The Look of Casinos to Come China's Wild Lottery Ride Macau's VIP Rooms Firing Customers

Aug-Sep 2006 • MOP 30

The Look of Casinos to Come China’s Wild Lottery Ride Macau’s VIP Rooms Firing Customers Spoiled for Choice A new wave of gaming options hits Asia

6 PROVEN PERFORMERS ARISTOCRAT OFFERING 6 UNIQUE GAME PRODUCT CATEGORIES TO THE ASIAN MARKETS

August-September 2006

Spoiled for Choice

Page 7 ~ China’s Wild Lottery Ride

Page 11 ~ Sands Macau’s7 High-Roller Push Page 12 ~ The Look11 of Casinos to Come Page 16 ~12 Macau 2Q Trends Page 22 ~ Macau’s16 VIP Market Structure Page 26 ~22 Firing Customers Page 28 ~ Tour of the Properties26 - Awash With Glamour Page 42 28~ Regional Briefs

Aristocrat is proud to present the latest range of gaming products to the Asian Markets and your gaming floor. Page 44 ~ International Briefs Create the perfect balance and gaming mix from our Reel Power™, Multiline™ and 50 Line™ game varieties and 42 progress your players to the exciting world of links with Double Standalone Progresives™ ( DSAP). Aristocrat also offers the latest in Mystery Linked and Linked Progressive gaming packages with Xtreme Mystery solutions and Page 47 ~ Singapore’s Example44 for the Global Gaming Industry the patented Hyperlink™ product to the Asian Markets. 47

For further information please contact the Aristocrat (Macau) Office Telephone: +853 722 777 • Fax: +853 722 783 • Web: www.aristocratgaming.com © 2006 Aristocrat Technologies Australia Pty Limited. Aristocrat, it’s all in the game, game names and the Aristocrat logo are trade marks or registered trade marks of Aristocrat Technologies Australia Pty Limited. AS06AD02

AS06AD02-Game categories cover a1 1 20/7/06 10:01:45 AM IAG ad 7/25/06 4:01 PM Page 1

Editorial

Global Vision. Choice Creates Desire

The drought of legal casino gaming options in Asia could soon give creates-demand will be repeated in Macau. The properties in the Local Outlook way to a fl ood. pipeline are world-class, but ahead of their arrival, several derelict Japan, mainland China, Hong Kong, Taiwan, and Thailand ban casinos or unfi nished offi ce and residential buildings in Macau were hastily outright. India only has casinos in Goa and Indonesia only on Bataan converted into hotel-casinos in order to capitalise on surging tourist Island. South Korea restricts all but one of its casinos to foreigners. arrivals, including the Casa Real, Golden Dragon and Galaxy’s Waldo. In Macau. Asia’s casinos are largely restricted to its poorer nations. Of these, These could soon be rendered obsolete. After all, it is quality supply apart from the Philippines, where casinos have signifi cant home- that will offer real choice and create new demand. Supply without For the past 75 years, the Bally name grown demand, casinos in Vietnam, Cambodia, Myanmar, and North quality has thus far only found customers because of Macau’s acute has stood for the broadest array of Korea rely almost exclusively on gamblers coming in across their shortage of gaming tables. borders – mostly from China and Thailand. The border casinos have With choice will come market segmentation. Wynn Macau will court superior gaming products, ranging recently been hit hard as Chinese and Thai authorities cracked down the big-spenders, while Galaxy will attempt to provide “affordable from the latest in video and reel- on citizens gambling abroad. luxury” at StarWorld – which was originally scheduled to open in Au- spinning slot machines to cutting-edge The tide looks set to turn, however, in large part due to the example gust ahead of Wynn Macau, but due to construction delays, will likely casino management and slot accounting of Macau. A former Portuguese colony with a mere 488,000 residents, trail it. Ever-bullish LVS Chairman Sheldon Adelson, meanwhile, says he systems. With the recent opening of our new Macau reverted to Chinese sovereignty in 1999, and has seen a mas- is after every segment, and wants to “maximize every opportunity.” office in Macau, we now proudly bring our sive infl ux of investment from foreign casino operators following New choice will also emerge throughout the rest of Asia. An effort is the liberalisation of its gaming industry in 2001. Macau’s newfound under way to centralize Kazakhstan’s casino operations and create global vision of excellence and innovation to prosperity could spur the introduction of new casinos across Asia, a gambling mecca along the shores of Lake Kapchagai to lure gam- this rapidly emerging and dynamic gaming with Singapore already well on the way to developing two casino- blers from eastern China and the rest of Asia. Kazakhstan already has market. centred “integrated resorts.” over 140 casinos, but the existing properties are hardly world-class. Prior to liberalisation, Macau was also characterised by a lack of casi- There will also be attempts to attract gamblers from Asia’s other • We offer the broadest array of gaming technology no choice, with the mass market long neglected in favour of lucrative emerging powerhouse, India, which, like China, has a rapidly growing products from traditional slot machines to VIP gamblers. In 2003, high-roller baccarat in VIP rooms accounted middle class. August saw the opening of the Shangri-La, the sev- advanced table-management systems in the gaming industry for over 77% of the city’s casino revenue. Choice fi nally arrived in enth casino in the Nepalese capital of Kathmandu, with Bollywood May 2004 when Las Vegas Sands Corp (LVS) unveiled Sands Macau, starlet Urmila Matondkar fl own in for the launch ceremony. Nepal • We are the undisputed world leader in slot the fi rst foreign-operated casino in the city, ending local gambling Recreation Centre, the group responsible for all the country’s casinos, management and slot accounting systems mogul Stanley Ho’s 42-year casino monopoly. Sands’ spacious and is mulling an eighth casino in the popular tourist destination of with more than 345,000 machines running comfortable main gaming fl oor, along with China’s easing of travel Pokhara city. If built, the Pokhara property would become the fi rst a Bally system in 625 locations worldwide restrictions on mainlanders wishing to travel to Macau and Hong casino outside the capital. • We feature an extensive library of video Kong, drew a rush of mass market gamblers to Macau. By the second While China will restrict casinos to Macau for the foreseeable future, gaming titles on the robust, reliable quarter of 2006, VIP baccarat’s share of the city’s casino revenue fell the mainland government has sought to expand the range of legal and technically advanced ALPHA OS™, to 57% as mass market revenues at Sands Macau soared, and the VIP gambling options in the country in order to claw back some of its including our hot new multi-level market stagnated. citizens’ massive spending on illegal gambling activities, as detailed progressive games Choice in Macau will soon expand much further. Wynn Macau will in “China’s Wild Lottery Ride” on page 7. The main initiative has been to introduce high-frequency lotteries, including video lottery termi- • We offer an exciting array of innovative open on September 6, trumpeting itself as the city’s fi rst “destination high-coin reel-spinning slots sharing resort,” and the third quarter of this year will also see the opening nals, which are virtually indistinguishable from slot machines. the same ALPHA OS as our video slots of Galaxy StarWorld, the expansion of Sands Macau, and other new Finally, in search of even more gaming options, Inside Asian Gaming properties from Stanley Ho’s SJM. Next year will witness the arrival boarded a casino cruise ship operating out of Hong Kong for this • We are the systems provider of choice at the of Macau’s fi rst mega-sized integrated resort, enetianV Macau, which issue’s “Tour of the Properties”, on page 28.

Sands Macau and a table systems technology will be followed by other monoliths including Galaxy’s Mega Resort, provider to Galaxy Entertainment Group Kareem Jalal MGM Grand Paradise and Melco-PBL’s City of Dreams. For more information about Bally products Analysts are confi dent that the Las Vegas experience of supply- We crave your feedback. Please send your comments to [email protected] or our vision for Macau, please contact Asia Managing Director Cath Burns at +853-785603 or [email protected] Editor and Publisher Kareem Jalal Inside Asian Gaming is published by দ Must Read Publications Ltd Director໊֬ށࡍૌ۾ᆣ۸࿷ᇤႼ۸ދϖ૑ޖሇ Rua de S. Domingos, nr 16-i, Ed. “Hin Lei” 7A - Macau João Costeira Varela Tel: (853) 646 0795 Business Development Manager For subscription enquiries, please email [email protected] Ricardo Carvalho

Contributors For advertising enquiries, please email [email protected] Aaron Fischer, Jonathan V. Galaviz, José Ho, Karen Tang, Steve Karoul or call Ricardo Carvalho (Macau) tel: (853) 6828475; Herb Moskowitz (HK) tel: (852) 2838 8702 Photography Ike Av: Dr. Mario Soares. 323, 31st Floor (C) Edf. Banco da China, Macau Graphic Designers www.BallyTech.com Ricardo Borges, Vincenzo Zaccaria

China’s Wild Lottery Ride Mainland China is expanding its lottery menu. The industry has huge growth potential, but the stock prices Nothing but the best. We’re proud to be part of it. of the companies involved, touted last year as “sure bets,” have recently given in to gravity Wynn Macau is 100% UBA, 100% ICB and 100% TransAct Epic 950. Chinese are reputed to be the most and stratospheric stock price surges have going to fund social welfare – the need for fervent gamblers in the world, yet, until returned to slumps. which has increased as a result of the eco- cently, the range of legal gambling options nomic reforms, which led to massive layoffs available in China has been severely restrict- from state-owned enterprises. ed. Several journalists – seeming to delight The Lesser Evil Two agencies oversee lotteries in China. in quaint explanations – point out that the Premier Deng Xiaoping realised that ideolo- The China Welfare Lottery Issuance Cen- Communist Party regards “eroticism, gam- gy had to give way to economic pragmatism tre (CWLC) was established in 1987 to raise bling and narcotics” as “the three evils.” Still, if the Party was to survive, and introduced his funds for social welfare. The China Sports the Chinese government has decided that “socialism with Chinese characteristics” from Lottery Administration Centre (CSLC) was expanding the country’s lottery offerings is the late seventies. This, along with the recog- set up in 1994 to fund sports development, a necessary evil, and China lottery operators nition that illegal gambling was rampant in and in addition to lottery-type games, also and suppliers are set to reap big rewards. the country, prompted the introduction of offers limited football betting on matches in jcm-american.com • 800.683.7248 Unfortunately, the rewards are not arriv- welfare lotteries in 1987 in order to provide the major European leagues. Chinese lottery ing as quickly or in as much abundance as a regulated outlet for mainlanders to fulfil sales have grown at a compound annual rate those companies’ shareholders had hoped, their gambling desires, with lottery profits of 30% since 1987 to reach US$8.6 billion in 7 2005 – accounting for 4.7% of the estimated lottery booths or shops throughout China. US$184 billion global lottery market. While VLTs will be restricted to parlours op- Still more needs to be done to bring gam- erated by Beijing Lottery Online Technology bling in China back under the government’s (CLO) – the mainland’s sole operator of elec- High-Frequency Options control. The China Centre for Lottery Studies tronic lottery ticketing systems, operating at Peking University estimates the nation’s il- under license of CWLC – keno terminals can Two types of high-frequency lottery games are available in China legal gambling activities – including online be located in almost any retail outlet with betting and illegal lotteries – last year were space for a ticket machine and keno moni- Keno involves players choosing two to eight numbers from 1 to Video Lottery draws are instantaneous, taking place at the worth US$87 billion; ten times more than le- tor, including food and beverage outlets, 80. A central computer system randomly selects 20 numbers out of touch of a button. Video Lottery Terminals (VLTs) are virtually indis- gal lottery takings. Moreover, mainland Chi- convenience stores, bars, youth centres and the total 80, and players receive payouts depending on how many tinguishable from slot machines, and any game that can be played nese are estimated to have spent over US$75 hotel lobbies. There are currently about 400 of the numbers they picked fall within the selected numbers. on a slot machine – including poker, baccarat, roulette, mahjong billion annually on gambling overseas in re- keno machines operating in a testing phase Perhaps it is fitting that according to ancient records, Keno is said and dice games – can be played on a VLT. Six games are now avail- cent years. in separate locations in 23 provinces across to have originated in China almost 3,000 years ago to fund military able on VLTs in China, with more expected to be introduced in the Apart from its ongoing crackdown on China. CLO aims to expand its keno network provisions, and was even said to have helped pay for construction of near future. illegal gambling, the Chinese government to 60,000 machines by 2008, at which time the Great Wall. It was brought to America in the nineteenth century The difference between slots and VLTs is that slots determine has a three-pronged strategy to increase the it also wants 150,000 VLTs operating across by Chinese immigrants, and it was in the US – which accounts for draws by means of an internal random number generator, whereas appeal of its legal gambling options. First, China, from 8,000 in June 2006. over 70% of Keno sales worldwide – that the game really took off. VLTs are linked to a centralized operating system, which determines it aims to offer a better deal. According to a Until recently, CSLC outgrossed CWLC, Keno draws take place once every 3 to 5 minutes. Nationwide, the results. The system allows lottery officials to keep close tabs on recent Deutsche Bank report, prior to March but the latter took the lead in 2004 after the each keno terminal averages about Rmb10,000 (US$1,250) in rev- money wagered and prize money paid and to add new games with- 2005, Chinese lotteries returned only 50% widely publicised “BMW scandal,” in which a enue per day (and Rmb5,000 in Beijing), and each terminal costs out changing equipment. of sales to winning players, compared to in- Shaanxi Provincial Sports Lottery Center con- about Rmb12,500 to install. Nationwide, each VLT generates an average of about Rmb5,000 ternational lottery standards of 60-75% and tractor was found to have been setting aside Keno terminals are now available in a wide range of locations, in revenue per day, and costs Rmb25,000 to install. black market gambling payouts of 80-90%. In grand-prize winning tickets for his friends. including restaurants, karaoke lounges, coffee shops and other Video Lottery Terminals are currently restricted to parlours op- March, the government announced it would One of these tickets had mistakenly gone food and beverage outlets. All that is needed at the point of sales erated by Beijing Lottery Online Technology (CLO), and through gradually raise returns on selected lottery to a 17-year-old migrant worker, and when is a ticket issuing machine and monitor for displaying results, with the centralized system, offer a single mega jackpot. The CLO halls games to international standards. The por- he went to claim his prize of a BMW and both linked to the centralized operating system. are financed, built and operated by provincial and municipal wel- tion of sales revenue going into the Social Rmb120,000, the lottery center insisted his Although only Keno itself is available through this network fare lottery centres. Fund will correspondingly drop from 25% to ticket was fake, prompting the young man in China, the system can generally support four to eight different All CLO parlours will feature a standardized layout of 200-300 10-20%, but Deutsche Bank points out that a to protest atop a city billboard. The scandal games. In Australia, virtual horse and car racing are also offered sq. metres in size, with 20-40 VLTs and one Keno monitor. The first rise in payout of this magnitude could poten- dealt a big blow to CSLC’s sales, and CWLC’s through the Keno network, and the government is expected to ap- CLO parlour was opened at the end of 2004, and by June 2006 there tially double legal lottery sales. lead is likely to widen given its control of Secondly, the Chinese government has high-frequency games, demand for which is prove more games in the near future. were 267 across China featuring about 8,000 VLTs. sought to expand the range of legal gam- predicted to explode. bling options in the country. Prior to 2003, One of the companies that stands to gain the CWLC only offered two games, lotto and most from the huge expansion of keno and assembly, but is considering setting up its in China will be slower than previously as- that “in practical and operational aspects, as instant scratch cards. Proving the choice-cre- VLTs is Hong Kong-listed China Lotsynergy own production line in Dongguan. sumed. CLS itself has revised its roll-out tar- we will have invested hundreds of thousands ates-desire thesis, following the launch of a (CLS). CLS was formerly called WorldMetals Meanwhile, CLS also plans to upgrade gets downwards – predicting 20,000 VLTs of terminals in the market in 10 years time simple new game, 3D – in which players pick Holdings and provided online metal trading Tianyi’s technology through its acquisition and 10,000 Keno machines by end-2006. As – we think it will be very difficult for other a 3-digit number from 000 to 999 – lottery platforms, but changed its name in October of 90% of Octavian International, a Britain- of end-June, however, Citigroup estimates companies to replace us at that time.” Thus, revenue soared 80% year-on-year in 2005. 2005 and switched its focus to the China lot- based gaming systems company. CLS plans only 8,000 VLTs and 400 Keno machines (the despite missing its short-term roll-out tar- The Deutsche Bank report points out that tery business. On August 1 2005, CLS formed to then market Tianyi’s VLTs to Octavian cus- latter in a test phase) were operating across gets, CLS remains confident about its long- Unlike traditional lotteries, when Keno was introduced in California in a joint venture with Australian gaming com- tomers in Europe, South America and India. the country, making even the more modest term prospects, especially given China’s huge 1993, lottery sales jumped 30%, and similar pany Tabcorp. One-third of CLS-Tabcorp is targets appear hard to achieve. Furthermore, market potential. where drawings are typi- growth was observed when it was brought held by CLS and the remainder by Tabcorp, Off and On Target Tabcorp, the majority JV-partner in the Keno cally made once or twice to the state of Georgia. and the JV was awarded an exclusive 10-year Shares of CLS have recently been sold down project, only forecasts for “a couple of thou- Other Players In order to offer even greater gambling contract with CLO to assist in the roll-out of hard after peaking at HK$4.2 on January 19. sand” Keno machines by end-2006. Hong Kong-daily The Standard ran a feature a week, new technology choice, the Chinese government introduced China’s first nationwide keno system, provid- On August 11, the company announced first CLS informed Inside Asian Gaming that on companies involved in the China lottery high-frequency lottery games in mid-2005. ing CLO with softare, central systems, termi- half 2006 losses of HK$9.03 million, compared it is currently ironing out some technical market entitled “A Sure Bet” in October, at allows drawings to take Unlike traditional lotteries, where drawings nals and other technical support. CLS-Tab- to a loss of HK$10.8 in the year-ago period, problems relating to the Keno terminals, and which time the stocks were undergoing a place either every 3 to 5 are typically made once or twice a week, new corp began testing its Keno network at the and its stock ended the day at HK$1.1. Eq- expects the massive roll-out originally sched- rapid ascent. The article compared the rise technology allows drawings to take place ei- start of this year, and has ambitious roll-out uity analysts have also dramatically reversed uled for July to be delayed to the third quarter. of such stocks to the earlier fad for Macau minutes, as with the Keno ther every 3 to 5 minutes, as with the Keno targets. their views on CLS’ stock price. In January, CLS claims that once the technical problems gaming-related plays, and pointed out how network, or even instantaneously through In January, CLS paid HK$980 million for a Citigroup issued a HK$4.3 price target on the are resolved, the massive roll-out can be done several “unprofitable penny stocks are hitch- network, or even instan- Video Lottery Terminals (VLTs). 50% stake in Corich International, which owns stock, but by July, had cut its target to HK$1.1 “very quickly.” Furthermore, CLS predicts rev- ing themselves to the China lottery boom taneously through Video Thirdly, the government is seeking to Tianyi Electronics, a mainland company with – right on the money, but not for those who enue generated by VLTs for full-year 2006 will through vague announcements of potential widen the geographical distribution of legal a 10-year exclusive agreement to supply VLTs acted on the January target. be five times greater than in 2005. deals, touching off huge share price jumps.” Lottery Terminals (VLTs) gambling options in order to compete with to CLO. While CLS-Tabcorp receives 0.92% of The main reason for Citigroup’s new- Citigroup also suggests that the exten- The article noted that such companies have ubiquitous illegal gambling. Traditional lot- keno revenues, Tianyi is entitled to 1.6% of found bearishness on CLS is the view that sion of CLS’ exclusive 10-year Keno and VLT hardly prospered. Among companies that tery tickets are sold in over 60,000 dedicated VLT takings. Tianyi currently outsources VLT the roll-out of both Keno and VLT machines contracts are uncertain, though CLS counters made such announcements and either failed 8 9 to follow through on their investment com- tegic International (SSI) functions as a sales mitments or experienced paltry returns were agent, and has been awarded 750 of Shang- Meanwhile, if high-frequency Hong Kong-listed China National Resources hai’s Keno sales agency permits – thanks Development Holdings and Creator Capital, a in large part to the political connections of lotteries gain in popularity Vancouver- based firm part-owned by casino its majority shareholder, Teddy Cheng. The and lead to problem gam- giant Harrah’s Entertainment. Shanghai Welfare Lottery intends to reduce One unlikely entrant to the China lottery the number of sales agency permits to 1,000 bling, “the government may market is Hong Kong-listed Chinese People by 2007 (from around 1,600 at present), and Gas (CPG), which last October announced the objective is to replace street vendors with slow down the roll-out or it was investing in a joint venture that will indoor sales operations within two years. even ban these new games,” provide operating systems and mainte- Operating system suppliers like CLS re- nance services for VLTs. The company is also ceive 0.92-1.6% of lottery sales, whereas sales warns Deutsche Bank looking at assisting in setting up and oper- agents are entitled to 6-7% in order to cover ating VLT halls in Hainan, and has sourced higher operating costs, such as rental and Australia’s Aristocrat Technologies as its selling expenses. Deutsche Bank points out equipment provider in the possible venture. that sales agents face greater regulatory and CPG management says the gas business will operational risks. Like CLS, SSI has ambitious remain the company’s core operation, and plans to expand across China. The company’s while the company’s stock price had rallied stock price began 2005 at a mere A$0.16, and following the announcement of its lottery rose as high as A$4.2 last year, but retreated aspirations, it has been sliding steadily since to A$2.75 by August 11. mid-February. Even though CLO is the only nationwide Hong Kong-listed Megainfo is in the high-frequency lottery operator, both Shang- midst of a turbulent stock market ride due hai and Beijing have their own officially sanc- to the China lottery hype, even though it has tioned local operators. However, the Guangxi no lottery interests. The company describes and Guizhou provincial sports lotteries are of- its principal activity as “the provision of fering Keno, and there is a risk that other city Sands’ High-Roller Push digital image processing management solu- and provincial governments may attempt to tions,” but unfounded rumours that its major run their own high-frequency lotteries. Not content with its domination of Macau’s mass market, Las Vegas Sands Corp (LVS) began an aggressive shareholder would inject his Chinese lottery Beijing and Shanghai each make up 4- push into the VIP market in August, spurring local casino tycoon Stanley Ho to accuse the company interests into the listed entity sent the stock 5% of China’s lottery market, and were the price rocketing to HK$2.05 on resumption of first cities in the country to launch Keno of engaging in “vicious competition,” as Jose Ho reports trading on August 1, from just HK$0.04 when (Beijing since mid-2004 and Shanghai since trading was suspended on July 18. It did not mid-2005). The two biggest US lottery sup- take long for gravity to take hold, however, pliers have interests in Shanghai and Beijing. M acau had 17 casinos in 2005, and tions would be difficult to break. an association of casino operators. Accord- and the stock plunged the following day, and Shanghai’s lottery network was set up by LVS’ Sands Macau captured about 35% of the In August, Sands Macau apparently fur- ing to Mr. Ho, with the exception of LVS, all continued falling after Megainfo announced Gtech, while a company now part of Scien- city’s mass market casino revenue that year, ther turned up the heat on its competitors in of Macau’s casino licensees – including SJM, it was not in talks relating to acquisitions. tific Games handled Beijing’s. Both Gtech and leaving the other 16 trailing. Sands Macau courting high-rollers. On August 11, erstwhile Galaxy, Wynn Macau, and the Melco-PBL and The stock closed at HK$0.275 on August Scientific Games trade on Nasdaq. began its push into the high-roller market monopoly casino operator Stanley Ho went MGM-Pansy Ho joint ventures – have agreed 11. Commenting on the Megainfo saga, 3V in 2005, and according to Credit Suisse First before the Macau media to announce Sands to join such an association. Mr. Ho said he had Capital’s Roger Luk advised avoiding China Boston (CSFB), raised its share of that market Macau had significantly raised rolling com- approached LVS executives to join the asso- lottery stocks, saying “if people don’t have Regulatory Risks from a mere 2% at the start of the year to missions that month, which he warned would ciation, but they failed to respond. time to go to Macau [to gamble], they can Regulation of China’s lottery industry is in- 9.8% by the end. trigger “vicious competition.” According to lo- The opening of Wynn Macau could place play here.” complete and inadequate, and there is ten- From Sands Macau’s financial results, cal VIP room operators, Sands Macau has be- further upward pressure on junket commis- The stock prices of Kantone Holdings and sion between the sports and welfare agen- CSFB estimates the casino is paying around gun offering direct rolling commissions of as sion rates, particularly since Wynn Macau’s sale Win Win Gaming have been much less vola- cies. Corruption is also ever-present in China, 32-36% of net win as comps and commis- high as 1.2% to walk-in high-rollers who are of its casino operating sub-concession to PBL- tile, even though both recently did actually with the introduction of online lottery games sions to independent junkets for bringing in not accompanied by junket agents. Before Melco for US$900 million has given Wynn the acquire China lottery interests. Hong Kong- driven by the scope for abuse of scratch-card high rollers, compared to the 12-15% offered the liberalization of Macau’s casino industry, financial strength to offer greater incentives. listed Kantone invested HK$70 million (US$9 games, as in the BMW scandal. by “local” operators and VIP promoters – in- direct commissions were rarely offered in the Meanwhile, despite poor results at its Las million) to buy a Shenzhen company that de- Meanwhile, if high-frequency lotteries cluding Stanley Ho’s Sociedade de Jogos de city, with commissions as low as 0.7% offered Vegas property, LVS’ second-quarter earnings velops paperless lottery systems for its native gain in popularity and lead to problem gam- Macau (SJM) and Hong Kong-based Galaxy to junket agents by SJM. SJM and Galaxy now were buoyed by strong growth at Sands Ma- city as well as Shanghai, and Win Win Gaming bling, “the government may slow down the Entertainment Group. Sands Macau needs offer commissions of around 1%. cau. Casino revenue at The Venetian in Las Ve- launched a second scratch-card game for the roll-out or even ban these new games,” warns to offer higher commissions because, unlike Stanley Ho claimed that Sands Macau’s gas fell 3% year-on-year in the second quarter Shanghai Welfare Lottery agency. Win Win, Deutsche Bank. VLTs in particular have po- the “locals,” it does not offer credit, so forces aggressive move could result in the closure to US$$71.3 million – although customers wa- which trades on the Over the Counter Bul- tential to lead to addictive behaviour, which junket operators to bear the risk of grant- of a third of his 150 VIP rooms and the loss of gered more money on slots and table games, letin Board in the US, receives 1.7% of the is why the government has limited them to ing credit themselves. Sands has also set the “thousands of jobs.” He also said that SJM’s the win percentage dropped. Sands Macau, scratch-card sales. CLO parlours, while Keno can be offered in a commission high enough to entice junkets VIP revenue could drop by 20%, though he however, pulled the company through, with While most foreign companies partici- wider range of venues. The government has to drop their established connections and offered no time frame. revenue up 52.7% year-on-year to US$307.1 pate in the China lottery market as operating also sought to prevent problem gambling by bring their customers to its casinos – thwart- Stanley Ho called on the government to million. The company’s total revenue for the system suppliers, Australia-listed Sino Stra- limiting the size of lottery jackpots. ing analysts’ predictions that those connec- intervene, and suggested the formation of quarter was US$517 million, up 29.6%. 10 11 to become the city’s second property from a Vegas-based operator. Wynn Macau is already testing its outdoor “performance lake,” which will feature fire effects and projected holographic images, and judging by what we recently saw from the street outside, it looks like it will be a big crowd-puller. Thus, Mr. Wong agrees it’s good for Sands Macau to have “extra surprises” to draw on. The podium expansion will add about 270 gaming tables and nearly 300 slot machines to bring Sands Macau’s capacity to over 700 tables and 1,200 slots – which, according to LVS President and COO William Weidner “is over three times the initial capacity” of Wynn Macau. Despite the famous rivalry between Steve Wynn and LVS Chairman Sheldon Adel- son, Mr. Weidner acknowledges that Wynn Macau will provide a level of quality that will draw new visitors to Macau and boost the marketplace, while many of the quick and cheap properties going up around the city will quickly fall by the wayside. Mr. Weidner is especially critical of the casinos converted from disused office or residential buildings, including Galaxy’s Waldo, which sits oppo- site Sands Macau on Friendship Avenue, and the nearby Casa Real, Golden Dragon and Emperor Palace, which operate under the license of Stanley Ho’s SJM. The quick-fixes are intended to save time and money, but Mr. Weidner believes such properties will soon be rendered obsolete by the glitzy new developments set to open around the city. The Look of Casinos to Come Mr. Weidner says the podium expansion will provide Sands Macau “capacity to meet The design of casinos is changing to reflect the growing importance of non-gaming revenues. the increasing importance of the mass market, which we believe will provide the lion’s Paul Steelman Design Group (PSDG) Asia Managing Architect James Wong shares some rules share of Macau’s market growth in the years of casino design, and offers previews of some of his firm’s upcoming projects ahead.” Indeed, as Deutsche Bank’s Karen Tang points out in her “2Q Macau Trends” on page 16, Macau’s growth is currently being People have funny ideas about what ated casino to open in the city. Sands Macau daylight outside several new casinos in Ma- driven almost solely by the mass market. the mainland Chinese want,” suggests Paul avoided cheesy themes and instead sought cau, Mr. Wong points out that “neon is not a The podium expansion will make Sands Steelman Design Group (PSDG) Asia Manag- to provide people a gambling venue with bad thing if done right.” Indeed, the original Macau the largest casino in the world un- ing Architect James Wong as an explanation conspicuous “quality of space and material,” Sands Macau was to have featured a much til LVS opens its mammoth US$2.3 billion of the pastiche and cheap glass-reinforced according to Mr. Wong. “Why one single ca- more comprehensive external lighting Venetian Macau casino resort in mid-2007, plastic (GRP) that litters many of the new casino has been able to capture about 20% of scheme, which was curtailed for cost reasons. with 750 tables and 4,000 slot machines. sino properties going up in Macau. He con- the market is not because we are trying to “The result at night would have been much Mr. Wong explains the configuration of the tinues: “They may be looking a little bit down put up cheap things,” he asserts. more eye-catching,” he claims. podium expansion “is different in that the on people from the mainland. They think as Inside Asian Gaming has seen many el- Sands Macau’s management is currently original Sands is one huge atrium space. long as you come from China, you have a ements of Sands Macau being imitated considering implementing some elements The new extension is on 6 floors, although low intelligence, you come for a short trip, so around Asia, from the carpets at the Subic of the original external lighting scheme, per- it will blend in with the various levels of the some of this quick stuff will satisfy you.” Diamond in the Philippines to the generous haps as an add-on to the current podium main area.” PSDG – which set up its Macau branch space at Galaxy’s Grand Waldo in Macau. expansion, which is due for completion in Each new level of the podium expansion office, PSDG Asia, in 2003 – designed the mid-August. Shortly after, on September 6, will have a gross area of 2,400 sq. metres. Ac- hugely successful Sands Macau, which in Street Lighting Wynn Macau will open its doors to the pub- cording to Mr. Wong, the first level will be the May 2004 became the first foreign-oper- As for the surfeit of neon creating an eerie lic – trailing Sands Macau by over two years ground floor lobby of a future hotel annex, 12 13 the mezzanine level will provide space for cana, and Desert Inn, lured gamblers with back-of-house support, and there will be free rooms and cheap buffets, but offered three gaming floors, including one extend- few distractions beyond the casinos, which ing from the existing mass-gaming floor. were dark, cramped and difficult to get out There is one last floor with a currently un- of. According to the Forbes article: “Keep a designated usage, though it could perhaps customer stuck, the thinking went, and he’ll house a future club or further gaming ex- play until he’s out of money.” That was also pansion, says Mr. Wong. the prevalent view in Macau, until Sands Ma- The biggest disappointment at Sands cau proved that gamblers will actually play Macau has been its fine dining restaurants, more when they have light, space and clear which have met with a lukewarm response, exits – studies have shown that clear exits and the property has yet to provide any keep gamblers playing for five minutes lon- real “Vegas-style” entertainment. Mr. Wong ger, on average. reveals the prime goal of the podium ex- During the heyday of the Flamingo et al, pansion is “to provide as many tables as gambling made up over 90% of the revenue possible,” given that they are generating of resorts along the Strip, just as in Macau such excellent returns, though he stresses today. Analysts predict Macau will gradually the tables are hardly being “crammed in.” move towards a Vegas-mix of 50:50 gaming The podium expansion will not feature any and non-gaming revenue. That will result in new F&B outlets, but Sands Macau is ex- traditional casinos giving way to “total hospi- panding its existing mass-market outlets, tality complexes.” In the new Macau, “casinos including the popular noodle shop and buf- will be an element within a mall-like environ- fet – though the buffet had previously been ment,” believes Mr. Wong. scaled-down in order to make way for more Mr. Wong sees potential for retail in par- gaming tables. ticular. “Shopping is hugely underdeveloped in Macau,” and “there’s a great opportunity when Hong Kong introduces its GST [goods New Concept of Casinos and services tax].” The Hong Kong govern- “In the East, casinos are traditionally seen as ment has proposed the introduction of a 5% a place where you make or lose money,” says sales tax in order to diversify the city’s narrow Mr. Wong. He believes PSDG has changed “the tax base. Given Macau’s lack of a GST, as well concept of what people perceive a casino is,” as its cheaper hotel rates and coming wider by throwing in “elements of entertainment, variety of entertainment choices, CLSA’s Aar- with F&B outlets, light and air and space.” on Fischer predicts “mainlanders and other Although only 5-10% of Macau’s casino tourists will divert their trips from Hong Kong revenues currently derive from non-gaming to Macau for shopping.” ture much theming. man also added, “One of the things we try to is also designing the behemoth US$1.9 bil- activities, the casino resorts on the Las Ve- More than themes, PSDG tries to pro- do is peak the curiosity for exploration. We lion Montreux entertainment and hotel com- gas Strip now make half their money from vide the “3 Cs” – cool, comfort and casual. Mr. don’t like straight lines. We want you walk- plex in Las Vegas, which is due for completion hotel rooms, retail, entertainment and F&B. Theming and the “3 Cs” Wong elaborates: “Cool as in hip and fashion- ing on curved paths, exploring nooks and in 2009, and will consist of 2,750 guest rooms LVS Chairman Sheldon Adelson touts the Sands Macau and Wynn Macau follow the able – trying to make it a place where people crannies. To say ‘Wow!’ or ‘I’m empowered to and a 104,000 sq. foot casino. The Montreux’s upcoming Venetian Macau’s extensive expo, current trend in Vegas of providing con- want to go to be seen, and to see the right gamble.” As witnessed in Sands Macau, Mr. crowning glory will be a massive observation entertainment, shopping and dining offer- spicuous luxury without a theme. Mr. Wong people.” A comfortable and casual environ- Steelman also likes his gaming spaces well- wheel atop the casino floor, which, like the ing, and underplays the gaming by saying does not believe theming in itself is a bad ment, meanwhile, encourages spending, on lit, with more concentrated lighting over the London Eye, will provide riders panoramic “oh, and we’ll have a casino as well.” The thing – after all, Venetian Macau will recre- either shopping or gaming. tables, since darkness confuses gamblers. He views of the city. Singapore government has also sought to ate the canals and serenading gondoliers of stresses the need for short walking distances According to the Forbes article, Mr. Steel- play down the gaming component of its the historic Italian city, while PSDG’s upcom- between the lobby, hotel rooms, casino floor man “plans to push the non-casino receipts two upcoming casino-centred resorts – the ing Montreux will feature a Swiss-lakefront Paul Steelman’s Rules and shopping areas to encourage spending, even higher” with the Montreux. The casino The Montreux’s crowning first of which will be developed by LVS, to theme. Mr. Wong does, however, criticize After more than 20 years in the field, Mr. and allows for plenty of space between tables and retail zones will be interconnected, and open in 2009 – by dubbing them “Integrat- “theming without quality,” as another quick Steelman has accumulated around 70 rules and slot machines so that players do not feel the property will feature a multi-functional glory will be a massive ob- ed Resorts.” During our interview, Mr. Wong fix to draw mainlanders. of casino design, many of which are based trapped. Mr. Steelman also understands the ballroom which can be transformed under coined his own phrase – “total hospitality Disney is an example of theming with on rigorous studies of consumption and draw of people-watching, and seeks to pro- two hours, so that in one day, it can host a servation wheel atop the complex.” quality. Macau’s Greek Mythology Casino, gambling behaviour. Mirrors are avoided vide openly visible eating venues with views fashion show in the morning, a poker tourna- casino floor, which, like the PSDG founder Paul Steelman worked featuring towering styrofoam GRP-shelled in gaming areas, otherwise once a gambler of the tables. ment in the afternoon and a boxing match on Wynn’s Mirage, which, when it opened in tributes to Poseidon and Zeus, and the Em- sees himself and “realizes he’s not James at night. Not only will this maximize the use London Eye, will provide 1989, became the first casino resort on the peror Palace Casino with its mock English Bond,” he’ll stop spending money. The co- of valuable real estate, but according to Mr. Las Vegas Strip to place as much importance Beefeaters performing the changing of the lour blue is notably absent, since it is regard- Coming Attractions Steelman, casino spectacles should in any riders panoramic views of on dining and entertainment as on gaming. guard while grumbling in Russian, are per- ed as “cold and discouraging,” whereas reds, The next PSDG design to go up will be the case be restricted to under 90 minutes, oth- the city According to a recent profile on Mr. Steelman haps not. Mr. Wong also does not believe that golds and earthen tones help to promote Four Seasons hotel, adjacent to the Venetian erwise “you are dipping into time people in Forbes magazine, the first casino resorts countries like Singapore or Japan – assuming feelings of warmth. Macau, as well as a new resort at the expan- would use spending money in other parts of on the Strip, including the Flamingo, Tropi- the latter will soon legalise casinos – will fea- In his interview with Forbes, Mr. Steel- sive Foxwood’s Casino in Connecticut. PSDG the casino.” 14 15 tinued to be a drag on overall growth. Monthly gaming revenue (yoy change) New supply on the way The soft results could put stocks under pressure in the near term. Long-term investors, however, could buy on dips as strong growth 50% YTD 42.9% should resume in the fourth quarter after the 40% opening of Wynn Macau on September 6. 30% 24.3% 18.2% 20% 16.1% 9.5% 10.8% 6.8% 2Q growth driven by mass market 10% 3.7% 3.7% 0.2% Growth in the second quarter of 2006 was 0% driven mainly by an expansion in the mass -10% -4.6% market segment, which continued to benefit -20% -11.0% from the opening of new casinos and tourist Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 attractions in 2006. Mass market gaming rev-

enue was up 37% year-on-year to US$0.67bn, Source: Gaming Inspection & Coordination Bureau, DSEC in line with our full-year expectations of 35% growth, while the VIP segment witnessed a marginal 3% decline in revenue growth to Gaming revenue (yoy change) US$ 0.90bn. We believe this could be the result of the World Cup effect and certain casi- 75% nos and cruise ships in South East Asia offer- 80% ing “remote gambling via live video link.” This 60% 44% 45% 44% 34% 37% 38% 40% 35% implies that high-rollers no longer need to 20% 11% 17% 12% 16% travel to Macau to gamble, and can now place 20% 3% 2% 4% their bets from other locations. Despite the 0% -3% slowdown, we still maintain our full-year fore- -20% -3% cast of 2% growth for the high-roller market. 2004 2005 1Q06 2Q06 2006F 2006-08F Cagr Due to its stronger growth momentum, the mass market segment captured 43% of Source: Deutsche Bank total Macau gaming revenues in the second quarter, up from 34% in the second quarter US$18,700/table/day, and mass market ta- the new developments in slots, which could of 2005. Conversely, the VIP segment has seen bles averaged only a quarter of that, around eventually contribute a lot more to the total its market share drop 9 percentage points to US$4,700/table/day. gaming revenue as the mass market devel- 57% in the second quarter of this year. Slots ops. For full year 2006, we expect slot win to remain a tiny portion of gaming revenues, remain at around US$140/machine/day. edging up one percentage point to 4% over Slots – Market acceptance increasing Macau added 310 slot machines in the sec- Macau 2Q Trends the same period. ond quarter of 2006 to total 4,533. Despite Industry demand and supply this 64% year-on-year jump in slot unit, win We expect the Macau market to double from The World Cup and a lull in new casino openings led to soft gaming revenue growth in May and June, Average table win US$8,800 per day per slot machine remained relatively stable, US$5.6bn in 2005 to US$11.4bn in 2009. In but Deutsche Bank’s Karen Tang expects growth to return to its strong track from the fourth quarter Macau added 277 tables in the second down only 7% year-on-year to US$136/ma- other words, it would grow at a compound quarter to a total of 1,925, mainly due to ca- chine/day in the second quarter. This sug- annual growth rate (Cagr) of 19%. Due to the sino openings (Galaxy Grand Waldo) and the gests that the Macau market is embracing distinct difference between the high-roller A lthough the opening of new casinos also grew 11%, bringing year to date growth sector risks include a slowdown and possible Sands expansion. This represents a 55% year- and tourist attractions in the first quarter to 17%. As of end-June, 10.4 million visitors monetary tightening in the Chinese econo- on-year increase in table supply. With such a Quarterly gaming revenue by segment spurred April gaming revenue to jump 24% had descended on Macau in 2006. my, and disruptions to travels. big increase in supply, unit table revenue was year-on-year, growth in May and June slowed The bulk of visitors hailed from mainland diluted 28% year-on-year from US$12,200/ significantly. The key calendar event that China (50%), Hong Kong (30%) and Taiwan table/day in the second quarter of 2005 to (US$bn) softened May growth was the Golden Week (7%). Same day visitors represented 51.6% Golden Week, World Cup tough on Q2 US$8,800/table/day in the corresponding holiday in China. of total arrivals, while approximately 45.3% June’s growth of 7% year-on-year was well quarter this year. On a sequential basis, the 1.60 Slots The Golden Week holiday in the first week of mainland Chinese visitors came under the below the year-to-date growth of 14%. We dilution is equal to 13% quarter-on-quarter. 1.40 1.20 42% 43% of May had traditionally been the peak season eased travel restrictions of the Individual Visi- believe the low June growth could be attrib- With a full pipeline of new casino openings 34% 34% 39% 42% 1.00 for mainland Chinese travelers to visit Macau. tor Scheme (IVS). uted to two factors. Firstly, there was a brief over the next two years, we expect this num- 0.80 Mass mkt This year, however, expensive room rates and Visitor growth could remain subdued lull in the casino resort pipeline, before the ber to be further diluted to US$4,600/table/ 0.60 packed tourist spots kept many mainland in the third quarter as the summer will be high growth phase kick starts in the second day by 2008. This is still almost 2x the current 0.40 66% 66% 61% 68% 58% 57% visitors away. Chinese tourists now prefer to another dull quarter in the casino opening half of the year. Secondly, the World Cup, Las Vegas average of US$2,600/table/day. 0.20 VIP spread their traveling evenly throughout the pipeline. Thankfully, the low base of compari- which began in mid-June, diverted gambling In addition, Macau faces a wide discrep- 0.00 year, leaving May 2006 visitation only 11% son set by the weak performance in July last activity to sports betting, particularly in the ancy in table win between its VIP and mass 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 higher year-on-year – well below the year to year – when gaming revenue declined 11% VIP segment. VIP baccarat revenue fell 3% market segments. We estimate that in the date growth of 18%. Visitor arrivals in June year-on-year – should be easier to beat. Key year-on-year in the second quarter, and con- second quarter of 2006, VIP tables averaged Source: Gaming Inspection & Coordination Bureau, DSEC 16 17 and mass markets, we have explicitly forecast Table win forecast the growth of each segment separately. Deutsche Bank - Macau Map (US$/table/day) DB forecast VIP market High roller market to drop to 4% Cagr Mass market We project the VIP market will experience a 30,000 Macau avg low rate of growth, averaging 4% through 2006-09 given its relatively higher penetra- 20,000 tion compared to the mass market. More- 11,700 12,200 11,600 10,800 10,100 8,800 over, current issues related to rising junket 10,000 6,400 commission rates and tightened regulations 4,700 4,600 on credit provision will hinder new players – from entering this market. The surge in visitation from the mainland Chinese middle class 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 2006F 2007F 2008F population will contribute more to mass market rather than VIP growth. Source: Deutsche Bank

chain and the Sands expansion. The SJM pipeline includes the Grand Lisboa, Accelerating mass market growth Arc of Triumph, Ponte 16 and other upcoming We believe the mass market still has much casinos. Our projections are based on publicly untapped potential, with adequate room 2007-08: Transformation of Cotai We project a spike in the supply of gam- announced projects, adjusted for our expec- for the coming pipeline of large scale casino ing tables, with the addition of around 3,000 tations on their likelihood of materializing. Al- resorts. We expect growth in mass market tables over 2007-08. Over half of this new though the potential for underestimation ex- gaming to be driven by rising tourist arriv- supply will come from the opening of mega- ists, we believe the margin of error is minimal, als on the back of expansion of the wealth size integrated resorts such as the Venetian as further projects are likely to be relatively effect on the middle class in mainland China Macau, Galaxy Mega, MGM Grand Paradise (a small, and, in the case of major projects, the and improvements in tourism infrastructure. joint venture with Pansy Ho) and the Wynn likelihood of completion before 2008 is low. These two key drivers should encourage visi- expansion. In addition, the Melco/PBL JV is tors to increase per capita gaming spend and scheduled to launch the Crown Macau and lengthen visitor stay in the city. We forecast Combining the market forces City of Dreams in 2007 and 2008 respectively. Given that we project a surge in industry per capita gaming spend per day to grow at a Cagr of 6% from 2006-09 while average length of stay could increase from 1.3 to 1.7 Casino supply forecast (number of gaming tables) days over the same period. As such, we esti- (No. of tables) mate mass market gaming revenue to grow Wynn Resort 6,700 by 33% through 2006-09, with the mass mar- 7,000 48% Cagr ket share of total gaming revenue climbing 5,400 SJM 6,000 from 26% in 2004 to 52% by 2008. 4,300 5,000 MGM/Pansy 4,000 Ho Backend loaded 2006 2,600 Melco PBL We project the addition of more than 1,000 3,000 2,000 1,400 gaming tables over 2006. Most of the new 1,100 Las Vegas supply will come from new casino resorts 1,000 Sands scheduled to open in the second half of 2006 – Galaxy including Wynn Macau and Galaxy StarWorld, and the balance will be derived from casinos 2004 2005 2006E 2007E 2008E 2009E under the SJM umbrella, Galaxy’s city clubs Source: Deutsche Bank

Table win (US$/table/day)

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 2006F 2007F 2008F

Macau avg 11,700 12,200 11,600 10,800 10,100 8,800 6,400 4,700 4,600

VIP market 34,500 36,100 31,900 28,100 30,300 18,700 17,700 11,700 10,800

Mass market 5,300 5,700 6,000 6,100 5,400 4,700 3,400 3,200 3,200

Slot machines 122 146 144 139 140 136 140 100 100

Source: Macau Government tourist Office, Deutsche Bank AG Source: Deutsche Bank 18 19 , -/ ,Ê/" 9t

egZhZcih

supply, with gaming tables to more than Macau gaming demand forecast double by 2008, it is clear that blended table win will drop signifi cantly over the Mass market period. We forecast average daily table win (US$m) VIP market Slot machines J£¨Ú will fall from around US$10,700 in 2005 12,000 19% Cagr 11,400 to US$6,100 in 2006, and eventually to 9,700 10,000 US$4,700 by 2008. 7,800 8,000 6,500 6,000 5,000 5,600 A two-tier market 4,000 ÓJÚ Investors should note the large differen- 2,000 tial in average daily table wins between – the high-roller and mass market segments. 2004 2005 2006F 2007F 2008F 2009F We estimate the average high roller table achieved daily wins of around US$28,600 in Source: Deutsche Bank .Jbb 2005, whereas the estimated average mass market table achieved daily wins of around around 10m Mainland Chinese tourists have to reach 28.5 million, driven by a pipeline of US$5,000. By 2008, we expect these fi gures to visited HK/Macau since 2003. new casinos, improvements in tourism infra- drop to US$9,500 and US$2,900 respectively. Looking ahead, we estimate tourist arriv- structure, and the continuing strength of the 4å££ÜÚãôôØ Despite our forecast dip in table wins, we ex- als to achieve a 15% Cagr through 2006-09 Chinese economy. pect that by 2008 the mass market table win ã{ÜÚQÚã©ÜÚ4v»Üv£XvÐÚãôôØ in Macau will still be signifi cantly higher than Table win by market segment the average daily win achieved in Las Vegas "JbJåÚÓvÐ£J¨ÍÓÚBJÐÚ~Ú ¬¨ëv¨Ü¬¨ÚQÚíXÜ¬¨Ú v¨ÜÐviÚ"JbJå (US$2,605 in 2005) (US$/table/day) Visitation VIP market 3ÚE%;Ú"Æ Tourist arrivals to Macau grew at a 16% Cagr 30,000 Ì7vÚJÐvÓÜÚJÜvÐ¨Ú¬ÚÓJÍÓÚbJÓ¨¬ÚJ£¨Ú¨låÓÜÐîÚ»Ð¬vÓÓ¬¨JÓiÚ through 2001-05. This has been driven by Mass market the increase in mainland Chinese visitors, ¨ëvÓÜ¬ÐÓÚJ¨lÚbJ»ÜJÚ£JÐvÜÓÚví»vÐÜÓÍ which grew at a compound rate of 37% over Macau average the same period. Of the 18.7 million visitors 20,000 J£¨ÚÓJÚ.JbbÚìÚëvÚJÜÜv¨lvvÓÚJÚ vJÐÚÐ¬£ÚvîÚåÐvÓÚ¨ë¬ëvlÚ¨ÚÜvÚ¬XJÚ to Macau in 2005, 56% came from Mainland »vÐÓ»vbÜëvÚ¬¨h J£¨Ú¨låÓÜÐîÚ¨bål¨h China, 30% from Hong Kong and 8% from 12,400 aÚ ÓJ¨ÚJ£¨ÚJ¨lÓbJ»vÚ~ÚÐvë¬åÜ¬¨JÐîÚbJ¨vhÚ aÚ ¬ÐvÚ%ëvÐJiÚ"JbJåÚJ£¨Ú ¬££ÓÓ¬¨ 10,700 Taiwan. aÚ BJ£Ú3ÀÚJl¨Ü¬ïÚ;¨ëvÐÓÜîÚ¬Ú#vëJlJÚ½3v¨¬¾ 10,000 åÜåÐvÚ»¬Üv¨ÜJÚJ¨lÚÜÐv¨lÓÚ¨ÚÓJÚ.JbbÚJ£¨ The relaxation of visa restrictions for in- 6,400 aÚ %»vÐJÜ¬ÐÚÓÜÐJÜvvÓÚ¨ÚÓJÚ aÚ 4vJ¨Ú"¬¨JJïÚ"vÐÐÚ î¨b 4,700 dividual travelers from China has been the 4,700 4,300 aÚ JbÜ¬ÐÓÚlÐë¨ÚÜvÚbåÐÐv¨ÜÚÐ¬ìÜÚ aÚ .vÜvÐÚ JJÐliÚ7JXb¬Ð» key driver of visitation. Since the Individual aÚ ¨J¨b¨ÚJ£¨Ú»Ð¬vbÜÓÚ aÚ "bJvÚ vïÚJÐÐJÍÓÚ¨ÜvÐÜJ¨£v¨Ü Visitor Scheme (IVS) was launched in 2003, – aÚ 3vJÜvlÚ¨ëvÓÜ¨Ú¬»»¬ÐÜå¨ÜvÓÚJ¨lÚvîÚÐÓÚ aÚ ÀÚ ÀÚ¬¬iÚ4" coverage has been expanded to 44 cities, aÚ JëlÚ åiÚJÐÚJÓÜÚ ¬¨Ó¬ÐÜå£Ú 2004 2005 2006F 2007F 2008F 2009F JbÜ¬ÐÓÚ¨ë¬ëvlÚ accounting for 15-20% of the most affl uent aÚ AJ¨vÓÓJÚJïÚ£»vÐ¬ÐÚÐ¬å» aÚ ÓbåÓÓ¬¨ÚÐ¬£ÚvîÚÓJ¨Úb¬å¨ÜÐvÓÚ¨ë¬ëvlÚ¨Ú people in Mainland China. Under the scheme, Source: Deutsche Bank aÚ 3¬XvÐÜ¬Ú JÓÜÐ¬iÚ. %3 ÜvÚJ£¨Ú£JÐvÜ aÚ ¨Ú"J¨Úv¬ïÚ.JÐJlÓvÚBJvÐÚ JÓ¨¬ aÚ 3våJÜ¬ÐîÚJÓ»vbÜÓÚ¬ÚJ£¨Ú¨Ú"JbJåÚ aÚ 7JJÓÚÓ¬iÚ¨ÜvÐÜJ¨£v¨ÜÚ åÓ¨vÓÓÚ¨ÓÜÜåÜv Mass market gaming segment - key growth drivers aÚ llÐvÓÓ¨ÚbJv¨vÓÚJÓÓ¬bJÜvlÚìÜÚÜvÚJ£¨Ú aÚ åìÚv¨¨ÓiÚ ¬ÐlÚ J¨bv X¬¬£Ú¨Ú"JbJå aÚ 3¬XvÐÜÚ"¬¬ïÚ""Ú"ÐJv 2003 2004 2005 2006F 2007F 2008F 2009F 2006-09F cagr aÚ "JbJåÚëÓÀÚ JÓÚAvJÓÚ~ÚvÓÓ¬¨ÓÚÜ¬ÚXvÚvJÐ¨vl aÚ ¨Ü¬¨îÚ JÐÜvÐiÚJJíîÚ¨ÜvÐÜJ¨£v¨Ü Mass market gaming revenue (US$m) 761 1,331 1,936 2,614 3,659 5,123 6,147 33%

yoy chg (%) 12% 75% 45% 35% 40% 40% 20% HedchdgZYWn/ HjeedgiZYWn/ Tourist arrivals (m) 11.9 16.7 18.7 21.5 24.7 28.5 32.7 15%

yoy chg (%) 3% 40% 12% 15% 15% 15% 15% asialaw

Visitor length of stay (days) 1.2 1.2 1.2 1.3 1.5 1.6 1.7 9%

yoy chg (%) -8% 0% 0% 8% 15% 7% 6%

Gaming revenue per visitor per day (US$m) 53.28 66.53 86.23 93.43 98.58 112.51 110.50 6%

yoy chg (%) 17% 25% 30% 8% 6% 14% -2% 7¬ÚÐvÓÜvÐÚ¬ÐÚÜÓÚÓå££ÜÚëÓÜÚìììÀvåÐ¬£¬¨vîÓv£¨JÐÓÀb¬£Ù.ôØÚ ¬ÐÚbJÚÃ{ãÚã{ãÚØ©ã©Ú Source: Deutsche Bank ¬ÐÚÓ»¬¨Ó¬ÐÓ»Ú¬»»¬ÐÜå¨ÜvÓÚ»vJÓvÚb¬¨ÜJbÜÚb¬¬XîÀåJ¨VvåÐ¬£¬¨vîJÓJÀb¬£ 20

Full page ad.indd 1 8/11/06 11:01:01 AM port level is Rmb20,000, which is considered a typical minimum bet • A challenge for the US casinos is to ensure that they recruit jun- in VIP rooms. Credit and facilitation is also important for convenience ket agents that operate within the bounds of US legislation. Failure and for “face.” to do so could create issues with the Nevada State Gaming Board. We However, in order to extend credit, the casino operator requires believe western operators will utilise junket agents over time but only detailed market intelligence on the player, including the ability to re- the ones that are permitted to do business in Las Vegas. pay. However, it is not easy to be able to distinguish the suitable play- • Due to Nevada Gaming rules, US casinos also require players to ers from the greater China region as there are very limited publicly complete paperwork, including the presentation of identification, on available credit reports. This is unlike the US, where credit history can the exchange of cumulative cash amounts above US$10,000. This de- be easily obtained by using a social security number. Therefore, the ters some visitors. casino operator will rely on junkets which are in a better position to issue credit because they possess the information on the player. This Revenue sharing for VIP play is one of the important roles of the junket. In the figure below, we highlight the standard breakdown of VIP rev- There is a credit chain going from the concession holder down to enue, which is known as the 40/40/20 model. Typically, the concession the junket, in which various players issue credit. holder receives around 20% of gross gaming revenue and the govern- In return for bringing in clients, junket agents earn 0.75-1.1% ment receives 39% in for gaming tax. The VIP operator derives around commission on the value of the non-negotiable chips purchased on 40% of gross gaming revenue from which a distribution needs to be behalf of customers. made for commissions. However, each participant’s share of revenue Junkets typically have access to tables at each of the hotels so can also vary significantly depending on which party is responsible their business is very mobile. Junket operators do not always have for paying commissions; providing infrastructure and other capital; VIP room in Emperor Palace Casino sufficient capital, so they are attracted to casinos that can offer credit and generally the risk appetite of the VIP room operators. and the best commission. As the market is becoming more competi- In order to provide an example of how the revenue model can tive, there is increasing demand for junket agents due to their role vary, we have highlighted Galaxy’s revenue sharing for its Waldo op- in arranging facilitation and tapping the right customers. However, eration from its latest accounts. One important variation is that 12% is potential changes in legislation dealing with facilitation and credit paid to the Waldo Hotel for rent of the hotel/casino operation and for could see a shift in power away from the junket agents. being responsible for the overall marketing of the operation. Macau’s VIP Market Structure Practices implemented by some junkets to enforce gaming debts could be considered questionable, at best. We understand that some- Unlike VIP facilities in Las Vegas, the key feature of Macau’s VIP rooms is credit, not luxury, one was accidentally killed recently in relation to the enforcement of Junket commission rates explains CLSA’s Aaron Fischer as he outlines the workings of Macau’s VIP market gaming debts. Any potential reaction from the Chinese government There is very limited visibility in terms of the actual amounts that VIP could create a short term risk for Macau’s gaming market. operators pay out to junket agents. The amount varies from operator to operator based on a number of factors including commission rates, which range from 0.75% to 1.1% and the specific arrangements with enerally, in Las Vegas the casino is the holder of the gaming necessary network of clients. Participants in the Macau market often G particular junkets. It is important to note that other parties act as jun- licence, raises its own capital, operates the casino and is responsible wear more than one hat. Challenging for western casinos to tap VIP market The dependence on junkets to provide player credit and facilitation kets including VIP room operators and players who wager very large for marketing or attracting clients. The Macau gaming market differs poses challenges for western operators in the medium and short run: amounts. These parties will therefore retain commissions. The com- to the extent that these activities are sometimes outsourced to third • The Macau government authorised casinos, operators and junket mission program is typically open to those parties that can turnover parties. The following explains the responsibilities of each participant How the traditional SJM VIP model works agents to grant credit in 2004. However, companies are not yet permit- over US$100mn in a one month period. in the Macau gaming market: Under the more established business model, SJM as the licence hold- ted to write off bad debts for tax purposes. At a 39% tax rate, this cre- Based on a commission rate of 0.75% and a net win percentage of • Gaming concession and subconcession holders have the right er would own the casino property and operate the main gaming halls ates a disincentive to grant credit and be liable for tax on revenue that 2.5%, the potential commission pool could be as high as 30% of gross to generate gaming revenue and are responsible to the authorities but subcontract the running of the VIP rooms to third parties known is not collected. We expect the authorities to pass legislation permitting gaming revenue (0.75%/2.5% = 30%). However, it is unlikely that 30% for the overall management of the casino or VIP room. Officially, the as VIP room operators. A revenue-sharing agreement typically gives bad-debt write-offs for tax purposes, in 2005. This could be a catalyst for is fully paid out to junkets as VIP room operators and players retain concession holder is responsible for activity in the casino and the the licence holder c. 20% and the room operator c. 40% of the gross gaming revenue. This revenue share can vary depending on the abil- western-operated casino to more aggressively market to high rollers. some commission. payment of taxes, but partners with a vested interest in the casino ity of the VIP operator to generate business and whether the licence operation, such as Greek Mythology, will have influence over deci- holder is required to contribute working capital. Standard VIP revenue-sharing arrangement Galxy Waldo’s revenue-sharing arrangement sions made in the casino. There is limited clarity surrounding the arrangements between • VIP room operators are responsible for the overall marketing casino/room operators and junkets. For example, Hong Kong news- of the room and providing hosts, rolling staff and cage personnel to paper The Standard reported last year that the auditors of Century conduct the rolling, buying, cashouts, etc, at the VIP room cage. These Gross gaming revenue Gross gaming revenue Legend Holdings issued a “qualified opinion” on its annual accounts cage outlets, one in each VIP room, are manned by the room opera- for the second consecutive year due to insufficient information on tors’ staff. All the chips in this cage have been purchased from the its intermediary business. This is largely related to the oral nature of casino concession holder and the cash belongs to the room operator, Concession VIP operator Concession Other charges Waldo (Service VIP operators agreements on junket arrangements. Tax 39% Tax 39.1% so the concession holder has no responsibility for the assets. Where holder 20.5% 40.5% holder 4.1% 5.3% provider) 12.3% 39.2% VIP room operators are not also the concession holders, they will typically receive a share of gaming revenue from the concession holder. The need for credit and facilitation VIP operators recruit junket agents. The VIP market is typically defined by the level of facilitation and Commission Other costs 1.7% Commission • Junket agents are responsible for marketing and attracting cli- credit that is extended to the player rather than the luxurious nature ents to the casino or VIP rooms. They are typically individuals or small of gaming rooms or provision of upmarket hotels, which would nor- Profit 2.4% firms with extensive personal networks on the mainland. However, it mally characterise the VIP market in Las Vegas. is important to note that concession holders, VIP operators and other The industry practice of facilitation and credit is necessary due parties can, and often do, act as junkets as well, should they have the the difficulty of transferring cash outside China - the current cash im- Source: CLSA Asia-Pacific Markets Source: Galaxy Casino SA accounts 22 23 Advertorial

The Legendary Maybach – A Masterpiece of Engineering

Maybach: the legend garde. And its lines create a timeless appeal, outside and in. combined to produce a two-tone colour scheme. Safety: maximising driver and passenger protection • More than two dozen extras are available to satisfy the most demanding The Maybach automobiles were acknowledged as icons of the “roaring twen- In addition to a highly sophisticated body structure, the exemplary safety tech- The highest quality materials – among them more than 100 exquisitely craft- of personal requirements. These include further, exclusive Mercedes innova- ties”, and a repository of impeccable craftsmanship and engineering. They were nology of this supreme luxury car includes a total of ten airbags – two adaptive ed and hand-fitted items of exotic wood trim – embellish the spacious interior, tions for even greater comfort and travelling enjoyment – such as the proxim- among the biggest, most handsome and impressive cars that have ever taken airbags with two-stage gas generators for the front occupants, four sidebags and whose design was guided by a single objective: the greatest possible comfort and ity control system DISTRONIC, the access and locking system KEYLESS-GO, a to the road. two large windowbags on each side of the interior. well-being for all the passengers and an entirely new definition of “first class”. unique panoramic roof with electrotransparent glass, and active seat ventila- Accordingly the Maybach 62 takes automotive luxury into a new dimension: the tion. Between 1921 and 1941, Maybach automobiles were the last word in avant- The three-point seat belts with automatic comfort-fit, high performance belt garde automotive engineering and aesthetics. Only 1,800 of these majestic lim- interior has an overall length of 2.68 meters and the distance between the front and rear seat is 1.57 meters. The Maybach is made for the individual. It is created in a manufacturing tensioners and belt force limiters are integrated into the seats and offer full ousines were produced in this time and the beauty of each one is in its individu- protective action in any position. These advanced safety features ensure the new ality of the craftsmanship and customization. No two Maybachs were ever the facility where craftsmanship plays a major part and exclusively small numbers Maybach easily surpasses the stringent safety tests prescribed by the European same. And more than 60 years on, 152 of the original Maybachs still exist around are produced to order, ensuring each one of these luxury cars, like its owner, is Individuality: approximately 2.2 million permutations and American NCAP (New Car Assessment Program). the world. Everything needed for entertainment, communication and sheer pleasure during thoroughly unique. a journey in the Maybach is included as standard: from a DVD player to a TV Retaining its original charm, Maybach made a revival in 2002 after taking a receiver, from a refrigerated compartment to a cordless telephone with two Performance: peak values for output and torque The Maybach’s high level of handling safety is assisted by the innovative 60-year break. Two new products have recently been launched – The Maybach handsets. But following the tradition of the legendary Maybach cars of days gone The Maybach’s newly developed Type 12 engine reflects the long years of experi- Sensotronic Brake Control (SBC™) braking system, which features two central 57 and the Maybach 62. Exteriors of the two models exude charm and sophisti- by, there is virtually limitless scope for individuality. ence and expertise of DaimlerChrysler in the development, design and production control units, two high-pressure reservoirs and two hydraulic units. This makes a cation, while the thoughtfully designed interiors highlight luxury and comfort. The of twelve-cylinder power units. With a displacement of 5.5 litres, and with the help total of eight braking circuits, while internally ventilated front disc brakes provide most significant difference between them is length: the former is 5.73 meters long Maybach owners have more than two million ways of tailoring their car to their of bi-turbo charging, the Maybach engine develops an output of 550 hp, with a extremely reliable deceleration. and the latter an exceptional 6.17 meters long. personal taste. And this can be complemented by exclusive Maybach accessories; maximum torque of 900 Newton meters. from a luggage set to a champagne goblet of sterling silver; from a humidor to a The legendary Maybach presently offers you a personal touch at the first Design: a perfect balance of technology and elegance golf bag; and from floor mats of the finest velour to a fluffy travel rug. Outstanding comfort offered by the suspension, the almost complete ab- Maybach Centre in Asia. Combining classic architecture with contemporary The Maybach combines technological excellence with elegance, aesthetics and sence of engine and wind noise, and its surprising agility make it a unique driving design and cutting-edge communications, the 20,000-square-foot Maybach design perfection. The harmonious interplay of form, colour and materials makes • When it comes to interiors Maybach customers have a choice of six grand experience. The interplay between the engine, with a scarcely detectable auto- Centre is located at 60 Repulse Bay Road in Hong Kong. It opens Monday to the Maybach the epitome of exclusive luxury and endows it with an unmistakable nappa leather colours and three types of fine wood. matic transmission, the precise steering and the response of the brakes put the Saturday from 10 am to 6 pm. Please call +852 2594 8133 to arrange an sophistication. The Maybach is a perfect balance of the classic and the avant- • A range of 17 paint finishes is available for the exterior and these can be Maybach in a new dimension for driver and passengers alike. appointment in advance.

24 25 outside pre-determined criteria or variances. welcome at our property. We usually opt for In practice, if you tell a player that Customers on the Red Flag Report are then the “half-fired” method. Firing Customers carefully and individually reviewed accord- It must be stressed that this process he or she will not be rewarded in ing to each variable. We find that many of our must be handled professionally. Proper com- any way and will have to pay for Red Flag customers are actually fine and the munication is key. I normally deal with these Excluding cheats and troublemakers is obviously critical, but so is controlling comps issued to highly-skilled, reason they fell outside of the variance was situations myself for two reasons. First, I have all services in full, the player will non-profitable customers, as casino marketing guru Steve Karoul explains chance or luck. Remember, if every customer the experience and title to deal with our big- always lost money while playing at a casino, gest players and still maintain a mutual re- quickly realize that he or she is no there wouldn’t be any casinos. Our best ad- spect. Second, things can change. I don’t like longer welcome at our property Those of you who follow my series of vertising comes from word of mouth when to burn bridges between potentially good articles on casino marketing have heard me someone wins big money. customers and our sales people, whether repeatedly stress that the casino business to- Once we begin to carefully analyze all it is a casino host or a player development day is not about making money, but rather, data, we can quickly spot the highly-skilled executive. I always leave them out of the about creating value. This is because people players. Those are the silent few we want to difficult processes and I play the role of bad are not stupid. We are all motivated by basi- look at more closely. One of the biggest sur- guy. That way they may be able to salvage cally the same things. Value is one of the top prises for us was that these are not all high- customers at a future date after the custom- motivators when it comes to selection or rollers. In fact, many of our most unprofitable ers have had time to reflect upon the issues shopping. players were the smaller players that always and possibly change. Creating “value” will help bring custom- seemed to fly just under the radar screen, We recently observed such a change. ers to your casino, but not all customers are never being picked up by anybody. When we I made a comp-abusing customer pay for good for your casino’s overall well being. For analyzed the revenue they generated versus excess retail charges with his credit card. example, I don’t think anyone would ever the expenditure devoted to them – including He was very upset and swore that he would dispute firing a customer or excluding a cus- promotion invitations, coupons, comps, etc never return. After a month or so, one of our tomer that is abusive to your staff. We value – many of them proved highly unprofitable player development executives was able to our employees and want them to be treated over the long term. We actually had history bring the player back with the up-front un- fairly and appropriately by both fellow em- going back several years for many of these derstanding that any excess charges would ployees and by our customers. We operate players, but they managed to go unnoticed be charged to his credit card. Everything has with a zero tolerance for any type of sexual, because the expenditure related to them been fine since and the comp abuses have racial or physical abuse of our staff by cus- was quite low in comparison to high-roller stopped. tomers as well as fellow team members. expenses. However, these expenditures add- A critical part of the Comp Review Com- We also look very carefully at verbal ed up in the long-run. mittee process is evaluating the life-time abuse and warn customers that we do not Our Comp Review Committee further value of the player, and that requires solid tolerate inappropriate behavior towards reviews and decides how to deal with these financial and analytical reporting. Ultimately, staff. We place customers on our exclusion players. This is the hard part because nobody that will sometimes result in the decision to list every week for such behavior. They are ever wants to fire a customer. We normally fire some customers in order to improve your given a formal warning that if they return to flag them for additional review and evalua- overall bottom-line. the property we will consider it criminal tres- tion. However, just like any other business, we Comps or free rooms and food and bev- pass and they will be arrested. Once again, Who’s hurting your bottom line? have to make tough decisions to safeguard erage are common enticements offered we view this seriously and arrest individuals ings in our computer in the comments sec- players to the casino. The easiest way to ex- our profitability. Sometimes we resort to half- to players in casinos in the US and to some who try to test our warnings and exclusion tion of our rating system. This way we can plain a concept is to personalize it. I normally firing the customer. extent Australia. Comps are still rare in Ma- process. track the patron to see if there is a pattern to ask both employees and customers what You can’t be half pregnant, but you can be cau and the rest of Asia, but are likely to be- There are also times when a casino may his or her behavior. they would want me to do if they owned half-fired. Basically, if we decide to half-fire a come more prevalent in the mass market as want to end a relationship with a customer. Next, we need to look at skill level versus the casino. Nobody wants to lose money patron we either limit the amount and types competition intensifies and foreign casino “Ending a relationship” sounds so much bet- patron profitability. The reality is that some and nobody can stay in business for long if of comps that we extend to them, or we ad- operators arrive on the scene. The primary ter than “firing” a customer, but it basically customers are very highly-skilled blackjack, they are losing money. Thus, while I do not just their ratings to reduce their theoretical incentive in the Asian high-roller market is amounts to the same thing. So, when does a craps or roulette players, and/or they are have a problem with allowing a patron who per game to limit what they earn in Comp the Dead Chip Rolling program, which pays casino want or need to fire a customer? The excellent money managers and understand is not cheating to play in our casino, I do Points (comp dollars), which can be used to a commission on chip turnover. Under the answer is only after every method has been all of the advantages to their benefit. Please have issues with rewarding skilled custom- redeem comps or make purchases at the Rolling program, operators could reduce the tried to salvage the customer, but the prob- don’t misunderstand me – as long as a cus- ers with complimentaries (comps) or other property. We view this as a drastic measure amount or percentage of commission paid lem persists. tomer is not cheating, I really don’t have a giveaways. and therefore only use it when we agree as a when faced with highly-skilled players. Most of these problems are related to problem with letting him or her play in our This is a huge problem in casinos today. committee that it is the best course of action cheating or questionable behavior, though casino. Obviously we have protective mea- Controlling comps is not easy. Controlling for the long-term benefit of the company. Steve Karoul is one of the top casino marketing some of them are also related to profitability. sures to counteract card counting, but other- comps issued to highly-skilled, non-profitable Sometimes, we do actually fire a cus- consultants in the world today with almost 30 Cheating is not always clear cut. Sometimes wise, skill level is another issue that needs to customers is critical. To do this, we formed a tomer. We don’t exclude the customer from years of experience with top casinos both in the a player may simply make a mistake. In those be addressed separately. Comp Review Committee that meets regular- the property, but we don’t reward him or her US and worldwide. He is a contributing writer to situations, it is up to the pit boss to speak to It was difficult to get our staff to ac- ly to review such problems and patrons. We either. In practice, if you tell a player that he or several major casino publications, drawing on the customer and explain what is considered cept the idea of “firing” customers. However, use internal reports to generate what we call she will not be rewarded in any way and will his own experiences and opinions. Steve can be to be appropriate and correct. In other words, through persistence and education we were our Red Flag Report. This report consists of a have to pay for all services in full, the player reached at Tel. (1-860) 536-1828, Fax 536-1898 issue a warning. We document all such warn- able to teach them the value of different list of players whose play and profitability fall will quickly realize that he or she is no longer or by E-mail: [email protected] 26 27 Tour of the Properties Awash With Glamour “It’s the journey, not the destination that matters.” You’ve probably heard that said about everything from life and love to success and happiness. That ad- age has found its perfect embodiment in the “cruise-to-nowhere” phenom- enon. Most of these cruises offer casino gaming, and take passengers on a pampered voyage for a night or two out into international waters, then bring them right back home. Beggars may not have the privilege, but high-rollers can definitely be choos- ers. While the range and quality of land-based casinos in Asia is growing fast, many high-rollers are happiest when gambling on the high seas. To find out why, Inside Asian Gaming boarded the Asia Star, one of the most exclusive casino cruise ships operating out of Hong Kong, and found that no high-roller whim was left uncatered for.

Photography: Ike Coordination: Kareem Jalal Stylist Alex Lam Models: Julia R; Etienne Fuchs Hair: Keanu; Risky Swimming Pool Make-up: Cathy Kwong Swimsuit: Burberry Jewellery courtesy of King Fook Jewellery Group Shoes: Stylist’s own Asia Star Executive Suite Veranda Whirpool Jacuzzi Her swimsuit and shoes: Miu Miu Her swimsuit: Burberry His shirt and shorts: D&G His swimming trunks: Prada His watch: Panerai Ring and earrings: Palmiero at Masterpiece by King Fook Dom Perignon Champagne courtesy of Riche Monde Ltd Poolside Splash Bar Swimsuit: Miss Sixty Robe, purse, sunglasses: Stylist’s own Earrings: Palmiero at Masterpiece by King Fook Karaoke Lounge Dress: Dior Shoes: Zara Ring and earrings: Palmiero at Masterpiece by King Fook

Asia Star Executive Suite Dress: Miu Miu Shoes: Zara Earrings: Palmiero at Masterpiece by King Fook Staircase Suit: Miu Miu Shirt: Dries Van Noten Shoes: Stylist’s own

Elevator Dress and Shoes: Prada Necklace, bracelet and earrings: Palmiero at Masterpiece by King Fook Casino Grand Dining Room Dress: Dior His tux: Dior Necklace and earrings: Palmiero at Masterpiece by King Fook Her dress: Classic Necklace and earrings: Palmiero at Masterpiece by King Fook Advertorial

tional waters, and the casino opens its doors. The dealers in Asia Star’s casino are friendly and cour- teous, offering the same level of service as in the boat’s other amenities. One innovation in Asia Star, also featured in Asia Cruises’ Omar III, is a bank of computer screens tracking the results of all the baccarat tables so punters can look for patterns without having to walk up to each individual table, and offering print-outs at the touch of a button. Asia Cruises has long-standing close relation- ships with its high-rollers. It’s a matter of credibility, with the high-rollers trusting Asia Cruises to run a fair, discreet casino, honour its obligations and keep them safe. The protection continues even after the ship drops anchor, with some VIPs escorted between the ship and their homes by crack martial- arts trained security personnel specially recruited from the mainland.

Meetings and More Asia Star also provides exciting venues for conferences, meetings, dinner parties and special events of all sizes. Asia Star can host fashion shows, product launches, media conferences and team building activities. The meeting and conference rooms and the Grand Dining Room are equipped with state- of-the-art lighting and sound systems suitable for conferences, banquets, and award ceremonies. The exquisite VIP conference room beside the open deck is suitable for festive promotions, private birth- day functions, and themed parties. Luxe at Sea All Leaders Magazine recently held a “Celebrity Night” onboard Asia Star, with guests enjoying suc- Hong Kong’s first six-star luxury cruise ship offers a discreet getaway from the stresses of the city culent meals and dazzling entertainment throughout the evening. Asia Star is happy to customize special programmes to meet your particular needs. Asia Cruises was also recently awarded the To commemorate its launch in December Unrivalled Experience your cabin. All 175 Asia Star Suites – including De- 2005, Asia Star held a dazzling fashion show be- luxe Suites on Decks 7 to 9 and Executive Suites on Prime Award for Brand Excellence by Prime Maga- The Asia Cruises experience is characterised by fine zine. The Prime Award is bestowed upon 10 spe- side its swimming pool and hosted Hong Kong’s dining, sumptuous spas, scintillating entertainment, Deck 9 – feature private verandas offering guests Ten Best Dressed Personalities Award Presenta- an intimate nautical escape. cially selected brands and enterprises which have innovative and friendly casinos, and the romance demonstrated outstanding quality and performance. tion, with a bevy of celebrities in attendance. Fol- and glamour of setting out on the high seas in a Guests aboard the Asia Star are truly spoiled for lowing its glitzy launch, Asia Star has continued to choice. First, there are the succulent meals, with a luxury vessel. Asia Cruises counts several VIPs and For general enquiries, please contact our reserva- set the standard for glamour on the high seas. celebrities on its passenger manifest. Passengers wide range of buffet choices and late night snacks. tions and enquiries hotline or send us an email. Asia Star is the pride of the Asia Cruises fleet. can choose to be picked up by regular tenders The sleek nightclub offers a perfect environment to Asia Cruises launched its first vessel, Captain Omar, from either Queen’s Pier in Central or the Tsim Sha unwind with a wide selection of drinks and premium in 1997, and has constantly upgraded the size and Tsui East Public Pier. VIPs, meanwhile, can opt to be vintages, while the private karaoke rooms are bet- Customer Service and General Enquiries: opulence of its ships, culminating in the magnificent taken by plush wide-bodied launch from a variety ter-equipped than most on terra firma. The spa Asia Cruises Asia Star, which features 12 decks of unbridled of locations, which is not only convenient, but not offers faultless full-body and foot massages, and Room 3317, 33/F luxury. Asia Star operates out of Hong Kong, tak- having a fixed pick-up point also thwarts attempts also features a relaxation room with state-of-the-art China Merchants Tower, Shun Tak Center ing pampered guests on a discrete overnight jour- by Hong Kong’s relentless paparazzi to snap VIPs massage chairs. Other amenities include a pool and 168-200 Connaught Road ney. Asia Star will also soon launch 3 day/2 night embarking on the cruise. adjoining Splash Bar, jacuzzi and games room. Central, Hong Kong monthly cruises to Shantou, and passengers will be Onboard, everything is taken care of. No filling Tel: (852) 2727 2729 able to enjoy exciting shore excursions, which can of clumsy immigration forms. Just hand your I.D. Gaming in Comfort Fax: (852) 2723 0123 be booked in advance. or passport over at the reception, and proceed to Within an hour of sailing, Asia Star reaches interna- www.asiacruiser.com 40 41 Regional Briefs

SJM Set for IPO China to study its football-lottery system. The Race for the Other Resort Macau casino mogul Stanley Ho’s Sociedade de Jogos de Macau (SJM) Ladbrokes Chief Executive Chris Bell said: “Our presence in China, Four consortia are competing to build Singapore’s second casino- is set to launch a US$1.9 billion initial public offering (IPO) in Hong where we are acting as consultants on the opening of China’s first centred integrated resort (IR), to be located on Singapore’s resort Kong after a Macau court on July 31 refused to issue an injunction pool betting shops, has opened up other opportunities in Asia, in- island of Sentosa. The consortia in the running are: Harrah’s Entertain- filed by Mr. Ho’s estranged sister Winnie to block the IPO. Winnie Ho cluding Vietnam where we are in discussions on a new football lot- ment with its Singapore partner Keppel Land; Bahamas-based resorts has a 7.3% stake in SJM, and according to Hong Kong-daily The Stan- tery, which is due to launch next year.” developer Kerzner International Ltd with its Singapore partner Capi- dard, said she didn’t approve the firm’s listing and that her brother Other potential partners the Vietnamese government could turn taLand; privately held Las Vegas casino developer Eighth Wonder, to- had pressured her to give up her interest in the parent company. Mr. to for help in legalising gambling are Singapore Pools and SMS, the gether with Starwood Hotels & Resorts and Isle of Capri Casinos Inc; Ho has denied the allegations. international data- processing company. and Malaysia’s Genting group, which is bidding through its two affili- ates Genting International and cruise operator Star Cruises Ltd. Genting has teamed up with theme parks giant Universal Studios Wynn Appoints Jack Binion to Head Asia on its bid. One of the bidders, Bahamas-based Kerzner International Wynn Resorts named Jack Binion as chairman of Wynn International and its local partner, real estate developer CapitaLand, disclosed the and senior executive for its Asian operations and development. appointment of celebrated architect Frank Gehry as the principal de- “The decades of experience and unparalleled success that Jack signer of their proposed Sentosa project. Mr. Gehry’s world-famous brings to our company is extraordinary,” commented Wynn Resorts designs include the Guggenheim Museum in Bilbao, Spain. Chairman Steve Wynn. “Jack takes his place in the Company at a mo- Singapore wants the Sentosa casino, a 49-hectare site, to feature ment in our history that is truly auspicious. He will lend his direction family leisure attractions to lure tourists to the region. South Africa’s and maturity to Wynn Macau. Jack’s guidance will greatly enhance Refining the Marina Bay Sands top casino operator, Sun International, pulled out of the race in June, our ability to deal with the challenges that we face as a fledgling op- Las Vegas Sands Corp (LVS), which won a bid to build Singapore’s first saying the project would incur too great a diversion of its resourc- erator in China.” casino, is discussing the refinement of the Marina Bay Sands design es. The bidding will close on October 10 and the winner will be an- Mr. Binion was formerly chairman of Horseshoe Gaming Hold- with the city-state’s government, and expects to start construction on nounced by the end of the year. ing Corp, and will join Wynn before the September 6 opening of the the casino resort by the end of the year. Construction of the Marina US$1.2 billion, 600-room Wynn Macau. Mr. Binion sold Horseshoe Bay Sands is expected to be completed by 2009. LVS will invest US$3.2 Gaming, which owned three riverboats in Louisiana, Indiana and billion in the casino resort, making it one of the most expensive proj- LVS to Invest Over US$8bn in Macau Mississippi, to Harrah’s Entertainment in mid-2004 for US$1.45 bil- ects of its kind. Las Vegas Sands Corp (LVS) will spend more than US$8 billion on ca- lion. The deal included a noncompete contract that precluded Bin- In May, the Singapore government picked LVS over Vegas rivals sino, leisure and convention facilities in Macau and the neighbouring ion from working for any Harrah’s competitor domestically except MGM Mirage and Harrah’s Entertainment and Malaysia’s Genting In- Chinese island of Hengqin over the next four to six years. The invest- in Nevada. ternational as the developer and operator of the country’s first so- ment is double the figure originally reported. Melco-PBL Picks Hyatt to Operate Macau Hotels called “integrated resort” (IR). LVS’ proposition focused on boosting The joint venture between Melco International Development and Analysts view the appointment of Mr. Binion as good news for Company president and chief operating officer Bill Weidner said: the city-state’s conventions business. Australia’s Publishing & Broadcasting Ltd (PBL) picked Hyatt Interna- Wynn Resorts. “Binion’s talent and creativity in dealing with high roll- “These development opportunities are contingent upon approvals The company’s Senior Vice President of Asian Development Ste- tional to operate two of the hotels it is building in Macau. ers should be of big benefit to Wynn, and we take this as a strong posi- by government at several levels and will occur in phases over time phen Weaver said there was already keen interest from players in the Melco PBL Entertainment (Greater China) Ltd is building a casino tive for the company,” said Jeffries and Co. analyst Larry Klatzkin. as the markets develop and mature.” LVS plans to spend US$3 billion meetings, incentives, conventions and exhibitions (MICE) industry resort on 27 acres of land on Macau’s Cotai strip. The “City of Dreams” Deutsche Bank analyst Andrew Zarnett said: “His experience each in two phases on the Cotai Strip and company officials also are and foreign retailers to be involved in the project. project will house a 40,000 sq. meter underwater-themed casino with with his dad in running Binion’s gives him unique experience in tak- in talks to develop Hengqin, which borders Cotai. Meanwhile, Mr. Weaver said it will cost more to rent a shop space more than 450 gaming tables and about 3,000 slot machines. The ing care of gamblers, and that’s what the Macau market is,” with at the Marina Bay Sands integrated resort than it currently does along project will feature four hotels with 2,000 rooms and serviced apart- the city’s high-roller market characterised by close one-on-one re- the city’s main shopping belt, Orchard Road. Mr Weaver, who has over- ments. lationships. Macau Poised to Overtake Vegas Strip all responsibility for the LVS projects in Macau and Marina Bay Sands, With over US$20 billion worth of investment committed to some 25 Hyatt International will manage two of the four hotels under the “Also, his folksy personality will be a great attraction. But the best also revealed that the casino operator is already in talks with retail new hotels and casinos over the next five years, Macau is expected banner of Grand Hyatt and Hyatt Regency. Grand Hyatt will have 380 part of the choice is the mutual respect Steve Wynn and Jack Binion tenants for around 150,000 sq. ft of the planned 800,000 sq. ft of retail to emerge as a world-class tourism destination. According to a fore- rooms, while Hyatt Regency will have as many as 800. have for each other,” said Mr. Zarnett. The two reportedly got to know space at the Singapore development. cast by Globalysis Ltd, a Las Vegas-based tourism and casino gaming Melco Chairman Lawrence Ho said of the partnership with Hyatt: and admire each other when Binion was running Binion’s Horseshoe Mr. Weaver said: “When we started to lease the Grand Canal consultancy, Macau’s casino revenue will rise to US$8 billion in 2007 “Having such a renowned partner joining the City of Dreams will and Wynn owned the Golden Nugget. Shoppes in Macau, we spent three to four months just talking to re- from US$6.8 billion this year, representing 18% year-on-year growth. enable us to tap the vast customer base of Hyatt Group.” The Hyatt tailers to make sure we got it just right in terms of merchandising mix, Globalysis expects Macau revenue in 2006 to already exceed that brand is on 214 hotels and resorts with more than 90,000 rooms in where they thought they ought to be, what sort of tenants they want- on the Las Vegas Strip. Still, it stressed that Macau is still some way 43 countries. Macau Retains Ban on Imported Dealers The Macau Post Daily quoted Secretary for Economy and Finance ed beside them, and revised the design as we went.” He added: “By from eclipsing all of Las Vegas’ hundreds of casinos, which brought in Francis Tam as reaffirming the ban on “non-resident workers” be- the time the leasing announcement was made, we had already leased US$9.1 billion in revenue last year. Vietnam Seeks Guidance in Legalising Gambling ing employed as dealers in local casinos. Recent rumours have been 100 shops. We may very well do the same thing here [in Singapore].” Globalysis also explained that the growth of Macau as a true tour- The Vietnamese government has approached three gaming groups, circulating in the local media, speculating that the government will LVS’ flagship property in Las Vegas, the Venetian, currently ranks as ism destination, rather than just a day-trip casino gaming hub, will including UK-based Ladbrokes, to help legalise gambling in the soon ease the restriction, but Mr. Tam asserted the government has the second highest earning shopping mall in the US, earning over contribute to growth. According to Globalysis partner Jonathon Ga- country. no such plans. The government does, however, allow casinos to hire US$1,200 per sq. ft of retail space. Mr. Weaver also pointed out that laviz, “Macau’s casino gaming revenue in 2007 will be driven by sub- Vietnam is keen to create a lottery-based football betting ex- a certain number of foreign employees at the management-level, the compound annual growth rate of retail revenue doubled that of stantial growth in non-casino amenities such as new convention cen- change, in large part to counter widespread illegal gaming opera- which apparently does not deprive Macau residents of employment gaming over the past six years in Las Vegas – with retail growing at tre venues and innovative entertainment options incorporated into tions in the country. Government officials have already travelled to opportunities. 9.2% compared to gaming’s 4.8%. Macau’s fresh Las Vegas-style integrated resorts.” 42 43 International Briefs

led the effort to gain legislative approval for wireless gambling in Ne- and the arrest by the Department of Justice of a senior online gam- Chaves (Solverde), Sao Miguel (ASTA) and Porto Santo (Siram). vada – became the state’s first licensed manufacturer and distributor bling executive on his way through the US to his Costa Rican base. of the devices. In March this year, Nevada became the first US state to David Carruthers, chief executive of one of the world’s largest allow wireless gambling in public areas of casino resorts, including online gambling companies, BetOnSports online, was arrested on US Congress Bans Online Gaming The US House of Representatives has voted to stop US citizens gam- restaurants, lounges and poolsides. Hotel rooms and other locations July 16 by federal agents at Dallas-Fort Worth International Airport. bling on the internet. Rather than go after the gambling and bet- that cannot be supervised are off-limits. The government claims that BetOnSports and its employees took ting sites themselves, they have made it illegal for any credit card Proponents of mobile gambling argue the devices will allow re- billions of dollars from US residents by phone and internet without company, or other institution, to allow payment to any betting site. sorts to better utilize space, with increasing space being devoted to paying taxes. The bill is an attempt to stop US gamblers from spending over US$6 non-gambling activities, including retail, dining and entertainment. Mr. Carruthers was fired from the company in July, and BetOnS- billion a year on illegal, untaxed sites, and still needs to pass the Sen- Tech-savvy gamblers in their 20s to mid-40s are seen as the likely ports has agreed to a judge’s order to stop accepting US sports online ate before becoming law. The bill also updates the Wire Act of 1961, market. A range of games are allowed to be offered, including poker, gambling bets. The London Stock Exchange has also suspended trad- which banned betting over phone lines, to include any communica- blackjack, horse race betting, slots, roulette and keno, though under ing of the company’s shares. Court proceedings against several BetOn- tion network. state and federal law, the devices cannot be linked to Internet gam- Sports executives commenced on July 31, and all entered not guilty There are some exceptions – betting on horse races is allowed. In- bling sites. pleas to charges of federal racketeering and wire fraud charges. dividual state lotteries are also excluded from the ban. The exceptions IGT research shows that about half of the gamblers surveyed have been branded as hypocritical by opponents of the ban. about the devices said they would try them. Biometric fingerprint The US Justice Department always viewed online gambling as il- readers have been discussed as a way to ensure minors do not use legal and most of the sites serving US gamblers are based in Europe the devices to gamble, though the survey also revealed some players or the Caribbean. Politicians said mobile phones, BlackBerries, and Wi- view the fingerprint readers as an invasion of privacy. Fi networks mean US citizens could soon be gambling from every- The wireless devices can be linked to a main casino server that where. Despite the legal situation, about half of online gamblers are verifies the gambler is the person who checked out one of the de- estimated to be US citizens. Some of them might need to find alterna- vices at a casino. Players could establish betting limits in advance by tive ways to pay for their bets. depositing money on account. IGT’s prototypes range from a small Casino Closure Hits Atlantic City Revenue device to a 10-by-12-inch laptop. Casinos in Atlantic City, New Jersey, won 4.8% less money year-on- Meanwhile, the Venetian Resort Hotel Casino in Las Vegas recently Global Gaming Revenues to Grow year from gamblers in July, when they were forced to close for three announced it will shortly begin field trials of mobile gambling devic- In a recent report, PricewaterhouseCoopers (PWC) forecasts global days. Casino revenues totalled US$480.5 million during the month. es. The Venetian is the first and only Vegas casino resort to announce gaming revenues will increase by 8.8% annually to US$125 billion by New Jersey Governor Jon Corzine ordered the shutdown of non- it will participate in the trials, and other resorts are on the sidelines 2010 from US$82.2 billion in 2005. PWC predicts that growth in the essential state government on July 1 and the dismissal of approxi- waiting to see what will happen, with concerns over security, under- Asia-Pacific region will be most significant, at 14% annual growth. mately 45,000 state employees when the Legislature failed to pass age use, and possibly even a rise in gambling addiction related to the According to the report, the US will remain the largest gambling a fiscal 2007 budget bill. Among the employees dismissed were the introduction of the devices. market and is expected to grow 6.9% per year, from US$53.3 billion casino inspectors required by New Jersey law to supervise operations in 2005 to US$74.5-billion by 2010. Online gambling is expected to in Atlantic City’s casinos, forcing the casinos to shut down. The casinos grow by 100%, from approximately US$5.1 billion to US$11.4 billion lost two court battles to have their state inspectors considered essen- WTO to Investigate US Online Gambling Restrictions by 2010. A new World Trade Organisation (WTO) investigative panel has been tial personnel. The governor ultimately lifted his shutdown order after The report also identifies the UK as a high growth area, where re- requested by the Caribbean island nation of Antigua and Barbuda the US$30.9 billion budget was finally approved. cent legislation is predicted to create an increase of 16.6% per year, to to investigate whether US restrictions on internet gambling breach The twelve casinos in the second-largest US gambling market saw US$6.6 billion in 2010 from US$3 billion in 2005. world trade rules. US laws banning interstate betting over the inter- their slot machine revenue fall 8% year-on-year to US$345.8 million, Stanley Ho’s Share of Portuguese Market Rises The report cited the legalisation of casinos in Singapore, as well as net will be examined by the investigators. Estoril-Sol, a Portuguese company controlled by Macau gaming while table game winnings rose 4.7% to $134.7 million. For the first possible future legalisation in Japan, Taiwan, and Thailand as a cause Antigua and Barbuda, which hosts several online casinos, has mogul Stanley Ho, boosted its share of the Portuguese gaming and seven months of the year, casinos won US$3 billion from gamblers, up for increased gambling in those markets. been in a long-running battle with the US over the legality of its gambling market in the first half of 2006 following the opening of Ca- 4% over the same period last year stance on the industry. The Antiguan authorities asked for the panel sino Lisboa in the country’s capital. Estoril-Sol’s market share reached Among the casinos that were forced to close was the Borgata Ho- to be set up after negotiations with the US broke down. The WTO 61.6% in the first six months of the year, almost three percentage tel Casino and Spa, which lost US$1.9 million a day in gaming revenue UK Seeks Online Gambling Summit earlier found that some of the US laws were not in line with trade points more than in the year-ago period. The UK is seeking to persuade offshore centres that are benefiting during the shutdown. Atlantic City’s casinos contribute about US$1.2 rules, though others were permissible, and it recommended that the Casino Lisboa, which opened in May, generated revenues of from the explosion in online gambling – including Antigua, Gibraltar, million in tax receipts daily to the state. non-compliant rules, which referred to Internet horse race betting, 14.57 million euros in two and a half months of activity. Contrary to the Cayman Islands, the Turks and Caicos Islands – to sign up to new Atlantic City casinos, like those in Macau, are still dominated by be addressed. what was expected, the revenues at Casino Estoril, on the outskirts controls on the websites. gambling, but both cities are moving in the direction of Las Vegas Antigua and Barbuda claim the US online gambling prohibitions of Lisbon, fell only marginally, by 0.62% to 61.44 million euros. The UK Culture Secretary Tessa Jowell told the Financial Times she – where non-gaming revenue contributes half of casino resort rev- are hampering its economy. The island government has invested casino at Póvoa do Varzim in northern Portugal, which is owned by would host a summit in October to try to get international agreement enues – by adding hotel rooms, shopping and dining. heavily in the industry in a bid to lessen its reliance on the tourism the same group, had revenue of 26.38 million euros, or a rise of 6.5%. on a new code of practice. The UK government plans to invite the In- sector, and it says three US laws are preventing companies from le- Portugal’s total casino revenue was 166.35 million euros in the first half, ternational Monetary Fund and World Trade Organisation, along with Nevada Endorses Another Wireless Venture gally accepting bets from the US. up 12.2% year-on-year. The country’s second largest gaming group, ministers from all the main offshore gambling jurisdictions, to the International Game Technology (IGT) won provisional approval from The announcement of the WTO investigation comes at a time of Solverde, saw its market share fall by 1.7 percentage points, to 29.4%, summit. However, the UK will possibly face an uphill task in persuad- Nevada regulators to compete in the state’s emerging market for turmoil for the online gambling industry, with anti-online gaming despite all its casinos having shown an improvement. Four new casi- ing offshore centres to put at risk a lucrative source of revenue by hand-held, mobile gambling devices. In May, Cantor Gaming – which legislation being passed by the House of Representatives in the US, nos are due to open in Portugal by 2008 – in Tróia (Amorim Turismo), imposing much tighter regulations. 44 45 Singapore’s Example for the Global Gaming Industry Research, strong regulation and free market competition were the key factors behind the successful legalization of casino gaming in the city-state, as Jonathan V. Galaviz explains

Much has been written, broadcast, investment associated with casino legaliza- ing into Singapore’s favor was a research and communicated about Singapore’s legal- tion was, in many ways, a forced initiative of driven approach by the Singapore govern- ization of casino gaming in the context of the Singapore government, but capitalized ment. Not only did the government study the large-scale integrated resort development. It upon the business models witnessed in free- casino gaming industry in Asia, but the re- has, in many ways, been the major news story market jurisdictions such as Las Vegas. search extended to places such as the UK, US, of the global casino gaming industry in 2005 In May 2006, Singapore selected the Mari- and Australia. The research was intended to and 2006 – excluding the continual amazing na Bay Sands proposal from Las Vegas Sands achieve an understanding of two primary is- stories out of Macau. One could even say that Corp (LVS) as the development of choice for sues: the tourism driven strategic advantage the strategy, approach, and competition in the Marina Bay location – Sentosa Island is from introducing casino gaming and the so- Singapore have the classic makings of a Har- the other. It is important to understand the ciological impacts of problem gambling. vard Business School case study. history, context, and approach of Singapore The first component of the research Singapore’s approach to casino gaming as it is likely this model and approach will consisted of looking at what makes a suc- legalization is now acting as a catalyst for be used by many other governments in Asia cessful tourism destination. It was clear that possible future gaming-industry legalization moving forward. the government would only make a move and liberalization in many other countries, towards casino gaming legalization if it was particularly in Asia. The concept of integrat- Research Driven Government done in the context of generating entertain- ing a tourism driven strategy with large-scale One of the most critical success factors play- ment propositions that could attract large 47 increases in incremental mass-market tour- ducted fairly and ethically. ism to Singapore. Ultimately, it was deter- The Singapore government has always mined that the ‘Las Vegas Model’ of tourism been respected as a government of high eth- generation was strategically in line with eco- ical standards and transparent operations. In socio-political objectives of the Singapore developing its RFP approach, it ensured that government. the commercial marketplace of prospective The second component of the research bidders knew all conditions, rules, and regu- consisted of understanding what problem lations before they went through the process gambling was and to understand its poten- of spending money to make a bid. tial sociological impact on Singapore. Gam- Ultimately, through free market competi- ing activity had existed in Singapore for many tion, Singapore was able to achieve its objec- years in the forms of lotteries, sports betting, tive of ensuring that MICE (meetings, incen- and horse track betting, but the casino form tives conventions and exhibitions) would be of gambling was something new. Generally the major component of a successful bidder’s speaking, there was no substantial problem proposal. gambling strategy as it related to the other Not only did Singapore’s ethical RFP pro- forms of gambling, and so, the legalization of cess build confidence with the bidders, it also casino gaming in Singapore became a new built confidence with financial markets, re- catalyst for addressing a problem which had ducing the cost of capital for the project, and existed for decades. This culminated in the thus allowing bidders to incorporate even creation of Singapore’s new National Council bigger tourism entertainment components on Problem Gambling. into their proposals. The Marina Bay Sands will be the most expensive integrated resort in the world, and LVS promises delivery of the Strong Regulatory Approach entire project by 2009. Singapore made it clear that a strong regulatory environment was going to be the rule, not the exception, in the development of Moving Forward integrated resorts with casino gaming ven- Many other countries in Asia will likely use ues. In fact, it became clear that the US based the Singapore model of integrated resort de- casino gaming industry requested – some velopment to drive tourism. A convergence parties demanded – a strong regulatory ap- will continue to occur in Asia where the ca- proach from Singapore. sino gaming, hotel lodging, airline, and MICE As those in the industry know, having industries continue to be tightly integrated a strong and ethical regulatory system of in countries that consider the use of casino casino gaming is critical to building confi- gaming activity to boost capital investment dence with both players and financial mar- and create tourism value propositions. kets. Singapore embarked on understanding As governments globally – especially in the regulatory systems of the top tier global Asia – continue to look to enhance their posi- gaming jurisdictions and began the process tion in the tourism marketplace, the path that of creating what would become the Casino the Singapore government took is one to not Not only did Singapore’s Regulatory Authority (CRA). only admire, but to seriously consider. Granted, Singapore’s new regulatory au- Singapore’s successful interaction with ethical RFP process build thority will only oversee the operations of the global casino gaming industry will likely confidence with the bidders, two casino facilities located in two large-scale be used as an example and case study for integrated resorts, but Singapore’s strong many years to come. Perhaps it will indeed it also built confidence with capability in this area will bode well for the become a Harvard Business School case nation should casino gaming activity ever be study in the not so distant future. financial markets, reducing liberalized there over the coming decades. the cost of capital for the Jonathan Galaviz is a Partner at Globalysis Ltd and is a highly respected tourism sector analyst project, and thus allowing Free Market Competition focused on the development and performance The key factor in achieving a superior pro- of the casino gaming, airline and hotel lodging bidders to incorporate even posal that would meet the objectives of the industries in Asia. bigger tourism entertain- government was to establish a free market mechanism of competition. The Singapore Globalysis Ltd. is a Las Vegas, Nevada based ment components into their government created a Request for Proposals boutique research and advisory practice; clients (RFP) process that is often used in defense of the firm include some of the largest names in WWW.ESCADA.COM proposals and military projects; the process is formal- the Fortune 500. Visit www.globalysis.com for ized and ensures that evaluations are con- further information. Av. da Praia Grande, No.874, Floor GF, Flat K, Macau 48 Tel:711826