized growth,” Bernstein notes. “Long-term investors should be interested in Galaxy’s future growth (Phases 3-4 in particular) which are not fully being priced in today.” Galaxy claims to have been the first of Macau’s operators to launch a scheme to help foster small and medium-sized businesses, with its “Large-Businesses-Leading-SmallBusinesses” model. The group says the majority of its procurement is now from local companies, with its Broadway Macau property in particular supported by SMEs. The group, like its peers, also has a strong corporate social responsibility program, launching its HK$1.3 billion Galaxy Entertainment Group Foundation in 2014, which is focused on education, both in Macau and Mainland China. Its volunteer team, launched in 2011, has so far organized 200 activities, contributing more than 10,000 hours in community service.

Asia Gaming Briefings | December 2019

operator 22

wynn

Premium to provide the Wynn-ing ticket Wynn Resorts’ properties embody the ultimate luxury experience and Macau is no exception, with its two IRs bearing testament to its now disgraced founder’s minute attention to detail and design.

ith the government’s push to see a capacity. The resort features a cable-car ride around broader mass market tourism base a central performance lake and contains displays of and the downturn in the VIP market precious Chinese artwork. due to the slowdown in the Mainland Steve Wynn has expressed a commitment to economy, that may be seen as a negative for Wynn, returning Chinese artworks to China and has made at least in the short term. several high-profile purchases at auction, such as the However, analysts at Bernstein says this is a mistaken $12.8 million acquisition in 2011 of four Qing Dynasty impression. The company has the second-highest Jiaqing-era vases at a Christie’s auction in London share of the VIP market after Galaxy Entertainment, and the 2006 purchase of a red Hongqu period vase. at about 20 percent, but the segment only makes up However, association with the Wynn name is 20 percent of EBITDA. The real driver for growth now seen as a liability for the company after Wynn has been in the premium mass market, which is faced multiple allegations of sexual misconduct and projected to see strong future was ousted from the company expansion as China’s middle last year. Executives were called class grows. The company has in to speak with the regulator, also outperformed peers in the the Gaming Inspection and Wynn has mass sector. Coordination Bureau, over the shown stronger Wynn has a share of about allegations facing its founder. 13 percent of the mass market, In the future, expansion of overall growth in behind Sands, Galaxy and Melco. Wynn Palace is expected to be its mass tables “Wynn has shown stronger a key driver for growth. overall growth in its mass C onstr uction for Wynn business than the tables business than the overall Resorts’ Phase 1 South Parcel overall market market and the mass tables Pavilion and 650-room hotel business delivers superior tower is expected to commence and the mass table yields,” Bernstein said in late 2021, with costs estimated tables business in an in-depth note on the at US$2 billion. company. “Wynn has one of The Crystal Pavilion is described delivers superior the best operating efficiency by the company as a “must-see” table yields. models in Macau, with 160 tourist attraction, featuring an percent+ fair share in tables. innovative architectural design Both Macau properties deliver with an all-glass structure. above-average margins and The expansion will ultimately generate some of the highest Mass GGR per room.” also include two-phased hotel towers with a total of Wynn opened its first property in Macau in 2006 1,300 luxury rooms and suites, entertainment attracon the Peninsula, expanding the resort to include tions, a 270-degree fully immersive entertainment more gaming space, retail and food and beverage theater, and a food hall offering a variety of regional options in December the following year. Asian cuisines. In 2010, it opened the 400-room Encore tower, According to the company’s presentation, the which is currently coming to the end of more renovation project is expected to be completed in 2024. work at a cost of about $125 million. It’s adding new At the time of the government’s interim review F&B outlets near the West Casino, aiming to offer a Wynn derived about 13 percent of its revenue from nonpremium experience to the mass market. gaming activities. As of end-June, the proportion was Wynn opened its second property, the Wynn Palace, 14 percent, according to the company’s interim report. on Cotai in August, 2016, significantly expanding its In terms of employing locals in management level

“

”

Asia Gaming Briefings | December 2019

operator 23

positions, Wynn scored above average to its peers, while it was below average in the metrics of upward and sideways mobility and the level of pay increases. Melco and MGM consistently awarded above average pay increases, the report found. In 2014, it overtook SJM Holdings to become the largest contributor to charitable causes and has consistently been one of the biggest donors.

property snapshot End-Sept, 2019

Gaming tables 736

vip tables 221

Hotel rooms 2,709

Slot machines 1,901

Mass tables 515 (Source: Deutsche Bank)

Asia Gaming Briefings | December 2019

operator 24

MGM

Jewel in the crown boosts MGMâ&#x20AC;&#x2122;s market share MGM China doubled its footprint with the opening of its HK$27 billion ($3.4 billion) Cotai property in 2018 and analysts currently view the operator as one of the best placed to gain market share, especially in the premium mass segment.

Asia Gaming Briefings | December 2019

GM Cotai made its debut shortly ahead of Chinese New Year after two years of delays. Even then, it opened without its luxury Mansion Suites and VIP rooms

and analysts at the time described the resort, whose architecture is designed to resemble stacked jewelry boxes, as underwhelming. Now the property is ramping up strongly, driven

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in part by its innovative, high-tech nongaming elements. The property features what it claims is the world’s largest display of permanent LED video screens, with 25 that are four storeys high and as long as a football field. The screens are housed within a giant atrium, known as the Spectacle, which is the world record holder for the largest free-span gridshell glazed roof. The resort also features Asia’s first dynamic theatre, which was designed by the creator of the Cirque de Soleil theatres in Las Vegas, as well as an impressive art collection. The casino floor offers approximately 27,696 square meters, with 1,203 slot machines and 261 gaming tables as at June 30, 2019. The hotel comprises two

towers with 1,363 hotel rooms, suites and skylofts, 12 diverse restaurants and bars, retail outlets, approximately 2,870 square meters of meeting space and other nongaming offerings. “The scale of MGM COTAI allows us to capitalize on our international expertise in providing exciting and diversified entertainment offerings,” the company says. According to Nomura Research, its market share rose to 9.9 percent in volume terms in Q3, compared with 8 percent the same period a year ago. In VIP, its share rose to 8.9 percent from 6.9 percent, while its share of mass was 10.7 percent. Analysts expect its market share to continue to rise with the Mansion on Cotai now fully functional, giving the company greater traction

in both premium mass and VIP. Like Melco Resorts & Entertainment, MGM has focused on the high-margin premium mass segment. At the end of June, it reported 62 percent of revenue from the mass market and 38 percent from the VIP, which is a slightly better split than the industry average. The company has noted however that there is a continuing migration of market share from Peninsula Macau, where its first property opened in 2007. It is now seeking to mitigate the impact by renovating the gaming space for its high-value main floor players. As part of those efforts, MGM Macau has reallocated tables from VIP areas to the main floor to maximise its yield. It has also stepped up its marketing and player loyalty efforts through customer service and promotions through its Golden Lion Club. At the time of the government’s interim review, MGM derived just five percent of its revenue from non-gaming activities. The company had a lower percentage of locals employed in management levels and above, though its pay awards and efforts to upwardly promote local staff were “superior” to the industry average. It was below average when it came to lateral movements within the company. MGM has 10,000 employees, with nearly 20 percent of them being employed since the beginning. It is co-chaired by Pansy Ho, daughter of the legendary Stanley Ho, founder of SJM Holdings. MGM is a sub-concession of SJM and like the Macanese company recently had its license extended until 2022 to bring it in line with the expiry date of the other operators.

property snapshot End-Sept, 2019

Hotel rooms 7,107

Gaming tables 1,684

Slot machines 3,584

vip tables 294

Mass tables 1,390 (Source: Deutsche Bank)

Asia Gaming Briefings | December 2019

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melco resorts & entertainment

Morpheus generates dream yields Melco Resorts & Entertainment has been gaining market share as its $1.1 billion Morpheus property, which opened in June last year, gains momentum.

he 770-room hotel, with its exoskeletal design by late architect Dame Zaha Hadid, has won multiple architectural accolades and was part of the third phase in the development of Melco’s City of Dreams resort. The IR has been revamped and rebranded with a Nuwa hotel replacing the Crown Towers. Nuwa is described as being chic and classic Chinese, while the old Hard Rock Hotel tower is being replaced by the Libertine, which has been designed to attract a “funkier” crowd and is scheduled to open in 2021. The company owns the City of Dreams, the Hollywood-themed Studio City, VIP-focused property Altira Macau and the Mocha Clubs. It also has the City of Dreams in Manila, is developing a property on the island of Cyprus and is pushing hard for a license in Japan. One of Macau’s three locally grown gaming companies, it had originally teamed up with Australia’s Crown Resorts to develop its properties. Melco bought out its partner in 2017, ending one of the most successful ventures in gaming. However, earlier this year, it announced it was buying a stake in the Australian company. Melco was the biggest gainer in gaming market share in Q3, up 310 basis points from the same point last year. Nomura estimates Melco had a 22.1 percent share of the overall market in the latest quarter, compared with 16.4 percent a year ago. Its share of the VIP market has gone from 16.6 percent to 24.5 percent in volume terms. “Over 12 months ago, we argued week after week that investors should overweight MLCO and MGM on

Asia Gaming Briefings | December 2019

the thesis that their innovative and compelling new capacity on Cotai would lead to share gains,” Nomura analysts wrote in a note. The firm managed to post growth in both the VIP and the mass table segments in Q3, bucking the trend for a general downturn in the high-roller segment. Analysts expect the group to continue to outperform, with its mass-market-focused Studio City property likely to benefit from infrastructure improvements. The resort has struggled to find its feet, in part because of its location at the far end of the Cotai Strip. However, analysts say the eventual opening of long-delayed light rail links will benefit Studio City as it’s the first resort travellers will encounter coming from China over the Lotus Bridge. Like its peers in the government’s interim review, Melco has met all of its commitments in terms of capital deployed. However, it had a lower number of locals employed in management-level positions than its peers at the time of the review, which was released in 2016. Its pay awards were higher than average both at the management and non-management levels, while it had a better-than-average track record in upward mobility of locals into management positions and of lateral movements between various disciplines within the resort. On the non-gaming front, Melco’s non-gaming revenue made up 13.5 percent of its total last year, that’s an improvement from just 9 percent in 2014, the final year studied in the interim review. The company has one of the longest-running and most successful non-gaming attractions in Macau, with

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property snapshot End-Sept, 2019

Hotel rooms 3,216

Gaming tables 861

Slot machines 2,544

vip tables 254

Mass tables 607 (Source: Deutsche Bank)

the HK$2.0 billion House of Dancing Water, which opened in 2010 and which had been seen by six million people up to June this year, when its contract was renewed. It’s also currently developing its plans for the next phase of Studio City, which will feature a larger array of non-gaming attractions. Under the plans, the project will have two additional hotel towers with about 900 rooms, as well as a waterpark with indoor and outdoor areas. Other non-gaming attractions expected to be part of the project include MICE space, retail and food and beverage outlets and a cineplex. As of end-December last year, it had spent $39.5 million and expects to spend a further $1.35 billion to $1.4 billion to complete the project. The company has not shied away from experimenting with its non-gaming offerings in Macau’s notoriously difficult non-gaming market. Although it has enjoyed success with the House of Dancing Water, it closed its House of Magic attraction at Studio City after just two years, while a post-apocalyptic car stunt show -- Elekron -- was not extended after a six month run this year. Melco has a strong corporate social responsibility program, in particular when it comes to sustainability. It’s aiming to become carbon neutral and achieve zero waste by 2020, while its properties have won awards for their environmental efforts. In January, the company teamed with a local SME to develop Macau’s largest solar array. Melco is the first integrated resort in Macau to install on-site renewable energy technology by installing over 18,000 solar photovoltaic panels covering close to 30,000 square meters of rooftop space at their flagship integrated resort City of Dreams and Studio City.

Asia Gaming Briefings | December 2019

MACAU 20 years 28

Asia first choice for mass, but VIPs venturing further It’s difficult to enter a tourist hotspot in Asia without observing signs written in simplified Chinese, or a street vendor shouting greetings in Mandarin a testament to the influence that Chinese outbound tourism has had in Asia.

tatistics from the China Outbound “customized travel,” according to Dr. Wolfgang Tourism Research Institute (COTRI) Arlt, founder and director of COTRI. Customized travel, as opposed to the wellshow that China is expected to see around 180 million border crossing known “package tours,” typically involves a in 2019, a figure which is expected to hit 400 smaller private group with a greater say over chosen itinerary and activities. Forced shopping million by 2030. While this is a promising statistic as a and typical sightseeing spots are not common whole, experts believe that Asian countries, in items on these itineraries, and “experiences” have particular, will need to step up their game if become the main objective of travel. For integrated resort operators in Asia, they want to keep their slice of the pie. In the past, the majority of outbound travel this means offering their Chinese customers has been to the Greater China region, which something unique, genuinely local, and experience-rich, say experts. includes Hong Kong, Macau, and Taiwan. “There is increasing travel for experiences,” Prof. Glenn McCartney from the University adds McCartney, pointing of Macau said this has out that Malta and Ireland been due to a level of have become popular “familiarity” to the tourists’ recently as these locations home country that these This profile of were used for the filming destinations offer. Chinese traveler of HBO’s Game of Thrones According to the TV series. professor, this market places more This profile of Chisegment has been attractimportance on nese traveler places more ed to countries that are importance on quality proficient in Mandarin quality and value and value for money, (or Cantonese), that for money, rather rather than quantity and support familiar paycheap prices, added Dr. ment methods, such as than quantity and Wolfgang. Alipay and WeChat, and cheap prices. “They are more and that offer food they are more interested in new, familiar with. authentic offers based on “There is a large local culture and nature Chinese outbound travel segment that still travels [based] on levels of if provided and communicated in the right way, through the right channels.” familiarity,” said McCartney. Some of the proposed integrated resort However, COTRI has seen a shift, especially from the wealthier segment of Chinese tourists, concepts for Japan appear to be headed in the right direction. who have been venturing off the beaten path. Tribal gaming operator Mohegan Gaming “First and second-tier city residents, who make up the majority of Chinese outbound & Entertainment recently revealed the concept travelers, are generally moving away from for their Hokkaido IR project in Tomakomai, popular destinations in favor of more novel, promising horse-riding, cross-country skiing, and other outdoor activities as part of their offerings. less-visited locations.” Melco Resorts & Entertainment’s Morpheus This type of tourist is becoming more sophisticated and selective about their travel Hotel tower in Macau, designed by the famous experiences - which has led to the birth of architect Zaha Hadid, which opened in June

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Asia Gaming Briefings | December 2019

2018, was built with the intention of becoming a tourist attraction of its own. During its opening, Melco CEO Lawrence Ho said the building was designed as a landmark that would be seen as “uniquely Macau.” However, the right products in the right place are not the only requirements to satisfy demanding Chinese tourists, say experts. Seamless travel experiences and “China-ready” destinations are key. On the technology front, this means the development of cashless payment systems. “Prior to the emergence of mobile payment apps in China, the country was primarily a cash-based society. However today, apps like Alipay and WeChat are transforming China into a cashless society where transactions are commonly carried out via the phone in your pocket,” said Dr. Wolfgang. “Yes, social media matters,” McCartney

MACAU 20 years 29

remarked. The use of the smartphone and apps such as WeChat and Weibo. Not just for payment methods but a host of functions beyond. So cashless payment methods are the way forward for destinations receiving Chinese outbound.” On the customer experience front, McCartney points out that there is a need for customer service in host countries to be “China-ready.” “There is a level of face-to-face service and hosting expectations. So for countries to be ‘China-ready’, sure, they must have the technology in place, but at the same time, must have a level of service staff trained to host Chinese visitors, such as language and customs.” he said. In 2015, the Cambodian Ministry of Tourism announced the development of a “China-ready Accreditation System,” an initiative aimed at developing better travel products to suit the Chinese market. This included upgrading infrastructure facilities across the country, a

more favorable visa policy for Chinese visitors, and cultivating professionals and talents in the tourism industry. Its efforts may be paying off with Cambodia appearing in the top 15 travel destinations for Chinese for the first time this year. In the gaming industry customer service staff will need to go further than just learn the language, they will need to know Chinese customs and thought processes back-to-front. Looking ahead, Dr. Wolfgang says that there is a huge opportunity for the tourism and entertainment industry to tap into 3rd and 4th tier cities in China. The lowering of entry-requirements for Chinese citizens, and the increased flight connectivity, particularly in 2nd, 3rd and 4th tier cities, will also help to spur the outflow of tourists, he said. “Today, no more than 10 percent of Chinese

citizens possess passports. Almost all live in 1st and 2nd tier cities.” “Yet, there are growing numbers of residents from third and fourth-tier cities who are starting to take their first trips abroad. This growth is being aided by the growing numbers of international flights and visa centers becoming available outside of first-tier cities.” Dr. Wolfgang believes that Asia will continue to be a destination of choice for first-time travelers, as well as gaming travelers. This is good news for mass-market focused gaming operators, who will benefit by tapping into 3rd and 4th tier cities in China. However, experts believe the region will see less growth from high-income tourists those who will be looking for more remote, and exclusive destinations. With that in mind, it appears that attracting VIP tourists is set to become a whole lot harder.

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MACAU 20 years 30

Technological breakthroughs and regulatory brakes Macau is not known for being an experimental market in terms of quick adoption of new technology or games, however its sheer size and unique requirements have helped to drive some key innovations and that trend is expected to continue.

hen asked to name a new Today, it’s around 15 percent,” he said, adding product or technology that has however, that the market is evolving and the helped to change the market new generation of ETGs need to have a greater in Macau, leading suppliers entertainment focus built in. “Traditionally, gambling was gambling, all point to the rise of electronic table games. A combination of a government-imposed and entertainment was entertainment. But cap on table numbers, the high costs of live today, the two must go hand in hand,” he said. dealers in a city where only locals are allowed “We have been implementing technology with to take up the position and a player profile of entertainment in mind.” Jumbo Technology’s Allen Hsu agrees. Mainland Chinese who prefer tables, but who may be new to the floor and shy of joining a “You’re going to see even more variety when it thronged game, have all helped propel strong comes to ETGs, with new variations of roulette, baccarat, and other traditional table games.” growth in this sector. In terms of table games themselves, The dominant player in the market is the introduction of Paradise Entertainment’s automated solutions LT Game unit, which has revolutionized the has 60 percent of the floor, vastly improving installed electronic table Traditionally, the accuracy and integrity game base in Macau, of transactions and with its Live Multigambling was changing a process that Game Terminals, which gambling, and had remained virtually were first introduced entertainment was the same for the past in 2011 in Sands. 100 years. Jay Chun, chairman entertainment. “Smart shoes and and managing director But today, the two shufflers were the precursor of Paradise and head to more complete solutions of the Macau Gaming must go hand in suchasPerfectPayBaccarat, EquipmentManufacturers hand. and other Smart table Association, said the solutions,” said Emily Io, LMG terminals offered senior VP sales at Walker an optimal solution to Digital Table Systems. tackle the issue of a “Live table games will continue to dominate shortage of dealers, whilst acting as a gamechanger for Macau’s casino operators given the casino floor, while the addition of real-time data available through the introduction of the cap on gaming tables. “With that, mass patrons can enjoy the technology to the live table games, will open a excitement of table games at much affordable new platform of opportunity to drive new player costs,” he said. “As a result, the landscape experiences, improved customer service and in casinos has a new look welcoming a new increased game volatility,” she said. While slots have always been the poor spectrum of clientele.” Interblock Gaming President for Asia, cousin in Macau, they have gained traction Michael Hu, said no one had really expected such as suppliers developed games specifically for a rapid rise in ETGs in table-dominated Macau. the local market and as the mass segment “When I started in 2005, the ETG footprint has expanded. Aristocrat has the largest market share in in casinos was not more than 3 percent.

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MACAU 20 years 31

Macau. Its sales and business development director for Asia Pacific, Lloyd Robson, says it was the hyperlink that was the “biggest game changer” for the company. “Hyperlinks really put link technology on the map, to the point that when you go to Macau and look at the mass market slot halls, you’ll see it is driven by hyperlink and link games.” With about 95 percent of Macau’s $38.3 billion in gross gambling revenue generated from table games last year, coupled with the notoriously difficult regulatory process, it’s understandable how the adoption of cuttingedge products and technologies has been slow. However, with most properties now built out, competition has been rising in Macau, pushing operators to find a way to get a winning edge. Suppliers say one way will be the increasing use of artificial intelligence and other forms of technology to improve customer services and the player experience. Ken Jolly, vice president, and managing director of SG Gaming Asia points to the use of hand-held devices on the casino floor that can relay messages directly from the player to the nearest staff member to improve customer service. “The player comes in and puts a card in, so the system knows that. Should the player want a payout, the message comes out to the nearest host,” he said. “If they leave you can have a messaging saying that you might get a discount on steak etc.” Michael Cheers, sales director, Asia at IGT also points to how customer service will be a key differentiating factor for operators and one where technology can help. “We will be utilizing tech to provide a better service experience on the gaming floor. We ensure the players’ needs are met, whether that is a game perspective, or food and beverage.” In an increasingly screen-driven world, there’s one major innovation most say they would like to see introduced in Macau and that’s the approval for multiple devices on the casino floor. “In five years the gaming floor may not look materially different from what it looks like today,” Walker Digital’s Io says. “However, always-connected consumers are today using multiple screens simultaneously both for entertainment and to stay more connected. For gamblers to play how they like to live, the trend board shouldn’t be the only screen at the table. Mobile and multi-layered gaming experiences will be a significant part of the gaming floor in the years to come.” That is if the regulators allow.

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High-end restaurants add star quality to Macau’s IRs Nineteen. That’s how many Michelin-star restaurants Macau has racked up to date, firmly establishing the former Portuguese colony as a gastronomic powerhouse on the world’s culinary stage.

n fact, the 30 stars awarded to these 19 properties makes Macau, which is home to more than 600,000 people, one of the leading cities for stars per head of the population. For the leading IRs, a lavish Michelin-starred restaurant serving up cutting-edge dishes and a world-renowned chef installed at the helm has almost become the ultimate status symbol in the Special Administrative Region. Filipe Senna Fernandes, catering sales manager for MGM Macau and VP of the supervisory board for MISE (Macau Meetings, Incentives and Special Events), says: “From an hotel perspective, a fine dining experience – somewhat similar to a shopping experience – is not only a way to differentiate from competition, but is also a non-gaming offering to attract and retain the VIP segment, which has become smaller in size, but has grown to become more sophisticated.” Taipa’s Grand Lisboa houses two of Macau’s three restaurants to be awarded a coveted three Michelin stars: The Eight with its mix of Cantonese and Huaiyang, and the Robuchon au Dôme with its French contemporary menu. The other establishment in this elite club is the Cantonese-inspired Jade Garden at Cotai’s City of Dreams. Those holding two stars are Tasting Room at City of Dreams, Golden Flower and Mizumi at Wynn Macau, and StarWorld Macau’s Feng Wei Ju. Legendary French-born Monegasque chef Alain Ducasse’s eponymous restaurant, situated on the third floor of the Morpheus Hotel, rounds off the list. Another 11 restaurants in the world’s largest gambling hub have been bestowed one-star status by the esteemed Michelin Guide. “It is certainly special and rare to have 19 Michelinstarred restaurants in a city of just 30 square kilometres,” says Desmond Lam, professor of integrated resorts and tourism management at the University of Macau. “I think Michelinstarred Chinese restaurants are popular as they brought out the uniqueness of dining in this part of the world. But all 19 Michelin-starred restaurants are good in helping to create special experiences to our visitors.”

Asia Gaming Briefings | December 2019

Meanwhile, Shaun McCamley, managing partner of Euro Pacific Asia Consulting, says Macau offers not only the “very best in fine dining for high-end VIP players” visiting from the Mainland and elsewhere, but also unique flexibility. “If a VIP player walks into the property’s headline fine dining outlet and asks for noodles and rice soup, he gets it without question or raised eyebrows. I’m not sure that would happen in a Michelin-starred property in Europe or the US.” With its distinctive fusion of Asian and Portuguese flavours, which gave birth to

Macanese food more than 400 years ago, the city has long been synonymous with cuisine, whether that be upmarket restaurants or mom-and-pop eateries. Indeed, for years many Hong Kongers have taken the one-hour ferry ride to Macau solely for a meal out. Yet with the influx of tourists from Mainland China and further afield, the authorities have made a concerted effort to elevate Macau’s standing into a premier destination for high-end cuisine. “In the past few years, the Macau government has deliberately positioned Macau as a city of gastronomy,” Lam says.

MACAU 20 years 33

Moreover, it is another step towards diversifying Macau from being a gamingfocused destination. The Statistics and Census Bureau recently announced that gaming and junket businesses accounted for over half (50.5 percent) of the city’s GDP. For the resorts, each unveiling of a glitzy restaurant generates headlines and a real buzz of excitement for their respective properties. And each resort tries to outdo the competition with ever-more dazzling interiors to impress their diners. A case in point is Morpheus, designed by the late renowned architect Dame Zaha Hadid, which opened at the City of Dreams in June 2018, with over 600 Lasvit-designed crystal chandeliers suspended from the ceiling of Ducasse’s restaurant. So, just how important is fine dining, and dining more generally, for these properties from a revenue standpoint? Most agree they are not major contributors. “These fine dining restaurants are subsidized and supported by casino gaming, so their price points are fairly accessible if you compare to Michelin-starred restaurants in Europe, for

instance,” MGM’s Senna Fernandes says. McCamley adds, “Unlike Europe or the US, food and beverage in Asia is viewed very much as a support function to the gaming

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It is certainly special and rare to have 19 Michelinstarred restaurants in a city of just 30 square kilometres.

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department, which means most, if not all, either run at breakeven, or some even at a loss.” “Headline high-end western brands don’t generate any real interest or excitement; what the VIP players here want are top-of-the-line

exotic dishes prepared by top Asian chefs who know what the market’s tastes are and, importantly, what the market craves.” While gourmet dining is now a must-have element of any IR, not just in Macau, Lam wouldn’t go as far to call these restaurants ‘loss-leaders’ for the city’s properties. “I would not consider them as loss-leaders but an added attraction to our visitors, expanding and diversifying our customer base beyond just gaming customers. Their continued presence will only add value to Macau’s economy. These lavish restaurants help provide more unique experiences to our visitors, other than gaming and I believe they will continue to excel and help Macau to achieve its aim of diversifying out of a gaming-centric economy.” In 2017, Macau underlined its culinary credentials when it joined 25 other cities to hold the coveted “UNESCO Creative City of Gastronomy”. It shows that this gaming hub no longer plays second fiddle to Hong Kong in the dining-out stakes and has gained a reputation for attracting some of the world’s top chefs producing experimental, cutting-edge food.

Asia Gaming Briefings | December 2019

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Impressive achievements, but still room for improvement At the time of its handback to China in 1999, Macauâ&#x20AC;&#x2122;s transition from a colonial outpost to a semi-autonomous global gaming powerhouse was far from assured. David Green*

Principal, Newpage

he Portuguese had left behind a substantial cultural legacy and several thousand expatriates, but the exchequer was bare, and 450 years of foreign control had left the territory without the empowerment and enablement for independence of thought of its leaders, and with limited institutional capacity and skills to assure its future. Macauâ&#x20AC;&#x2122;s human capital was restricted to a population of 420,000, occupying a land area of no more than 28 square kilometres. Per capita GDP then was US$15,500, about 60 percent of what it was in Hong Kong, which had become a Special Administrative Region some 2.5 years earlier than Macau. The newly operative

Asia Gaming Briefings | December 2019

Basic Law left Macau responsible for its own fiscal affairs, which it was required to conduct conservatively and with a view to balancing revenue and expenditure. Fast forward 20 years and Macau sits at the apex of the global gaming industry. Its nominal GDP of more than US$85,000 is approaching double that of Hong Kong, and is 25 percent higher than in Singapore, which opened its two mega integrated resorts in 2010. The SAR government generated a budget surplus in 2018 alone of more than US$5 billion, and has accumulated reserves of more than US$75 billion. Unemployment is structural, at under 2 percent. So all is good, right? Not

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in seeds when they may not harvest the fruit? nowhere near as attractive as they were for the An openness to the use of Public Private 2002 grantees. Slicing and dicing the concessions (including the so-called Partnerships (PPP) sub-concessions) into for infrastructure time frames shorter development would than 30 years makes have been vastly beneficial An openness little sense, given the for Macau. Large public to the use of prime sites are occupied, infrastructure projects regional competition since the East Asian Public Private is growing, and the Games in 2005 have Partnerships (PPP) current concessionaires evidenced a lack of have arguably paid institutional capacity for infrastructure their way forward via a for the management development combination of high tax of them. In less than ontheirgamingrevenues, the time it has taken would have been and far exceeding to date to construct the vastly beneficial their minimum city’s light rail system, contracted expenditure the Zhuhai-Macaufor Macau. commitments. Hong Kong bridge has The danger of been designed, funded, retrospectives is that built, commissioned and operated. The foundations for wider use they tempt curation of the truth. I trust that I of PPP’s have already been laid by the casino have not succumbed to temptation! concessionaires, with properties constructed and opened since 2004 utilising a Build, Own, Operate, Transfer model. * Prior to founding Newpage, David Green The process for the re-tender of casino was a partner of PricewaterhouseCoopers in concessions remains opaque, despite the fact Macau, and later Director of the firm’s gaming that the present administration has had 10 practice. He has advised on casino regulation years to deliberate on the issue. The SAR has in a number of geographies, including New 30 years left to run. Investment returns will be Zealand, Singapore, Macau and Taiwan.

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necessarily, there is room for improvement. While the concept of the full rice bowl undoubtedly guided the government to reserve the occupation of dealers exclusively for Macau permanent residents, the policy needs a re-think. There are currently around 26,000 dealers employed in the casinos, equivalent to 1 in every 14 people working in Macau. How is this compatible with the government’s desire to see Macau broaden its economic base, and to reduce its reliance on gaming? What does such a policy contribute to the development of a “smart” society, where knowledge, aspirations and technology drive greater success? In August 2019, the government formally withdrew a proposal to set up a sovereign wealth fund, which it had planned to seed with about US$7.5 billion. Such a fund could have done some of the heavy lifting on diversification of Macau’s economy, but it seems the default position of reliance upon the casino concessionaires is to remain. Their interest in sustainability and wealth creation for the people of Macau is limited by the temporal and financial constraints imposed by the concession system; why should they invest

Asia Gaming Briefings | December 2019

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Ben Lee*

Managing Partner, IGamiX

Gaming to continue to drive Macau’s wealth Twenty-nine years ago I visited Macau for the first time. It was a consolation day trip from Hong Kong for not being able to apply and obtain a visa to enter China in less than a week when I had only four days to spend. My friend and I took up the offer of a tour guide with a van upon arrival at the Macau terminal, and off we went. Ah Ma temple, St Paul ruins... the usual tourist offerings then.

hen our tour guide asked if I was an overseas Chinese. It appeared that in the early 90s, China permitted overseas born Chinese to take in electrical goods such as TVs, heaters and refrigerators duty free once a year as gifts for their relatives. Apart from procuring on the spot free visas for my friend and I, I was also paid AUD$200 to get the vouchers stamped at the border, which in turn would allow the ‘people’ to bring in the goods at a later stage. After the short journey across a little bridge, our greeter advised that should I return in the future, I would get AUD$600 instead of $200. It seems that our guide received $200 and an intermediary he went through also received $200. Fast forward to today, Macau is now the fourth-richest country in the world in terms of GDP per capita (PPP) at US$110,000 in 2017 according to the CIA Factbook. Like Singapore, we have no natural resources and even have to import our water. Our only ‘resource’ is the mandate to host gambling for the Chinese. We have some of the world’s top earning casinos in our midst, their owners catapulted into Forbes billionaire ranks. In the space of just twenty years, our gaming industry has emerged to become a world leader. Where Vegas and Monte Carlo, Macau’s initial role models, are still using decades old systems, Macau commands with cutting age digital hardware on every gaming table. We have pioneered new modes of gameplay and game tracking such as the Fast Action Baccarat and digitized Baccarat scoring. We have introduced higher standards of gambling addiction preventative measures such as prevention of continuous play and continuous note insertions in slots, as well as the recent banning of all casino employees from casino floors. More stringent protection of non-smokers than anywhere else in the world with a complete ban property wide and the introduction of negative pressure smoking chambers. And now the installation of leading AI recognition technology. Local companies with no gaming background whatsoever have emerged as category killers. Galaxy

Asia Gaming Briefings | December 2019

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Entertainment, a building products supply company, has excelled in the VIP segment as well as F&B. Melco Resorts & Entertainment, a formidable competitor in premium mass. The foreign companies too have learnt the business, Chinese business, and the art of Baccarat. Their footprint in Macau has enabled them to leapfrog over their competitors at home. Macau will never be a Vegas nor a Monte Carlo. It doesn’t have to be. Macau is a juxtaposition of new and old, east and west. With a horde of international casino operators eagerly awaiting the new concession bidding process, Macau is in a position to dictate its

wants and needs for the next phase of growth, which is to share the wealth throughout the whole society through diversification. Macau’s uniqueness lies in the fact that it sits as a gateway to the Chinese market, inarguably the world’s single largest gaming market. Despite the next chapter to be focused on non-gaming attractions amidst an integration effort into the greater bay area in which it sits, Macau will likely continue its trajectory as a Mecca of gaming for the next thirty years. Its way of doing business is to share, as per my own experience, rather than exclude.

For my part, I was happy to have shared with the others as without them, I would not have had my most rewarding China experience. A lesson in there perhaps for some? * Ben Lee is the managing partner of IGamiX Management & Consulting based in Macau. He is acknowledged as one of the region’s experts in the area of Asian gaming market. With extensive gaming experience all over Asia and Australia, Ben has been covering and uncovering new gaming projects around the Asia Pacific region.

Asia Gaming Briefings | December 2019

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Macau 2020 and beyond Sir Glenn McCartney*

Professor of International Integrated Resort Management, University of Macau

The 1999 handover and casino liberalization policy put in place a new phase of development for Macau. All six casino licenses are soon set to expire and once the retendering process has been enacted, Macau will enter a crucial next phase.

he competitive landscape for casino and integrated resorts (IR) has, however, dramatically changed across Asia, with multiple iconic IRs and casino properties emerging. Macau’s position within the Greater Bay Area, Belt and Road initiative and Hengqin Island developments are factors to put into this dynamic development mix. Looking to 2020 and beyond, what will Macau’s new phase look like and what policies will be put in place to guide and encourage buy-in from the private and public sectors? To project scenarios for Macau’s next phase of casino and tourism development, it’s necessary to step back 20

Asia Gaming Briefings | December 2019

years and look at the actions that essentially signaled and were a catalyst to Macau’s impressive IR and casino development post-handover. The triad turf wars that played out so publicly in the years up to the Macau handover were to have a negative impact on annual gross gaming revenues, which fell 11 percent year-on-year from 1998 to 1999 from $1.8 billion to $1.6 billion. That’s essentially less than two weeks of gaming revenue generated today. VIP revenues in 1999 had dropped to $1.1 billion, making up 70 percent of total gaming revenue. Again, a minor reflection on the revenues now generated from

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VIP and premium mass. The liberalization of Macau’s casino industry and the end of the casino monopoly only a few years after the handover was to be a fundamental policy to stimulate economic growth and return stability to Macau. In 1999, the Macau government received $766 million in direct tax of gross revenues, but by 2018 took $14.2 billion, showing the sheer volume of casino play in Macau today, and its contribution to the now over $70 billion in government fiscal reserves. With 337 gaming tables and 796 slot machines at liberalization time, Macau still had Asia’s largest gaming revenues, though this shifted to global leadership when it overtook the Las Vegas Strip in mid-2000. By 2018, Macau’s casino industry had a total of 6,588 gaming tables and 16,059 slot machines (or electronics games). Of the 7 million visitors to Macau in 1999, 1.6 million (23 percent) were from Mainland China, a three-fold increase in Mainland Chinese visitation to Macau from 1997. With the establishment of Special Administrative Region (SAR) status for both Hong Kong and Macau, the two SARs become the first to get ‘ADS’ (Approved Destination Status) agreements from China. This signaled that Mainland Chinese were about to start travelling outbound in ever increasing and significant numbers. Combined with casino liberalization, Macau’s casino (and tourism) success would be and still is based essentially on the comparative advantage of being a cross border location to another jurisdiction that bans

casinos, in this case China. Today Mainland Chinese visitation is crucial, representing over 70 percent of Macau’s 36 million visitors in 2018. This description of data comparisons is an important one. It shows rapid and sometimes unexpected growth, of greater dependence on casino revenues and the Chinese travel market, and where development goals are not necessarily to be restricted by fiscal constraints. I was in Macau before 1999 working in the hospitality and tourism sector and experienced the changes first hand. The Macau government receives 85 percent of tax revenue today from the gaming sector, while there is a constant narrative that Macau needs to diversify beyond gaming. Over the years I have researched and commented on the various reasons why Macau has become more reliant on the gaming industry, examining Macau’s policies, destination communication strategy, city branding, stakeholder collaboration and sustainable development. The Macau government has pitched the city as a ‘World Centre of Tourism and Leisure’. A vision can require various levels of objectives with clear key performance indicators. When suggesting future tourism scenarios, one outcome is based on there being minimal change in current direction. At the other end of the spectrum, another will take a more dynamic position, with a greater level of disruption needed to achieve its aims. A forecast for Macau’s casino and tourism landscape in 2020 and beyond needs to obviously consider many variables. It is a

dynamic situation where a sudden public or tourism policy initiative, infrastructure development or regional competitive factor could all influence a well devised tourism plan. Based on Macau’s tourism history and trajectory of the past 20 years, I currently would take a cautious position, with Macau continuing in the current development cycle with incremental non-gaming growth. As well as internal city challenges to growth, I am aware too of the competitive tourism landscape throughout Asia and the future growth projections in each destination’s tourism and casino development and infrastructure surrounding this. A new phase of tourism development for Macau must take into account that these factors did not exist 10 or 20 years ago and could even impact non-gaming growth goals. Defining and rallying consensus around Macau’s tourism vision and a tourism strategy based on this, could certainly put the city in a greater competitive foothold for 2020 and beyond. * Professor Glenn McCartney MBE is Associate Professor of International Integrated Resort Management at the University of Macau. Professor McCartney worked for many years in different operational, strategic and consultancy roles within the tourism, hospitality and gaming industry in Macao and other Asian countries. He is also the British Honorary Consul for the territory for which service he was awarded an MBE in 2016.

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Jorge Godinho*

Visiting professor at the Faculty of Law of the University of Macau

Twenty years of gaming twists and turns The 20th anniversary of the Macau Special Administrative region is upon us. When it comes to gaming, these were not two linear decades. There were plenty of twists and turns.

n 20 December 1999 everybody knew that the STDM monopoly concession would expire in 2001, and its 40-year monopoly would end. It was decided that there would be three concessions. Some observed that three concessions was not enough, while others doubted whether any international companies would

Asia Gaming Briefings | December 2019

want to invest in a place that so recently had been through a rough crime-infested period. In the public tender of 2001/02 a grand total of 21 bidders showed up. The LVS/Venetian started the process with one partner and ended it with another, Galaxy. Soon after, disagreement broke out between them and, in a major twist, the first subconcession

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Baccarat grew “ a lot and gaming

promoters rose in importance, in a manner that nobody could have predicted, so much that commissions on Baccarat had to be capped.

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was created in late 2002. And so the three became four. Another twist soon followed: operators basically forced the Government to legalize credit for gaming, something that was not in the original plans. A law approved in 2004 did that and, in passing, spoke of “subconcessions”, in the plural. In 2005 and 2006 two more subconcessions were agreed. And so the four became six, providing the basis of a booming industry. The economy was pretty good, money was flowing. This may be largely forgotten now, but in 2002 nobody was really interested in investing in the Cotai, often derided as a faraway swamp full of mosquitos. Macau is where the action was, and most of the sub/ concession contracts were executed in old Macau. Lots of casinos opened, big and small. Then a major twist happened: the Venetian

opened in August 2007. Suddenly everyone wanted land to build in the Cotai. And since then no more casinos opened in old Macau. Another twist was the very rapid growth of gaming promoters. In 2004 some analysts were predicting a vast mass market, with many slot machines. The opposite happened: Baccarat grew a lot and gaming promoters rose in importance, in a manner that nobody could have predicted, so much that commissions on Baccarat had to be capped. Only now, in 2019, is the mass market finally overtaking the VIP sector. And suddenly we really didn’t want the industry to grow that much: table caps were imposed, and everybody started talking about the importance of non-gaming and diversification. The economic crisis halted the development of the Cotai for a while, but with so much liquidity around, and more properties opening,

the revenue continued booming, and reached a stratospheric all-time high in 2013. Then, in a major twist, suddenly things turned very negative. Various regulations tightened (money laundering, smoking) and money dried. Gaming promoters, so strong just a few years before, now had serious problems. Many promoters simply closed; scandals erupted and lawsuits followed. The VIP market lost some of its luster. Half of the 2013 gross gaming revenue vanished by 2016. Markets and analysts were very depressed. Then finally things started to recover a bit. The interim review of the concessions in 2016 was an unexpected regulatory twist. Now there would be a large examination. Nobody saw it coming, but all sub/concessionaires passed the exam. In 2019, the twisted concession deadlines (18 years for SJM and its sub-concessionaire, 20 years for the others) were fixed. They will all come to an end at the same time, in 2022. The next twists in the plot will be unveiled soon after 20 December 2019. The twist that the industry always wanted — lowering the heavy taxation — never happened. *Jorge Godinho is a legal consultant and a visiting professor at the Faculty of Law of the University of Macau, where he teaches gaming law and anti-money laundering law. Jorge joined the Faculty of Law as fulltime assistant professor in 2004 and became an associate professor in September 2009. His current academic interest is gaming law.

Asia Gaming Briefings | December 2019

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Sudhir H. Kalé*

Founder, GamePlan

Customer focus urgently needed The casino industry in Macau grew from US$2.77 billion in revenues in 2002 to over US$45 billion in 2013. Then, in 2015, revenues fell precipitously to under US$29 billion, a fall from which casinos are still reeling.

n 2009 two very senior casino executives predicted casino revenues to top US$100 billion by 2020. Now that we are approaching the cusp of the new decade, a figure of US$35 billion seems more realistic. Macroenvironmental factors (such as “tigers and flies” campaign, restrictions of Union Pay credit card withdrawal, and tightening of credit in China) aside, the casino industry in Macau, has partially been a victim of its own success. The years from 2004 (when Sands Macao opened on the Peninsula) to 2013 were marked by a building flurry with scant regard for customer retention. The number

Asia Gaming Briefings | December 2019

of casinos in Macau increased from 15 to 35 during this time with the number of gaming tables going up from 1,092 to 5,750. This feeding frenzy came to an abrupt stop in 2014, beginning three years of sequential decline. All operators were quick to cut their head count, consultants were shown the door, and player reinvestment was further reduced from an already low base. Today, as 2019 draws to a close, we are again witnessing serious challenges. Markets such as Singapore, Philippines, Cambodia, and Vietnam are ramping up their offerings and luring customers away from Macau. At a time when customer franchise building should be

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the clarion call for Macau’s six casino operators, most seem preoccupied with cost-cutting. When over 90 percent of large businesses around the world are competing primarily on customer experience, casino operators in Macau are cutting back on customer-facing initiatives to shore up the bottom line. It appears that senior leadership in the Macau casino industry is running out of ideas to deal with—or is simply oblivious—to the current and impending competition in their backyard. According to Union Gaming, around US$65 billion will be invested in casino properties in Asia between now and 2025. Economic growth in Asia will not be enough to fuel the new casino development across the region, the analysts warn. With a slowdown in Mainland China’s economy, the looming re-licensing question in Macau, continued restrictions on the outflow of currency in China, and devaluation of the Renminbi, we could very well be looking at 2014 all over again. The supply in the casino industry in Southeast Asia is increasing every day and will continue to increase for at least another

five to ten years. The demand for the casino product is simply not there to handle the increased supply. Asian customers visiting

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Casino operators need to act now and focus almost singularly on initiatives to foster customer retention and customer intimacy.

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casinos are increasingly cutting back on their gambling budgets and this cutback is already hurting casinos everywhere from Melbourne

to Macau, from Singapore to Sydney. These developments could cumulatively result in another perfect storm to hit Macau, and this time it won’t be a typhoon like Hato which devastated Macau in 2017. Casino operators need to act now and focus almost singularly on initiatives to foster customer retention and customer intimacy. These customer-franchise building activities should include all customers, not just the much-touted premium-mass segment. Corporate ethos in the Macau casino industry needs a serious overhaul, a redirection toward a customer-centric culture and market-oriented management. * Sudhir H. Kalé, Ph.D., is the Founder and CEO of GamePlan Consultants. He has written over 100 articles on the management and marketing of casinos. Sudhir has advised casino clients in the areas of customer experience, marketing and CRM on five continents. You can write to him at skale@ gameplanconsultants.com.

Asia Gaming Briefings | December 2019

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Peter Johns*

Chief operating officer/ business development, IDX Games Ltd.

Macau memoirs - the good, the bad and the future My first visit to Macau was in August 2004 to have a look around the newly opened Sands casino. I recall the day well. It was a T3 (Typhoon) that felt like a T8, not the best ferry ride I’ve had. I recall squeezing myself around a packed Sands floor in the days when it had more tables on the mass, then queuing to get into the old Lisboa, which was also hemorrhaging people.

etting back to the ferry to get off the island was also a challenge. No taxis in sight we took a rickshaw back for HK$60 and got soaked, even though the poor rider gave us his umbrella. I think my last words were, not sure I’ll be back here too soon. Fourteen months later I was back on a networking trip, meeting several of the early executives in town, some of whom are still around Macau. Two months later, I moved to help Galaxy City Clubs in a role at the Rio Casino. My first impression was what the hell have I done? It was foggy a lot in those days and I don’t think it cleared to see 100 meters in front of you for at least a month. It was two months before I could see Taipa across the water, though there was not much to go over for. You were considered a bit mad if you were looking for accommodation over there in those days.

Asia Gaming Briefings | December 2019

And there was not much choice if you did. The only decent place was the newly opened Kingsville. The biggest change is that you now have a multitude of excellent choices especially for families. The same goes for shopping, eating and entertainment. In the early days you basically had HQ (the old Roadhouse on the Macau side), or if you were really feeling like letting your hair down, a trip to the Embassy Bar at the Mandarin, or the Cave at the Landmark. The latter was always fun for some live music and dancing with the right crowd. The challenge was what made the early days fun. It was a challenge to find food in the supermarkets; a challenge to keep your family and young kids entertained; a challenge to open new properties from the ground up with few resources, but those days were memorable. Everyone knew each other. You didn’t pass another gweilo in the street without

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saying hello, because if you didn’t know them, you knew by the weekend you probably would. There were new people coming to town every week, and most of them met up in the old HQ for weekend drinks, or at the very few restaurants everyone seemed to go to, such as Antica Trattoria or Pizzeria Toscana, or listening to “Blue card” play at the Old Taipa tavern. Everyone in those days had at least one “Macau day” every week. The ones you know can only happen here. Most involved either a day at immigration, or the blue card office, or a day with a real-estate agent who took you around a bunch of places you would never think of living in, before Macau. I remember being shown the same apartment by three separate female agents, none of whom spoke English. It was the best of a bad bunch, but the price was way out of my budget at the time. I asked for a second look from the last of the ladies, who brought along her English-speaking niece to translate. (She was about 12). While I was in the apartment the other two agents showed up and began squabbling over the lease. The niece told me they were arguing over the commission and wanted to know what I wanted to pay. She said they have to split it three ways, so wouldn’t want to drop too low. I asked the niece, what if I gave them the full commission if they got me a good price, so they wouldn’t lose out. I ended up

paying a third of what they originally asked, as long as they got the 20k commission to split. I slowly began to realize how things worked around this place. Also, in those days it was prudent for everyone to have one of those guys, the person you called for almost everything you needed doing or getting. There were a few early entrepreneurial locals who did a great job for a lot of people. Over the past 13 years, I feel like I accomplished quite a lot in Macau. After moving from Galaxy City Clubs after six months, I joined MGM and was in the first group setting up the property from the WanTu offices. It was like a small family back then and we had a good pick of the market for some talented new hires, some of whom are holding high positions across Macau today. The MGM opening was in the middle of the global financial crisis and a few other local challenges. I distinctly recall the irony of our very creative opening tagline and advertising, which was “Players wanted.” But we survived and I’m proud of having had the opportunity to be one of the early pioneers in Macau and of having created some of the biggest electronic gaming floors in a table-orientated market. After almost five years I was about to move back to Australia, but was asked to join Galaxy again to open the Cotai property. I was on the opening of stage 1 in 2011 and stage 2 in 2015, seeing the glory years of 2013 and 2014, when Macau GGR was almost $50 billion before the perfect storm arrived. No smoking, AML restrictions and outside forces brought the market to a new, sustainable level. After 2016, I took an 18-month break from Macau to travel and enjoy life. I came back after starting to do some consulting around Asia. The market bounced back, new properties continued to open, albeit with delays and some without their fleet of red Rolls Royces. But now Macau is back to a bustling city, not only for gaming, but for shopping, eating and almost for entertainment. Despite the recent slowdown in response to certain issues in HK, I think Macau will survive the next 20 years just fine. Everyone is a little apprehensive about the 2022 concession, but I see this as a possible new spike in growth in the market. The possibility of new licenses and competition, coupled with all the new reclamation projects, Hengqin, the Greater Bay Area and HKZM Bridge,

will possibly contribute both to a population increase and more economic growth. Japan may be opening at least one casino by 2025 but I don’t see this having much effect on Macau. There are many emerging gaming markets and growth throughout the SE Asia region, but somehow there always seems to be enough people to sustain most of the regulated ones. I am setting some new challenges myself for 2020, onwards. I recently got involved in a new company called “ IDX Games LTD,” a subsidiary of idNerd Studios, an innovative group from Hong Kong. We plan to bring some new innovation and excitement to Macau and the Asian market in 2020. * Peter Johns is the chief operating officer/ business development at IDX Games. He has a long career in Macau, working on opening projects for MGM China and Galaxy Entertainment.

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Macau memories Gambling has a long history in Macau, dating back to about 1850 when rulers in the Portuguese trading post decided to legalise gambling to generate more revenue.

or more than one hundred years there was little growth, with the fragmented market consisting mainly of an assortment of fantan houses. The first real revolution came in 1962 when the government awarded the monopoly to Stanley Ho’s Sociedad de Turismo e Diversoes de Macau. Known as the King of Gambling, Ho introduced western-style games and modernised the transport service between Macau and Hong Kong, bringing millions of gamers into the territory. In 2002, history took another turn when the government, again seeking more revenue after a period of economic instability and triad wars, liberalised the

Asia Gaming Briefings | December 2019

market and awarded the six concessions. What happened next is now common knowledge, with the market exploding to become the world’s largest gambling hub. In this section of our 20th anniversary edition of Asia Gaming Briefings, we ask some of the people who helped build the modern Macau to take a trip down memory lane and write about their early experiences. They share their first impressions of what was back then a far sleepier city, together with the biggest changes that they have witnessed in the evolution of gaming in Macau. They tell us some of their “only in Macau” moments and look into the crystal ball to see where it’s heading over the next 20 years.

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Herman Ng CEO and executive director, Asia Pioneer Entertainment

hen did you arrive in Macau, and in what capacity? I grew up in Macau, and I went to the United States to study when I was 16. After I graduated, I came back to Macau in 1996. After that, I took a job as an arcade operations manager in an arcade games center. By that time, I had met a bunch of Japanese guys in the industry. After 1999, the Macau government started to open up the gaming licenses, and my Japanese business colleagues asked me to start distributing some Japanese gaming products to Macau. I didn’t have any knowledge of gaming at the time and I thought it was a similar thing as arcade games, so I started doing it all together. My company was called Japan Pioneer Entertainment.

Andrew Billany CEO Inspire, Entertainment Resort

hen did you arrive in Macau, and in what capacity? I arrived in Macau with the pre-opening team for Sands in 2004, at that time overseeing all the non-gaming elements of the operations. What were your first impressions? Well, having survived the madness of the immigration and Jeftfoil crush on the way over from Hong Kong in those days, my first impressions of Macau were that it was tranquil, apart from the old embassy bar. I remember being impressed with the history in Macau, that mix of Portuguese colonial culture, fusion cuisine and oriental charm. Very different from the fast and the furious era of today In 2004 there were very few cars or buses, definitely no supercars and very few expatriates. Before we opened the Sands, to get a good steak, we used to take the ferry to HK and eat at Ruth Christie’s steak house.

What were your first impressions? At the beginning, there were not many slot machines in the market and many opportunities to bring new products to Macau. At that time, it was a monopoly by SJM so the gaming industry was very closed and the most important sector for the industry was junkets.

Getting to that point was quite a difficult job but everything was on time. In a way I can say it was lucky in that everything was fate that it was all on time and perfect.

How are you expecting Macau to evolve in the next 20 years? Macau is one of the most significant cities in the Greater Bay Area (GBA). The whole What are the biggest changes you have region has about 70 million inhabitants and seen in your section of the a gross domestic product industry? of about US$1.3 billion. We We could The most important could definitely embrace the definitely change is that there are more opportunities of investment varied qualified electronic and business. At the same time, embrace the gaming products under mature it will also be challenging in opportunities of the next 20 years if Macau regulations. Everything is black and white. It is part of still treats gaming as its core investment and the top level of gaming in the business. Resorts are looking business. world. It is more challenging into more entertaining for new manufacturers to activities and building enter into this market. leisure facilities to prepare for the coming challenge. I hope the next step is that IRs What have you found most challenging, or and the government increase talent in the memorable? hospitality field and create another strong In 2017, APE listed on the Hong Kong industry other than casinos to attract tourists Stock Exchange. It was a great moment. to stay longer in Macau.

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Macau back then had none of the ultra consumerism that you see today. What are the most significant changes you have seen in your section of the industry? The overall shift in the players’ visitor profiles, they are younger, coming from further afield and more affluent. They want to be entertained and appreciated. They expect larger rooms, quality linens, great F&B, offered a variety of entertainment options with world class service, for themselves and now even their families. What have you found most challenging or memorable? The journey; pre and post the “Sands Effect,” having been involved with some of the most renowned Integrated Resort companies on the planet, and it all took place in such a short period. It was a once in a lifetime opportunity for learning and growth. Can you share a curious/ funny episode that could only have happened in Macau? We once had a customer who, over a

period of one year, lost US$60 million, never stayed in his comped suite, never ate at the best restaurants we booked for him, and only drank watermelon juice at the table while playing. Only in Macau. How are you expecting Macau to evolve in the next 20 years? While not in possession of a crystal ball, Macau, because of its proximity to China and favorable travel policies, will always be a preferred gaming destination with ever-expanding nongaming amenities. By all forecasts, China will remain the principal source of Asia travelers and GGR because it reflects not only the growing desire of the Chinese to travel given the emergence of the middle classes but also their higher propensity to gamble. Twenty years from now, the value proposition that drives GGR today (player budgets, accessibility, casino experience, and attractions) will have changed, but I’m sure Macau will be at the forefront of those changes.

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Emily Io

limited to the public sector, SJM and banks.

senior VP sales,

What are the biggest changes you have seen in your section of the industry? Over the years, since gaming liberalization, I have witnessed the evolution of table games from the acrylic shoe, handwritten trend sheet and plastic chip to the intelligent shoe, trend board display, automatic shuffler and ultimately PJM technology for casino chips and the Perfect Pay platform for baccarat tables.

Walker Digital Table Systems

hen did you arrive in Macau, and in what capacity? I returned to Macau from the U.S. in March 2003 seeking opportunities, but certainly had not expected to settle for over a decade and a half now. I had chosen the public sector, in investor relations at the Trade and Investment Promotion Institute as a civil servant. It became a gateway to the gaming industry and more so for suppliers opening up unlimited potential of a career path. What were your first impressions? At that time, job opportunities were quite

Chris Rogers Founder and CEO, East2West Solutions

hen did you arrive in Macau, and in what capacity? I have been travelling to Macau since about 2003 and moved permanently in 2006 with my wife. We have been in Macau pretty much permanently since then, moving up there in a corporate business and moving out of the corporate world with my own businesses. What was your first impression of Macau? There’s not a lot there. It was a monopoly. There was a lot of talk about what it could be, but no one really knew. When we got there Sands was on the cards, but it was more about trying to find out what the regulation was going to be, what the operating protocol for machines was going to be. Was it going to be U.S, or Australia oriented? Macau in the early days was influenced a lot by Australians, there were a lot of Australians working in Macau. What’s the biggest changes you have seen? The biggest change in Macau has been on a number of fronts. Regulatory, it’s become

Asia Gaming Briefings | December 2019

What have you found most challenging, or memorable? Macau has transitioned from the SJM-dominant local operation to an international gaming hub topping not just the GGR of Las Vegas, but superseding the performance in various aspects of the gaming operators in Asia Pacific. It has always been challenging and will be more challenging as competition

a lot more regulated and not just in gaming but in Macau itself. When we got there, there weren’t many rules or guidelines to follow. It was a very much a Wild West situation. From the technology point of view, there has been a huge amount of technology being adopted into Macau, simply because the market has matured. The other big change is that the customer base coming to Macau has matured. It’s educated now, so their expectations are much higher. When it first opened, many, many people who were coming in were seeing slot machines from different regions that hadn’t been seen before. There were only five table games when Macau opened. The operators didn’t want to entertain anything else because when they opened their doors they were just making so much money. They didn’t have to differentiate. The ability to enter new technology and products was difficult, both from an operating and regulatory point of view. What did you find most challenging/memorable? All the Macau-isms. Terms like “cannot.” In the early days, the first thing that anyone would say to you was “cannot.” You’d go into

from the likes of Singapore, Vietnam and perhaps Japan in the future, continues to rise with mega IR projects and casinos. Share a curious/ funny episode that could only have happened in Macau? That in Macau, with a population of over half a million on soil of less than 50mi², the Venetian Macau is two fold the size of The Venetian Las Vegas. The Eiffel Tower is only half the size of the actual Eiffel Tower. It has made it to the 2nd in the world by nominal GDP per capita, all because of the liberalization of the gaming industry that happened less than two decades ago. How are you expecting Macau to evolve in the next 20 years? To continue to be an industry leader, Macau will require more regulatory and policy enforcement by the relevant governing entities to ensure that the infrastructure of the city is more connected to the Greater Bay Area and the city continues to help develop the local population by diversifying talents in conjunction with the continued growth of the gaming industry.

a restaurant and say can I move that chair and they’d say “cannot,” you go to the bank and someone says “cannot.” Macau-isms are just why is it like that..because it’s Macau. The fact you still need a chopped document, the fact that when you need a document notarised you can only get it done in Portuguese and Chinese. The casino sector has been on steroids for ten years, but when you look at the rest of Macau, it’s only now starting to catch up. It’s a Macau-ism. How are you expecting Macau to evolve in the next 20 years? I think the government will try to encourage Macau to become less reliant on gaming. I don’t think it will be that successful, but they will make a concerted effort. Macau will become part of the Greater Bay Area and there will be more continuity between Macau and China. That opens up opportunities outside of gaming. Technology will come into play, things like AI. From a gaming point of view, you have another three years of build out. I’d say by 2025, the gaming growth in terms of infrastructure will stop. The focus will be on delivering results on the current assets.

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Constance Hsu chief operating officer, Jin Bei Group

hen did you arrive in Macau, and in what capacity? I came to Macau in 2003 for the Mocha Clubs project as Financial Controller in charge of finance, treasury, audit, legal compliance, procurement and human resources. Being the pre-opening team, I also participated in the negotiation of the T&C for new sites, determination of product mix, marketing strategy and etc. What were your first impressions? It was a cozy place with delicious Portuguese food, seafood, noodles and snacks, and amazing heritage buildings and sightseeing spots. Especially people here were very friendly.

Dennis Andreaci

What are the biggest changes you have seen in your section of the industry? There are many more games tailor-made for this market with preferred volatility and bonus features. Players are getting more sophisticated. What have you found most challenging, or memorable? Mocha Clubs was the pioneer to bring the transformational evolution that introduced club-style electronic gaming entertainment to Macau, offering a coffee shop-style atmosphere for patrons. During Stanley Ho’s 40-year Macau casino monopoly (which officially ended in 2002), slot machines were housed either on the way out of the tables areas to catch players’ loose change, or in cheap and cheerful parlours with relatively antiquated machines. Today, Mocha is known for having a slick player rewards scheme and one of the best returns to player on its machines in the whole of Macau. Mocha has become the leading non-casinobased electronic gaming chain with multiple locations across peninsula Macau and Taipa. Also, Mocha Clubs was the first to introduce electronic table games in Macau and Asia.

even thinking ‘WOW! There must be something big happening over there!” When we arrived, we realized, they were managing director, there for us. There must have been more than Andreaci Consulting 40,000 people there. We were absolutely shocked. The line went around the corner and all the way he first Sands Macao people were some down the street. The police were called in for of the first foreigners to come to Macao. crowd control, it was amazing. When we arrived, we were all living together The initial plan was to go over to the cultural at the Westin Coloane Hotel. There were seven center, give a presentation about Sands and then of us, and I was the third person to arrive field questions from the public about what it was from Sands. like working at the company. I remember one day, We only had six people with Not many I suggested casually to us, and around 10,000 pieces our HR consultant from people could of information. the U.S. to organize an But I remember once we event to see if people were even get to Cotai walked in the door, and saw interested in working for at the time. There those 40,000 people, we knew us, or if they want to learn there was no way we could follow about our company. This were no taxis or the plan. So instead, we spent the was early 2003. day handing out pamphlets and buses. So, indeed, we decided brochures like street vendors! we would put on a job fair We even had some people to be held at the Macau Cultural Center, just pushing their way to the front of the line, only behind the Sands Macao. to pick up the brochure and sell it to those at the The morning of the job fair, I remember back of the line, as if they were selling jobs. Police coming across the bridge in our little van, like had to get involved to identify the perpetrators we do every morning. I remember looking at and throw them out. the Cultural Center and lines of people, and Looking back, I’m still not exactly sure why

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Share a curious/funny episode that could only have happened in Macau? When I reached out to the several EGMs manufacturers for the first time in 2003, most of them had not heard of Macau or were not aware of where Macau was. (Note: Before gaming liberalization, there were only approximately 800+ slot machines in Macau, which were purchased through a distributor.) It took me some time to make them feel comfortable to come for a visit and provide us with a proposal. After all, both Macau and Mocha Clubs were new to most of them at that time… How are you expecting Macau to evolve in the next 20 years? The Macau market will continue to perform well, especially as the critical mass of the tourism offering on the Cotai Strip continues to increase and when Henqin’s development is underway as the backyard of Macau. The Cotai Strip has in recent years developed into a world-class destination for business, leisure and family travelers, and it has become a very attractive destination as a result.

there was such a turnout, I guess we were one of the first American companies in Macao, we were the new company with a license. It was a combination of reasons. I also remember around the time when Wynn Macao opened up, and of course The Venetian in Cotai. Not many people could even get to Cotai at the time. There were no taxis or buses. Everything in Cotai was new and far away. We had to arrange all the transportation - we bought coaches, vans, buses, we had to create the transportation network. So much has changed since then. However, what I think about most is the people and the lives we’ve changed. I think about all those young people that we hired and trained in the early days - and now when I go to Macao, I see they’ve become managers, with great jobs. That’s what makes me happy. Business is booming in Macao, there’s nothing quite like it in the world. But I’ll always remember the people. That’s what makes a good story.

Asia Gaming Briefings | December 2019

TESTIMONIALS 52

Fiona Dennehy

Michael Hu

Senior Vice President,

president Asia Pacific,

Main Floor Gaming, Wynn Palace

Interblock

hen did you arrive in Macau, and in what capacity? I arrived in September 2005 as the Director of Table Games.

What were your first impressions? I was amazed at how clean Macau was and how nice the people were. I had not really done much homework on Macau prior to this. I was also blown away at the potential size the casino industry was heading for. What are the biggest changes you have seen in your section of the industry? So many changes over the years. Technology has developed so quickly ie., even the Angel Shoe was new back then. Having designated card rooms etc., was way ahead of Australia in the day. What have you found most challenging, or memorable? One of the most memorable experiences was being part of the building of a brand new table games system. All the stakeholders and the developers in the same room discussing how the system needed to interact with all our various transactions and yet be very intuitive for our team members. Share a curious/ funny episode that could only have happened in Macau? Some of the most funny and endearing memories were in the early days, and the occasional confusion of language translations. We had just trained some of our more mature team members from the hotel to become dealers. In order to test if we had to polish our processes, I remember asking a pit manager how they were progressing now that they were dealing in a live environment. The reply I got was confusing, “not really well,” they said. Probing further I asked if it was the payouts or the card rules that they were struggling with. I was told, “no, they are ok.” So I pressed further for understanding, to be enlightened with “when they have to deal with a lot of players, they become very flatulent.” My reply was, “oh, I can see that might be a problem,” before bursting into fits of laughter. There were many such interactions like these in the early days, and they were a constant reminder to me of how the difficulty of language was my problem, not theirs. How are you expecting Macau to evolve in the next 20 years? I expect that there will be even greater development of technology in the work place. Macau will develop more leisure tourism and will be less dependent on the gaming dollar, as the other aspects of resorts earn their market share. The architecture of Macau will change as housing and rehousing develops, but I hope it will never lose its current charm with old and new together.

Asia Gaming Briefings | December 2019

hen did you arrive in Macau, and in what capacity? I arrived in 2005, working for Interblock as a sales director. We pretty much started from zero at that time. What were your first impressions? There was only one casino at the time besides SJM, which was Sands Macao. It was the first IR for the casino industry. We could see that there was huge market potential, with lots of licenses and construction going on. At the time, however, we were the only ETG provider, and the market was in its infancy. Cultivating the ETG market and its concept was the challenge then. What are the biggest changes you have seen in your section of the industry? There is a common agreement that ETGs have seen rapid growth and development. This has been attributed due to market pressures such as higher labor costs, less manpower, and the We’ve growth in demand from players found the for more privacy and individual experiences - all these elements Macau market go into gaming which has led to to be a very the growth of ETGs.

“

traditional

What have you found most one. challenging or memorable? We’ve found the Macao market to be a very traditional one. Any new games or new configurations take time for the market to accept. Players tend to be very conservative about new concepts. This is due to the majority of Macau players being from mainland China, where gambling and gambling promotion is illegal. They only know and trust live table games - which has led to ETGs having to offer live dealers in order to be successful. We made this change to make people more comfortable with our machines. But it represents a slowdown in innovation.

”

Share a curious/ funny episode that could only have happened in Macau? It’s interesting to see that the game of Sic-Bo works perfectly for the Macao market, but is not popular anywhere else in the world. How are you expecting Macau to evolve in the next 20 years? Over the next 20 years, while revenue will continue to grow steadily, I think you’ll see slow adoption of new technology. The speed of acceptance in Macau is indeed slow.

TESTIMONIALS 53

Rashid Suliman Vice President, Global Gaming Asia-Pacific, Transact Technologies

hen did you arrive in Macau and in what capacity? My first trip to Macau was back in early 2006 for a project at Wynn Macau when I was with Orion Art. In August 2011, I joined Transact Technologies and shortly after relocated to Macau with my family from Sydney. What were your first impressions? I developed a keen sense of wanderlust at a young age when I moved from South Africa to Australia as a child. As such, I really looked forward to visiting this captivating city. When I first arrived, I was fascinated with the East meets West culture. It was initially a culture shock, but I quickly grew to love this city, and I’m proud to say this has become the place that my family and I now call home. Seeing the landscape of Macau change so quickly right before my eyes, I never

Harold Tsakmaklis Vice President of Casino Operations, Sands China Limited

hen did you arrive in Macau, and in what capacity? I arrived in April 2004 and joined Galaxy group. I’m not sure what the job title was, my good friend Tab ( Albert Davia) was here and he just said” get your **** here quickly! Initially we were a small group headed by one of the greatest Ciaran Curruthers... The rest is history. .. What were your first impressions? My first impression was OMG! We seemed to socialise a fair bit, it was lots of fun and great networking. I met a lot of people that went on to become some of my greatest friends. Macau itself was small and sort of quiet, well the streets seemed quiet during the day. I found it difficult getting around as nobody spoke English. I was lucky as my partner Connie

expected it would become what it is today and I’m excited to see how it will continue to evolve.

at the same time. I appreciate all the customers and business contacts I have made thus far.

What are the biggest changes you have seen in your section of the industry? Technology has come a long way in the last decade, and that is evident when you look around the properties and gaming floors. In addition, what’s taking place behind the scenes in both hardware and software technology advancements is creating a more dynamic and enjoyable user experience. Customer experience and loyalty are paramount.

Share a curious/ funny episode that could only have happened in Macau? T.I.M (This is Macau) was the phrase used on many occasions in my early days of Macau to depict situations that seemed to have no rhyme or reason. A series of books could be written about these and other amusing events which have taken place over these years.

What have you found most challenging or memorable? Logistics (taxis in particular) were certainly what I found to be the most challenging, and I’d have to say the friendships we’ve made throughout this journey to be the most memorable by far. The gaming industry is large but pretty tight-knit

How are you expecting Macau to evolve in the next 20 years? I think technology will play a key part in this constantly evolving landscape, and we will see more attractions for families and non-gaming visitors to Macau and Henqin Island. I also expect it to be easier to get in and around Macau saving time and creating a more overall enjoyable experience.

Share a curious/ funny episode that could only have happened in Macau? Countless funny stories so I will pick something quick. My friend Joe Leonardos, who was working at Sands called me and said, H, it’s raining and I want to buy an What are the biggest changes you have seen umbrella, how do I ask for it in Chinese... in your section of the industry? I replied Joe that’s easy, it’s the first thing I We went from building satellite casinos on learnt when I arrived.. Ask the shop owner the Peninsula to large IRs on the Cotai strip. for a Nowetmi.. (no wet me)... for the next Grand Waldo was actually the five minutes I heard Joe first property built on what asking the shop owners for I have was then called Coloane. I a nowetmi.... hilarious. worked with watched the Venetian being built day by day. The industry How are you expecting some of the has changed and for the better. Macau to evolve in the next greatest in the 20 years? Look at all the magnificent properties and amenities I would like to say that industry. we have, I don’t need to go the foundation has been set into detail. to continue the success of the industry and Macau as the entertainment What have you found most challenging, or capital of the world. The opportunities are memorable? countless with Hengqin Island development Challenging is easy, leaving my family and the further expansion of no gaming and friends on what was supposed to be a products across Macau. three-year gig that turned out to 15 years and It all looks positive in my view, hopefully now a full Macanese resident. Memorable is I’ll be enjoying the golf with my buddies in that I’m glad and proud to be part of the new the country club reminiscing our stories as pioneers of Macau. I have worked with some we watch our magnificent industry continue of the greatest in the industry. to succeed. and her sister Jaimie also came with me to Macau for work and they are both Chinese Australian. That made things sooooo much easier for me. I loved that the people were friendly and Macau seemed very safe.

“

”

Asia Gaming Briefings | December 2019

TESTIMONIALS 54

Ken Jolly vice president and managing director Asia, SG Gaming Asia

hen did you arrive in Macau, and in what capacity? I arrived as general manager of Aristocrat Asia. At that stage Aristocrat didn’t have a permanent person in Macau so I was asked to come and set up the office and build the team there. I started travelling in and out from 2002 and more permanent from 2004. What were your first impressions? At that stage there were only the SJM casinos and people talked about this massive future and how they were going to build all these casinos and it would be like Las Vegas. It was difficult at that stage to get a grasp of what

Ted Chan chief operating officer, Japan Development, Galaxy Entertainment

hen did you arrive in Macau, and in what capacity? I arrived in Macau in 2003 and at that time I was working for Melco. I recall it was in the middle of SARS (Severe Acute Respiratory Syndrome) and before Sands. Melco had just started and I got the opportunity to open the Mocha Clubs. I was one of the first to explore the opportunities. What were your first impressions? My first impression was in the late 80s when I was a kid. I remember there was water all around and just one bridge and you went through Taipa to get to Coloane. Then later I remember showing investors and fund managers around and looking at all the land reclamation and the properties that were starting to be built. It was amazing and you would never see anything else on this scale anywhere else in the world, except perhaps Dubai. I used to have fund managers from the U.S. call me to ask if Macau was safe as they

Asia Gaming Briefings | December 2019

was really going to happen. About that time, SARS was in the area. There were hardly any Westerners, just lots of Chinese wearing masks and I remember thinking wow, what have I got into. When you look at the numbers of people who go through Sands and Galaxy now on a per day basis, it’s just amazing. What were the biggest changes? The sheer number of visitors for what is a small area and population and the actual dollars coming into the market are just astounding. Now what we’re seeing is the government building infrastructure, such as the Hong Kong, Zhuhai Bridge, the ferry terminal, getting the light rail going shortly. Also, a whole city is being built on Hengqin Island from the ground up, so it shows the significance of what the Chinese government expects that area to become. Gaming in Macau and family entertainment in Hengqin. The vision from Mainland China is that this whole thing together at the bottom of the Pearl Delta becomes the Florida of China. What have you found most challenging? At the end of the day, it’s a strong tables market.

had heard about the triad wars on the news. I’d answer it was very safe, and much safer than New York. When I started working here, it was very relaxed. The pace of life was very slow, while Hong Kong was fast. Now it’s the same. There was not a lot of business and a lot of meetings where you’d have coffee with government officials that would last until 3pm after lunch! What were the biggest changes you have seen? In terms of non-gaming entertainment things have changed. If you came 10 to 20 years ago all you could do was gamble, but now when I talk to friends in Hong Kong and China it’s also a place to come to enjoy great food and entertainment...That and the pace of life! The customer has also become more discerning. They are demanding more from us and have seen more and we have to catch up with them. What were the biggest challenges? At the beginning if you ask any of the principals, they never thought Macau would

At SG, we’re very fortunate to be very diverse, with table systems and shufflers etc. If you are just a slot company, it could be quite frustrating as revenue is still only about 5 percent of tables. Where do you see Macau evolving for the next 20 years? It’s obvious that the central government is trying to push more non-gaming in Macau. Still, when you actually talk to the casino operators, they say that 90 percent of players are from Guangdong Province. So as more and more of China gets more affluent, more and more people are going to come to Macau and have a look. And as infrastructure improves, with bridges, fast trains and better access, it will continue to grow. It’s my understanding that a lot of the new infrastructure that has been built in the area is designed to handle something like 80 million visitors. That’s more than double what it is today. They will come from second, third and fourth tier cities and further north. There is a chunk of land that sits 150 metres away that’s six times the size of Macau that’s being developed by the Chinese as a city with a financial centre, Chinese medicine research, theme parks.

become so big. But we have also been through some difficult times. The global financial crisis was the hardest, it was the time every IR operator was hit hard and even the biggest operator almost went into bankruptcy. We cannot be complacent. The business cycle now has got much shorter, but we have learned from the crises and we are getting stronger. What do you expect to see for the next 20 years? I am very lucky as I’m one of the few who has witnessed the changes from the monopoly to today. I am super bullish on Macau given the Greater Bay Area initiative that connects 70 million people. Macau will be the centre for entertainment in the Greater Bay Area and it will be a truly first class offering. The Macau government has done a good job liaising with Beijing on policies and vision. With the current administration, Macau will become more liveable. There are a lot of complaints about traffic etc, but it will improve. Macau has a large surplus and the ability to improve the city.

TESTIMONIALS 55

Kevin Lee General Manager, Aruze Gaming Macau

hen did you arrive in Macau, and in what capacity? I first came to Macau around March 2007 as sales for RGB. I was new to the industry, a green boy with a background in IT. I was tasked with table games product sales, like chips and layouts. The market was all table games back then. Three years on I joined Aruze and everything changed. What were your first impressions? Coming from Malaysia my first surprise was the amount of money people were carrying on the streets. Everyone had these big man purses full of cash. Back home there’s only one casino at Highlands, mostly for regular customers, but in Macau they were mostly tourists and they were spending a lot!

Alidad Tash Managing Director 2NT8 Limited

hen did you arrive in Macau, and in what capacity? I first visited Macau in August 2005. I arrived as a director for the Sands sister company in Las Vegas to ensure that they’d be using the same metrics in setting up the Venetian. Steve Rosen, who was the head of casino marketing asked me to stay and I was thinking, why in the world would I come here? Rosen was right… Macau was a great move. What were your first impressions? I saw a lot of opportunities. Macau was stuck in the 20th century because of the monopoly, naturally. It took awhile for the new foreign operators to realize that Macau is not Las Vegas, Atlantic City or Melbourne… It’s Macau. Eventually, it only took Macau six years to generate gaming revenues seven times that of Las Vegas… No one expected Macau to be this big, this good, this fast.

What are the biggest changes you have seen in your section of the industry? The fast adoption of new technology. We have brought a lot of new technology and innovation to this market and the customers have embraced it. New cabinets with multi layer games, multi features and they’re all playing. And also changing the minds of the operators to do more. What have you found most challenging, or memorable? A big step for electronic gaming happened with the opening of Galaxy Macau. They were open to new ideas and concepts, not afraid to move away from the traditional and were able to create something special. Share a curious/ funny episode that could only have happened in Macau? How we all go and come around. Seems like no one can just let go and forget about Macau. In many instances, friends and acquaintances from the hospitality and gaming

What are the biggest changes you have seen in your section of the industry? Macau went through a dramatic increase in terms of product and offer. Sands Macao and The Venetian were great successes on their own. They completely exceeded expectations - every other opening since has paled in comparison. But the real game changer was Cotai. What have you found most challenging, or memorable? Everything about Macau was on another level. An example was the casino management systems. I remember we had to have a chat with developers as they had never anticipated having to add “billions” to their reporting. They asked. So you need to add billions in the end of year reports? NO - any given day! They could not understand… nine zeros! No one ever anticipated billions. Share a curious/ funny episode that could only have happened in Macau? Even before opening, Venetian struck a deal with Manchester United back in 2007 that they would come for a marketing campaign in the middle of July. The thing

industry whom I’d known in the early days left only to return, simply because it’s still THE leading the industry in many ways. How are you expecting Macau to evolve in the next 20 years? Everything will be electronic. Only VIP areas will have live dealers. It’s very challenging for operators to keep up with the labour costs for tables. Makes sense that, 20 years on, only the VIP will get to play with live dealers because they’ll be the only ones that can afford it. By then everything on the casino floor will be cashless, contactless. The player will use their smartphone to credit their ETG and just play, move on to the next game…

is… after the deal was made, the opening was delayed to the middle of August. The contract was unbreakable so we literally had to “open” a casino, but not “open” a casino - a month before the real opening day for all the superstars. We all pretended the casino was opened, everything looked opened, except there were no ‘real’ customers… Then at opening, there was literally not enough hotel staff. In the first few days things got so slow that the lines for check in were a mile long and many of the execs were asked to come down to the front desk and play the role of customer management and explain that their rooms were not going to be ready any time soon. How are you expecting Macau to evolve in the next 20 years? Macau will go through another phase where there’s no more new supply, just completion of phases. That will create a steal-share market. What we need is new concepts. I think that Japan, with its “über technology advances” will prompt a wave of innovation. Macau has also entered a stage where locals are finally taking over. Even the upper echelon of casino management is being cut down from foreigners to locals. I wouldn’t be surprised if in a few years the vast majority of the senior management would be Chinese.

Asia Gaming Briefings | December 2019

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Asia Gaming Briefings | December 2019

LAST WORD 58

Lost horizons Sharon Singleton

Managing Editor, AGB

I first discovered Macau whilst working as a foreign correspondent in Hong Kong in the run up to the 1997 handover to China.

ack then, Macau was the closest place to segment of the tourism market, albeit a very large one. Its mantra in the past few years has been to push go for R&R, away from the crowds and the hustle of Hong Kong to a quieter pace of life the six gaming operators to diversify their product and a little taste of Europe. Traffic at that offering and introduce more non-gaming attractions point was virtually non-existent and the preferred to appeal to a broader family audience. They have mode of transport was the mini-moke, a glorified golf also sought to throw the tourism net wider, to attract cart that was possible to hire cheaply with no focus visitors from longer-haul destinations such as India. Still, in 2018, more than 90 percent of tourists came on niceties such as licenses and insurance. The Cotai Strip was not even a twinkle in Sheldon from Mainland China, Hong Kong and Taiwan. Macau’s tourism authorities have been trying Adelson’s eye and in the mostly low-rise town of old Macau, the Lisboa dominated the skyline. It was not hard to rebrand Macau, with a focus on its unique cultural heritage and as an for the faint hearted. Entering events city, with a strong through the metal detectors, calendar of annual features, the noise from the casino floor such as the Grand Prix and was a deafening assault on Branding and the Macau Film Festival. the senses, while your eyes tourism experts However, according to struggled to adjust to the thick most academic research, blanket of smoke. argue that Macau the first image that springs Still, it was always crowded still has not been to mind in the prospective and a good indicator of the traveller is of Macau as a underlying potential that able to develop a gaming hub. When the tiny came to be unleashed with consistent message city was the only real game liberalisation of the market in Asia that may not have and awarding of six new across all the various been such a major issue, but licenses in 2002. stakeholders when it with competition mounting Returning in 2013 to across the region, it can no cover the industry as the comes to the city’s longer claim gambling as its managing editor for Asia brand identity. unique selling point. Gaming Brief, Macau was Branding and tourism virtually unrecognisable. The experts argue that Macau still Venetian, Sands Cotai and has not been able to develop a City of Dreams were open for business amidst a giant building site that was hard consistent message across all the various stakeholders when it comes to the city’s brand identity. There has to envisage as the Cotai Strip of today. However, that old Macau, with its unique mix of not been adequate input from the integrated resorts, Portuguese and Chinese culture had seemingly been which each have their own marketing departments pushed to the back burner and for a non gambler the pushing their own brands to fill their hotel rooms. enclave held little appeal as a holiday destination. Yes, Few of the IRs can argue they are offering something it has increasingly fine restaurants, top end hotels and uniquely Macau, with Italian, French and soon-to-be shopping...lots of it, but not much else to fill the days. London-themed IRs providing social media photo After its first significant downturn in gross gambling opportunities for Chinese tourists. Without a clearer focus on what is uniquely Macau, revenue since liberalisation in 2014, the government sat up and took notice that the bulk of its revenue came it will be an uphill battle for the city’s tourism authorities from a single industry that was dominated by one to attract a non-gaming, diversified tourism base.

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Asia Gaming Briefings | December 2019

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