Ho Shows He Makes Macau Money Vegas Men Can’t
Replicate, By William Mellor and Chia-Peck Wong (Credit: Bloomberg)
20 (Bloomberg) -- On a sultry June morning in
Macau, casino billionaire Stanley Ho strode into
the Venetian, the gambling palace of American
archrival Sheldon Adelson, and reflected on life,
death and how not to succeed in the world’s
biggest gaming market.
almost half a century, Ho, 87, had reigned as
King of Gambling in the 10-square-mile dot on
the steamy South China coast. Even when he lost
his government-bestowed monopoly in 2004, Ho resisted
the glitzy casino resorts of Australian billionaire
James Packer and U.S. moguls Kirk Kerkorian, Steve
Wynn and Adelson.
vision proved particularly grandiose: He’s
spending $12 billion to create a Vegas-style strip
in Macau complete with a replica of his Nevada
Venetian and its canals and singing gondoliers.
wasn’t impressed. “The success of
one market model cannot be migrated to another,”
he told an audience at an international gaming
expo in Adelson’s 3,000-room Venetian that
June day, switching between perfect English and
his mother tongue, Cantonese. “Ignoring
Macau’s special characteristics and duplicating
a Las Vegas or an Atlantic City would not be a
by most Westerners in the audience, Ho, who’d
defied advancing age with daily swims and spins
on the ballroom dance floor, uttered an aside
in Cantonese that would prove prescient:
many decades can a man live?” he asked rhetorically.
months later, Ho’s role atop the Asian gambling
haven that generated $13.8 billion in revenue
last year -- more than Las Vegas and Atlantic
City combined -- took a precarious turn.
Aug. 4, Hong Kong’s Adventist Hospital confirmed
newspaper items that reported Ho had been admitted
for treatment. On Aug. 13, Ho’s spokeswoman,
Janet Wong, said reports in Chinese papers that
he had suffered a stroke were unfounded and he
was progressing well. Neither of Ho’s publicly
traded companies made a statement to the stock
the absence of further details, investors scurried
to study the sprawling Ho family tree -- including
Ho’s 17 children by four different mothers
-- to determine who might take over.
octogenarian who’d carried the Olympic torch
in Macau last year, Ho had never announced a successor.
and healthy as I am, I have no plans to retire,”
he wrote in a June e-mail to Bloomberg News.
who have bet on Ho and his no-frills gambling
halls have had reason to cheer. SJM Holdings Ltd.,
Macau’s largest casino operator by revenue,
enjoyed 23 percent to 31 percent of the market
this year through July, according to Portuguese
news agency Lusa, which publishes monthly figures.
shares gained 65 percent this year through Aug.
19, compared with a 30 percent rise for Wynn Resorts
Ltd. and a 39 percent plunge for MGM Mirage. Las
Vegas Sands more than doubled in the same period,
after plummeting 99 percent to a low of $1.42
in March from its October 2007 high. Las Vegas
Sands and Wynn got more than 60 percent of their
revenue from Macau last year.
Shun Tak Holdings Ltd., which runs most of the
high- speed ferries and all of the helicopters
that deliver gamblers to Macau from Hong Kong,
soared 141 percent this year through Aug. 19.
Son Lawrence Ho’s Nasdaq-listed Melco Crown
Entertainment Ltd., which is 34 percent owned
by his Melco International Development Ltd. and
34 percent by Packer’s Crown Ltd., owns
two Macau casinos, including the $2.1 billion
City of Dreams. Melco Crown shares rose 60 percent.
far, Ho’s strategy -- along with SJM’s
lack of debt and booming stock price -- has dealt
him a winning hand in Macau. Adelson, 76, who
arrived in the former Portuguese colony in 2004,
piloted Las Vegas Sands through a potential brush
with bankruptcy in November by raising equity.
His plan to re-create the Vegas experience in
the Chinese territory hasn’t fared as well.
Adelson has delayed construction on nine hotels
and casinos with 21,000 rooms, leaving swaths
of the nascent Cotai Strip covered by steel and
92, with his MGM Mirage, has amassed $12.4 billion
of debt worldwide, and his company reported a
$212.6 million net loss for the second quarter.
Adelson and Wynn, 67, have announced plans that
will enable them to boost capital by selling shares
in their Macau businesses on the Hong Kong stock
who says his nickname is a misnomer because he
doesn’t bet, has managed to outfox the newcomers
by offering unadulterated gambling to Chinese
content to live on noodles and cigarettes as they
head for halls like his $1 billion Grand Lisboa.
Macau, which is about one-sixth the size of the
city of Washington, the 23.5 million visitors
who came last year stayed an average of 1.3 nights
compared with 3 nights in Las Vegas, which augments
dice rolls with Broadway-style shows and restaurants.
Macau’s gamblers have been known to catch
some sleep in massage parlors rather than pay
for a hotel.
the Americans showed up, they thought they would
literally reshape Macau like Las Vegas,”
says Alex Motola, who helps manage $40 billion,
including Las Vegas Sands shares, at Santa Fe,
New Mexico-based Thornburg Investment Management
Inc. “The Macau audience is less focused
on the ancillary things around gambling. Stanley,
with his wealth of experience, understood that
the Hos are struggling with a concern that vexes
all family-run businesses, especially those in
Asia, says shareholder activist David Webb, a
former independent director of the Hong Kong exchange
and publisher of Webb-Site.com.
Europe, many family companies have been around
much longer,” he says. “There’s
an internal meritocracy that enables them to choose
whichever is the best qualified cousin to be chief
current companion, Angela Leong, 48, mother of
his five youngest children, is one likely candidate
to head SJM, says John Koh, who helps manage $1.1
billion at MEAG Hong Kong Ltd. Leong is already
an executive director at SJM.
of Ho’s daughters by his second wife hold
top positions at Shun Tak and may continue running
that company, Koh says. Pansy Ho, 46, an art lover
who sits on the international advisory board of
Sotheby’s, has been Shun Tak’s managing
director for 10 years. Daisy, 44, is deputy managing
director and chief financial officer; Maisy, 41,
is an executive director.
obviously got very bright children,” says
Sean Monaghan, a Singapore-based investment consultant.
“Angela Leong is also very well respected.
He’s been a force for so long that his children
have become a force as well.”
also has built a long-serving non-family management
team headed by SJM Chief Executive Officer Ambrose
has got some very capable people,” says
Allan Zeman, a Hong Kong-based director of Wynn
Resorts. “My take is it will be business
Ho’s women, children and siblings will have
to get along. In 2006, Winnie Ho, one of Stanley’s
13 brothers and sisters, filed more than 30 lawsuits
dispute over who owned the company’s family-held
shares delayed SJM’s initial public offering,
after Winnie, 86, claimed she was owed $386 million
in dividends. Stanley Ho denied the allegations
through his lawyers; the $494 million share sale
went ahead in July 2008. In another squabble in
2001, Stanley Ho threatened to disinherit daughter
Pansy when she briefly dated the son of a business
and her stepmother Angela, who are virtually the
same age, have had their differences. Both are
on the board of Sociedade de Turismo e Diversoes
de Macao, Ho’s private company that owns
61 percent of SJM. Ho’s third wife, Chan
Un Chan, is an STDM shareholder, as are Winnie
Ho and another sister, Louise Mok.
has been serious family feuding,” says Steve
Vickers, Hong Kong-based CEO of FTI International
Risk Ltd., who has performed investigations for
potential Macau investors.
Ho was the magma that held the tectonic plates
together,” he says. “I don’t
think any one of his wives or children will be
strong enough to operate in the way he did.”
family also has to navigate the challenges confronting
all of Macau’s gambling tycoons. Next year,
two casinos will open in Singapore -- one of them
Adelson’s $5.25 billion-plus Marina Bay
Sands -- to attract high rollers that account
for two-thirds of Macau’s annual casino
continue to compete successfully beyond China,
Macau needs to improve its air links, says Jonathan
Galaviz, a partner at Las Vegas-based consulting
firm Globalysis Ltd.
service from strong, reputable carriers from the
rest of Asia is critical for Macau to up the ante,”
to home, the Chinese government is restricting
entry visas to Macau for mainland Chinese. With
a population of 544,000, Macau depends on nonlocal
the Portuguese handed the territory back to China
in 1999, Beijing pitched in by relaxing visa restrictions
for its citizens. The resulting boom pushed up
Macau’s gross domestic product 27 percent
in 2007 yet also boosted inflation to more than
who were already steaming about the bribe taking
and money laundering of Ao Man Long, the territory’s
secretary for transportation and public works,
took to the streets to protest inflation-fueled
rising prices. Ao, 53, was jailed by a Macau court
for 28 ½ years in April.
state media also began reporting that officials
from the mainland were spending illicit funds
or laundering money through Macau casinos. In
May, two former managers of a Bank of China Ltd.
branch in nearby Kaiping, who’d fled to
the U.S., were jailed for more than 20 years by
a Las Vegas court for defrauding the bank of $485
million and laundering some of it through Macau.
August, official media reported that gangsters
in one of China’s biggest cities, Chongqing,
had set up loan-sharking operations in Macau.
China gave no official reason for its decision
to curtail visas.
is interested in Macau’s stability and wants
to portray it as a success,” says Albert
Louie, founder of A. Louie Associates Corp., which
advises companies on risk. “But many high-level
Chinese officials end up in Macau spending government
money. They strut around like kings and queens.”
Chinese cadres are just one blot on Macau’s
global ambitions. In 2005, the U.S. Treasury blacklisted
Macau’s Banco Delta Asia SARL for allegedly
laundering money for North Korea. The bank, owned
by Stanley Au, a former candidate for chief executive
of Macau, denied the U.S. claims.
government took over management before returning
the bank to Au in 2007. The U.S. agreed to allow
Macau to release the money that year. The Treasury’s
ban preventing the bank from accessing the U.S.
financial system remains.
year, Kim Jong Nam, eldest son of North Korean
dictator Kim Jong Il, was spotted in Macau and
interviewed by Japanese television.
Delta Asia was the tip of the iceberg,”
Louie says. “Macau is a financial window
for North Korea.”
Macau struggles with its international image,
the recession is pinching gambling venues worldwide.
In the first six months of 2009, Las Vegas Strip
casino revenue fell 15 percent -- adding to what
had been a record 11 percent decline in 2008.
Macau’s gambling revenue dropped 10 percent
in the first seven months of this year in part
because of the visa restrictions. Atlantic City’s
revenue was down 15 percent in that period.
his office high above one of Hong Kong’s
trendiest nightlife districts, Lawrence Ho ponders
the impact of the gloomy economy on his City of
megacasino, across from Adelson’s Venetian
on the now- stalled Cotai Strip, opened on June
1. That was two months before Nobel Prize-winning
economist Paul Krugman predicted that a global
recovery would take two years or more.
the plus side, the younger Ho says, it’s
good to be up and running when your rivals are
hurting. The downside?
City of Dreams doesn’t open well, it’s
the endgame for us,” he says.
of his U.S. institutional shareholders agrees.
way City of Dreams performs in the next few months
will be critical not just for Melco Crown but
also for the Cotai Strip and the long-term growth
of Macau,” says Charles Norton, Dallas-based
portfolio manager of USA Mutuals’ Vice Fund.
far, the signs indicate that Ho and Packer might
keep their shirts. After a June when high rollers
made too much money, the house won more of the
bets placed in July and the first week of August.
Ho hasn’t had such worries because he didn’t
go for the glitz. Ho, who is gutting a department
store to refashion it as a $200 million casino
called Oceanus, says thrift and local know-how
leave him in better shape than his rivals.
is limited in size and land is expensive, so gaming
and leisure development must be more efficient,”
he wrote in his e-mail. “We follow a very
conservative financial strategy. No matter how
thorny the problem is, I will find a way through.”
was forced to rely on his wits early on. Born
into a prosperous Eurasian family in 1921, he
fled to Macau from Hong Kong ahead of the invading
Japanese army in World War II.
started trading everything from kerosene to airplanes
up and down the Pearl River Delta, once even fighting
off pirates, according to Joe Studwell, author
of “Asian Godfathers: Money and Power in
Hong Kong and Southeast Asia” (Profile Books,
married Clementina Leitao, daughter of a prominent
Macanese family. Macau was a commercial backwater
with fishing, firecrackers and incense as the
only industries. Yet Ho recognized Macau had one
big advantage: Gambling was legal. Macau is still
the only place in Greater China where people can
bet in a casino.
1962, the colonial government awarded Ho and his
partners a monopoly. Ho lured hard-core bettors
into halls that had fading paint, worn carpets
and croupiers whose bow ties wilted in the humidity.
garish, yellow Hotel Lisboa, shaped like a bird
cage, offered one concession to refinement: “no
spitting” signs in Chinese, Portuguese and
English. Gangs led by criminals with nicknames
like “Broken Tooth” fought to run
casino VIP rooms. Prostitutes and loan sharks
patrolled casino entrances and exits.
China took control of Macau in 1999, the People’s
Liberation Army calmed the violence. Ho’s
STDM had long dominated the Macau economy, contributing
75 percent of tax revenue each year.
named him to the Chinese People’s Political
Consultative Committee, which advises China’s
leaders. Angela Leong became a member of the Macau
thing China wouldn’t do was extend Ho’s
gambling monopoly. Instead, Macau’s leaders
voted to clean up the industry. The government
allowed five new licenses and invited Las Vegas
operators who’d already passed muster with
U.S. regulators to apply.
was lots of cleaning up to do, says Frank Fahrenkopf,
president of the Washington-based lobbying group
American Gaming Association, who visited Macau
in the last days of Ho’s monopoly.
is a polite word for what it was like,”
was first in. His $260 million Sands, a gold-
colored building with 740 gaming tables, had a
big selling point: It was next to the ferry and
helicopter terminal and close to the land border
with mainland China. Raffle tickets for the chance
to drive back to China in a Lamborghini enticed
gamblers. Compared with Ho’s tired offerings,
the Sands created such novelty value that it paid
for itself in the first eight months.
Adelson plowed ahead with the Cotai Strip in another
part of Macau, starting with the Venetian. He
declined to be interviewed for this story.
wasn’t to be outdone. In 2006, he opened
the $300-a- night Wynn Macau across from Ho’s
Lisboa. Wynn hung Renoirs and Matisses in the
lobby and displayed a $10 million Ming vase in
the VIP Wynn Club.
same year, Lui Che-woo, 77, a self-made Hong Kong
billionaire, introduced the StarWorld. Even though
it was fashioned in the Stanley Ho pure-gaming
mold, Lui’s casino was more modern. Lui
also unveiled plans for his own megaresort on
the Cotai Strip.
October 2007, he sold 20 percent of his Galaxy
Entertainment Group Ltd. to Permira Advisers LLP,
Europe’s biggest buyout firm, for 6.5 billion
Hong Kong dollars ($840 million). Even with the
cash injection, Lui too has been forced to slow
his rivals slugged it out, Stanley Ho wasn’t
standing still. Convinced that his no-frills model
still worked, he decided on a newer version of
the Lisboa next door to his fading flagship.
time, Ho went for a 40-story high-rise shaped
liked a giant lotus and named it the Grand Lisboa.
With 430 rooms and 240 tables but no designer
malls, convention center or shows, it cost $1
billion -- less than half the price of the $2.4
so, the Ho family hedged its bets. As Stanley
laid plans to battle the foreign invaders, his
daughter and son were doing deals with them.
2004, Kerkorian’s MGM Mirage announced it
had taken Pansy Ho as its 50 percent partner for
the MGM Grand Macau. The curvy gold-and-silver
waterfront landmark with MGM’s lion roaring
out front in July had a 12 percent market share.
Ho might even end up with all of the MGM Grand,
says Gabriel Chan, a Hong Kong-based analyst at
Credit Suisse Group AG.
May, MGM Mirage disclosed that investigators from
the New Jersey Division of Gaming Enforcement,
which oversees an MGM investment in an Atlantic
City casino, had deemed Pansy an unsuitable partner.
The investigators recommended MGM sever ties with
her, giving no public explanation.
Mirage said it disagreed with the recommendation
and would defend the partnership. Pansy Ho declined
to comment until she could decide how to respond
to the recommendation.
MGM sell its Macau investment, she would be the
most logical acquirer, Chan says. Either way,
the investments of Pansy and Lawrence, 32, mean
that five years after losing its monopoly, the
Ho family retains full or partial control of more
than half of the world’s biggest gaming
this rarefied arena, pride has become almost as
big a motivator as profits. Adelson and Wynn have
extended their Las Vegas rivalry to Macau while
Adelson and Ho have exchanged barbs.
told Bloomberg News in 2006 that his Macau investments
would help him overtake Bill Gates and Warren
Buffett in wealth.
egos are at play,” Lawrence Ho says.
the sniping, investors are watching City of Dreams
for clues to whether Macau’s Las Vegas-style
strip will get back on track. Second only in size
to the Venetian, the City of Dreams complex features
Hard Rock and Crown hotels, 519 gaming tables,
1,350 slot machines and a 200-outlet shopping
mall. A Hyatt hotel is set to open soon.
the June unveiling, firecrackers lighted the tropical
sky as Lawrence Ho, Packer and their wives led
the festivities. Macau residents rushed the tables,
ignoring for once the even- larger shadow of the
Venetian across the road.
says he needs to attract about half of the 70,000
people a day who pass through the Venetian and
get them to spend money at his venue. In July,
the two Lawrence Ho-Packer casinos had a 17.8
percent market share compared with 21.6 percent
Ho wrote in his e-mail that he, Lawrence and Pansy
-- with their rival visions for Macau’s
gambling future -- aren’t teaming up to
quash the opposition.
are my children but also my competitors,”
and Pansy say they never discuss work when the
Hos have their regular dinners.
you know our family, there are more interesting
things to discuss than business,” Lawrence
Ho’s health makes any debate about the direction
of gambling in Macau more urgent.
2004 and 2007, the American casinos made a lot
of noise,” says Billy Ng, a Hong Kong-based
gaming analyst at JPMorgan Chase & Co. “Whoever
was willing to invest won. But now the game has
changed. Whoever is leveraged most loses.”
could change again in an economic recovery, Ng
do not see why the Vegas model won’t work
in Macau eventually,” he says. “Chinese
are pretty receptive to shopping and entertainment.”
his children embrace Las Vegas-inspired megaresorts
and his own company sticks with the tried-and-tested
no-frills Macau style, the King of Gambling may
have successfully hedged his bets -- as long as
his heirs concentrate on fighting the opposition
and not each other.
assistance from Beth Jinks in New York and Frank
Longid in Hong Kong. Editors: Gail Roche, Jonathan
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