Saturday, July 19, 2008

World's biggest casino bets on Macau

MACAU — Thousands streamed into the world's biggest casino, which opened here Tuesday. It's the most daring move yet in a $24 billion bid to build a Las Vegas style "neon alley" in this once-sleazy Chinese gambling enclave.The hopes of more than a dozen hotel, casino and retail operators building on the Cotai Strip — 1.5 square miles of reclaimed land fusing two islands — are pinned on the Venetian Macao, built by U.S. operator Las Vegas Sands.
"Even if they open 10 more casinos, it's still not enough," said Charles Zhao, a resident of Zhuhai, a Chinese city close to Macau. He lined up for hours with hundreds of others, to try his luck on the new gaming tables and slot machines. "These days, you can see all the (Macau) casinos are always full."
Macau is the only place in gambling-mad China where casinos are legal. Such zeal helped gaming revenue in Macau, on the southern tip of China, overtake those of the iconic Las Vegas Strip last year.
If the Venetian succeeds, according to analyst estimates, it will help double Macau's annual gaming income to $13.7 billion by 2010.
Changing face of Macau A day before its opening, some of the casino's 16,000 employees were practicing dealing cards in the echoing halls.
The Venetian boasts 3,000 hotel suites, 1,150 gaming tables, 7,000 slot machines, 350 shops, an 1,800-seat conference center and a 15,000-seat entertainment arena.
"It's changing the face of Macau," said Adelson, the 75-year-old son of a Boston taxi driver.
The Macau government and casino operators hope the Cotai Strip will persuade gamblers, mainly from China, to stay a couple of days and spend more money. Many of the 20 million visitors who visit the former Portuguese colony each year do not book into a hotel, preferring to gamble until dawn or visit massage parlors.
The Cotai Strip has drawn investment from a raft of casino and hotel operators, including Nasdaq-listed Melco PBL Entertainment, (MPEL) MGM Mirage (MGM) and Macao Studio City — a venture involving eSun Holdings.
"The Venetian is a very important event, because it marks the beginning of the diversification process in Macau," said David Friedman, chief executive of Macao Studio City. "It may take time for the full extent of success to kick in, but there's no doubt in my mind it will be very successful."
Some analysts see the huge new supply of hotels, shops and gaming tables cutting profit margins in the short term. Daily revenue per gaming table in Macau has already dropped to around $12,000 from $22,382 in 2002, when a four-decade monopoly owned by casino mogul Stanley Ho expired and other players, including U.S. operators, were allowed in.
In a sign of concern about mounting competition, Wynn Resorts (WYNN) has toned down plans for major expansion in Macau.
The firm run by Steve Wynn, a fierce rival of Adelson, plans to open another 25,000 square-foot gaming space at its Wynn Macau casino this year instead of the planned 123,000 square feet.
In the last couple of weeks, the global credit crunch sparked by the U.S. subprime mortgage crisis has also raised questions about funding for casino operators. Bankers have said Melco PBL Entertainment will restructure a $2.75 billion loan deal because of problems with a $1.5 billion offering aimed at U.S. investors.
Gaming analyst Gavin Ho of Asia-Pacific specialist CLSA thinks the Venetian's opening will lift gaming revenue in Macau in the same way the Sands and the Wynn casinos have. But because it is remote from other casinos, and the first on Cotai, it is likely to take market share from incumbents.

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