|
Macau,
Part II? Stanley Ho
Brian
Trumbore
President/Editor, StocksandNews.com
Following up on last week's story on
Macau, gambling capital of the world, until the past
four years, $billionaire Stanley Ho had a monopoly
on the action, though today, even with greatly increased
competition, he is still taking in about 55% of the
total action there.
Ho
was born in 1921 to a wealthy Hong Kong family, but
his father abandoned them and fled to Vietnam amidst
the depression of the 1930s. Then, during World War
II, when Japan invaded Hong Kong, Stanley, now 21,
fled to neutral Macau, where he married the first
of his four wives. [Ho has 17 children.]
Ho
established a trading company, making a fortune by
swapping goods with Japan for much needed food. He
returned to Hong Kong after the war and in 1962, formed
an investor group that won the monopoly franchise
for casino gambling in Macau; gambling's roots there
going all the way back to the 1840s. Ho promised to
promote tourism and tackle infrastructure issues and
in 1972, he built the garish Hotel Lisboa?where back
in 2004 I had one of the best lunches of my life?but
I digress.
Casino
gambling didn't take off in a big way, though, until
the 1980s after China's economic reforms began to
take hold. With new wealth, especially in Hong Kong,
there was a need for VIP rooms, which Ho subcontracted
out for with tour operators, who in turn shared the
revenues generated with him.
As
you'd expect, and as Ho has never denied, this led
to a lot of organized crime activity (more so than
already existed), and the VIP operators have links
to the bad guys who are called triads.
David
Barboza of the New York Times explains the success
of the VIP room system.
"Gambling
experts say that Mr. Ho's subcontracting of the VIP
rooms was an inspired business move because it required
little investment on his part. It also essentially
outsourced the collection of huge gambling debts.
By subcontracting the VIP rooms, Mr. Ho's casinos
had only to provide the rooms, chips and dealers;
the casino did not have to search for big customers,
do background checks or ensure that the high rollers
paid their debts."
But
things began to change with Portugal's return of Macau
to Chinese control in 1999 after more than 440 years
of colonial rule. Before the turnover, however, there
was a vicious gang war as the triads fought for control
before the Chinese moved in. One of Mr. Ho's right-hand
men was murdered in Hong Kong and a senior Portuguese
official shot in the face. The violence didn't end
until China brought the army in.
Everyone
knew it was impossible to run a casino in Macau without
having some ties to organized crime but Ho has always
maintained he was isolated from it. What he couldn't
prevent, though, was competition as the Chinese felt
Ho was too powerful. He then lost his monopoly in
2002, with Americans Sheldon Adelson and Steve Wynn
being granted two of the three major gambling concessions,
and Stanley Ho getting the third. Others then followed.
While
Ho sees his empire dwindle with each new opening that
he's not part of, he doesn't want to give up the game
just yet. He set up his son Lawrence at the helm of
a Hong Kong-listed company he controlled, Melco International
Development, which is building several large casinos
and hotels in the city and went public in the United
States last year. Daughter Pansy has formed a joint
venture with MGM Mirage, giving her a 50% stake in
some of Macau's biggest projects.
Stanley
Ho also still owns a 33% stake in the airport, a 14%
ownership in the main local airline, Air Macau, plus
he owns the highly successful TurboJet ferry service
that zips you from Hong Kong to Macau in less than
an hour. [I've taken this a few times and it's very
comfortable. Only about $35 roundtrip.]
But
there are fears the underworld is muscling in again.
Just this week I learned that the day after I visited
Sheldon Adelson's Sands Macau, a man fell from the
third floor to the lobby after he "was seen being
chased around the casino shortly before his death.
Police said it was not a suicide." Glad I didn't see
that? or have the guy land on me.
On
April 14, a junket operator from Taiwan "hacked the
neck of his middleman, who was sleeping in a Macau
flat. The victim narrowly escaped death." A man arrested
for the crime said it was the result of a partnership
dispute. Another junket operator was arrested for
hiring a killer to gun down a high-roller from the
mainland. And it turns out two casino managers were
mysteriously murdered eight months ago. It's all about
the increased competition and the pressure to get
the VIP room action.
Speaking
of which, I found this remarkable. In a story from
about ten days ago in the South China Morning Post
on the continued surge in revenues?roughly $2.3 billion
in the first quarter?a full 65% of it comes from VIP
baccarat, the game of choice among Chinese high-rollers.
Walk-ins, those wagering cash and mostly on tour bus
excursions, accounted for 30%, and the other 5% was
from slots. In Vegas, 52% of the revenues on The Strip
are slot related.
You
can be sure local officials, and the operators, are
watching the crime issue. [It's not exactly great
in Vegas, either.] There is all manner of competition
on the planning boards around the region, like in
Singapore, and Macau isn't preordained to always be
number one.
In
the meantime, though, development continues to explode.
In the third quarter, for example, Sheldon Adelson
is set to open the $2.4 billion Venetian Macau, a
mammoth complex that will feature 3,000 hotel rooms
and a casino with 850 tables (the world's largest).
And
that's the last I'm likely to write about casinos
for some time, aside from updates in my "Week in Review"
column. Remember, bet with your head?not over it.
Sources:
David
Barboza / New York Times
Neil Gough / South China Morning Post
William Mellor and Oliver Staley / Bloomberg News
Fox Hi Yu / South China Morning Post
Wall
Street History returns next week.
Brian
Trumbore
|
