ZZZ - GMG - VEGAS INC 2011-2014

October 03, 2011

VEGAS INC Magazine - Latest Las Vegas business news, features and commentaries about gaming, tourism, real estate and more

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COVER STORY Macau is off to a good start, thanks to some excellent teachers. They came from Las Vegas. Vegas companies that have invested in Macau. Las Vegas Sands, owner of the Venetian and Palazzo on the Strip, Wynn Resorts, owner of Wynn Las Vegas and Encore, and MGM Resorts International, owner of resorts including MGM Grand, Mirage and Mandalay Bay, have developed casino resorts in Macau. They aren't simply knockoffs of the originals on the Strip but, by many measures, have surpassed the genuine article in terms of size, amenities and luxury. Indeed, they have collectively raised M the bar in Macau, the new world stage for gambling excess, and have forced competitors to keep up. An examination of Macau's fast fortunes, of course, invites comparison to Las Vegas. The mob was involved in Las Vegas casinos in their infancy; the Chinese triads were involved with Macau's casinos. Nevada lawmakers passed legislation to encourage corporate investment and respectability in Las Vegas casinos; governments overseeing Macau had a competition to award concessions — known as casino licenses in the U.S. — to gaming companies worldwide beginning in late 2001 to encourage the development of resorts. Las Vegas has a historic downtown area and the famous Strip of luxury resorts; Macau has a peninsula attached to the Chinese mainland where casinos were built in the historic part of the city, and the more modern Cotai Strip — a broad boulevard where narrow cobblestone streets are the norm — under development on islands off the coast. wasn't until 1937 that the government awarded a casino license. The face of gaming changed in Macau in 1962 when a syndicate of Hong Kong and Macanese businessmen, which eventually came under the leadership of Chinese entrepreneur Stanley Ho, was awarded a monopoly on the industry. Known as "the King of Gambling," Ho is Steve Wynn, Sheldon Adelson, Kirk Kerkorian and Howard Hughes all rolled into one. A 15-year extension of the monopoly S 18 o how did Macau get so fat so fast? Gambling was legalized by the Portuguese in 1847, but it uch of the credit for Macau's growth — some may call it the blame — goes to the three Las to a close at the end of 2001 when the government opened the industry to competition. In a competitive bid, concessions were granted to Ho, Galaxy Entertainment Group, which partnered with Las Vegas Sands, and Wynn Resorts. Ho's Sociedade de Jogos de Macau had a head start on the Las Vegas companies and today runs 16 of Macau's 33 casinos, including his flagship Casino Lisboa near the southern tip of the peninsula. Sands drove the partnership with Galaxy and was intent on beating the pack in opening the first casino. He did so in 2004, with Sands Macao. (Sands prefers to use the Chinese government's spelling of the city's name.) With its dandy location, it is the first big building visitors see when arriving by ferry from Hong Kong to Macau's main ferry terminal on the eastern edge of the peninsula. By opening quickly, Sands gave Macau a taste of what was on its horizon with a Las Vegas-style casino. And it was successful — it made enough money to cover construction costs in a year. Meanwhile the company's signature property, the Venetian Macau, was under construction miles away. At the same time, Las Vegas Sands wanted out of its partnership with Galaxy. Because it had already invested so much, the Macau government decided to allow Las Vegas Sands to have its own "subconcession" and allowed the other two licensees to sell their subconcessions. Ho sold his subconcession for $250 million to his daughter, Pansy, who used it to partner with what is now MGM Resorts International, an important move for MGM to enter into the market after its unsuccessful bid for a concession. Wynn managed to sell his subconcession for $900 million — just shy of what it cost to build Wynn Macau — to Ho's son, Lawrence, who partnered with an Australian company, Melco Crown Entertainment. Industry observers noted that for Wynn, it was like setting up shop in the world's best gambling market with minimal capital outlay. The race to build a resort that would be better than everybody else's was on. The six license holders secured property, drafted plans and brought in the construction cranes. In the late 2000s, Macau looked like Las Vegas in its boom years of the late 1990s. It bustled with such developments as: ■ Expansion of Stanley Ho's Casino Lisboa with the 1,000-room lotus- shaped tower. ■ Construction of the 600-room was granted in 1986, but that came Wynn Macau, a scaled-down version of the sweeping bronze-skinned Wynn Las Vegas. ■ The late 2007 opening of the 583- room MGM Grand Macau. Meanwhile, 10 minutes away, the area that has become known as the "new" Macau has begun to take shape. Built atop a massive public works infill project that began two decades ago are resorts including Venetian Macau, the largest casino in the world, in what is believed to be the sixth- largest building on Earth. The 40-story structure has a 1.6 million-square-foot retail center reminiscent of the Las Vegas Canal Shoppes at the Venetian, 1.2 million square feet of convention space and a 550,000-square-foot casino — twice as big as the gaming space at the Venetian and Palazzo combined. Also on property is a resident Cirque du Soleil show, "Zaia," a pitch-and-putt golf course and a 15,000-seat arena that has hosted a tennis match between Andre Agassi and Pete Sampras and a National Basketball Association exhibition game. Other projects include a luxury Four Seasons Hotel and Melco Crown's City of Dreams resort, a 2,200-room development comprised of a 1,005- room Grand Hyatt Macau, a 366-room Hard Rock Hotel and a Crown Towers Hotel with 295 suites. Although the recession has slowed development for some companies, the building boom on the Cotai Strip — the name of the infilled area housing the "new" Macau — is expected to last through the decade. Asia's version of Las Vegas Boulevard will extend west to the Lotus Bridge, the gateway to mainland China. Near that bridge is a golf course, of note because it is owned by Caesars Entertainment. Caesars has no gaming license, but the company is positioned in the event of a public policy change that would enable it to enter the market. When Macau's government awarded concessions, Caesars was left out, and it also was shut out when licensees sold their subconcessions. Most observers don't think Macau's government is going to grant new concessions anytime soon. About a block off the Cotai Strip is the site of Wynn Resorts land for a new property. Last month, Macanese authorities approved the site for development, but it was no secret that a Cotai development for Wynn would happen — Wynn signs marked the site before the announcement. | 3 OCTOBER 2011 |

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