Gambling Heir Raises the Stakes in Macau
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Gambling heir raises the stakes in Macau As a gaming boss, Lawrence Ho Yau-lung invests billions in casino projects, but you won’t find him feeding slot machines or piling up chips on blackjack tables. „I am not a gambler because I know the odds,“ he said. And he is perfectly candid on this matter with the gamblers at his casinos. „I tell the people who are gambling that they should do it for fun and avoid becoming addicted to it,“ he said, sitting comfortably in his Central office with two models of his Macau casino projects. The 29-year-old chairman and chief executive of Hong Kong- listed Melco International Development is focused on expanding the gaming and entertainment business with partner Publishing and Broadcasting Limited (PBL), the largest casino operator in Australia. His elevation to the Melco chairmanship came when his father, Stanley Ho Hung-sun, decided to list his flagship Sociedade de Jogos de Macau (SJM) in Hong Kong. Mr Ho senior, who remains a Melco shareholder, stepped aside because SJM and Melco are competing with each other in the Macau casino market. The Melco-PBL joint venture two months ago spent USD 900 million buying the sixth and last gaming licence from Wynn Resorts so its two major casino projects can be on its own licence, instead of paying an annual licence fee to Mr Ho’s father’s company. The move allows the joint venture to operate an unlimited number of casinos, tables and machines in Macau until June 2022. „By having our own licence, we no longer need to rely on my family connections, and shareholders will soon recover value from buying the licence instead of paying an annual licence fee to my father’s company,“ Mr Ho said. Stanley Ho, nicknamed the Casino King because of his 40-year casino monopoly in the former Portuguese enclave, continues to be a major player in the business since it was opened to competition in 2002. And both Lawrence Ho and his sister Pansy Ho Chiu-king are separately expanding into the trade. But it will be no mean feat for Mr Ho and his sister to emerge from their father’s shadow. Vincent Lee Kwan-ho, chairman of Hong Kong Institute of Securities Dealers and a friend of Mr Ho, said he was working hard to show he was not someone relying on the family fortune. „Having a prominent father means high pressure for Lawrence. It means he needs to work doubly hard to show his abilities and to gain social recognition,“ he said. „Lawrence works day and night to expand his own business and to perform public duties.“ Mr Ho did not go straight into his father’s casino business after graduating in commerce from the University of Toronto, instead opting to start his career in the financial sector, working at Jardine Fleming and then Citibank. He also opted to marry young – aged 23 – to Sharen Lo, a member of another well-known local family, which owns Vitasoy, one of the largest soft-drink firms in the city. Mr Ho joined his father in 2001 to take over Melco at a time when the firm was operating the loss-making Jumbo floating restaurant in Aberdeen. In five years, Mr Ho, who is in charge of the daily operation of the firm, has turned it around. Its net profit last year was $ 548.7 million, up ninefold on 2004. The firm’s recovery involved improving the dishes and décor at Jumbo; expanding into financial and technology businesses, including VC Brokerage and technology firm i-Asia; and – the biggest step – teaming with PBL on the casinos. Despite a hectic schedule, Mr Ho makes time for public duties and is chairman of the Chamber of Hong Kong Listed Companies. He also contested last week’s election to the board of Hong Kong Exchanges and Clearing. Mr Ho was not elected, but he is not dwelling on it. „Now that the election is over, I will continue to contribute to the development of Hong Kong’s financial market by providing input to the exchange in my capacity as chairman of the Chamber of Hong Kong Listed Companies,“ he said. Some people believe the HKEx election marked the first step in a political life which could see Mr Ho on the way to a seat in the Macau legislative body or even running for office as Macau’s chief executive. But Mr Ho has other ideas. Just as he is not a gambler, he is seemingly not a politician in the making. „There is no chance of me running for election as a legislator or as chief executive of Macau,“ he said. „I do not want to be a politician. Politics are not my cup of tea. My focus is my business and doing public works in my spare time.“ Although he has fingers in many pies, Mr Ho said his heart belonged to the entertainment and casino business, following his father’s footsteps. „My father is a great businessman. When he started his business 40 years ago, he had nothing, and so he had to build everything with his own hands,“ he said. But Mr Ho’s business differs from his father’s, which concentrates on hard-core gambling in which people flood in hoping to win fortunes. „In Macau, Melco has three different projects targeting different segments of the entertainment markets,“ he said. „They are not only for people who like to gamble, but those who want to have fun and relax in Macau,“ he said. The first of these was slot-machine operator Mocha, which opened in Macau immediately after the Sars outbreak in 2003. Before Mocha, slot-machine centres were not common in Macau, although in Japan they are widespread, with housewives and white collar professionals playing for everything from cash to cars. „Mocha is like a Starbucks coffee chain. We plan to open two to three more clubs every year,“ Mr Ho said. He also wants to introduce Las Vegas-style entertainment in which the casino is only a part of the offering, with restaurants, shops, movies, hotels and serviced apartments all adding to the mix. „In the United States, people go to Las Vegas not only to gamble, but also to relax and enjoy the facilities and entertainment. People like me, who never gamble, can go there to dine or enjoy themselves at the shows,“ he said. Such concepts need much investment and expertise. This is what prompted Melco in late 2004 to form its joint venture with PBL. The joint venture’s first grand project is the six-star, $ 1.45 billion Crown Macau, which is due to open next year. Another plan is the US$ 1 billion mass-market City of Dreams resort on the Cotai Strip, with hotels, restaurants, shopping malls, theatres and the world’s first underwater casino, due to open in 2008. Mr Ho said both projects were on schedule and dispelled rumours that plan for the costly underwater casino had been scrapped. However, he did say the format would be somewhat different from what many people expected. „Some interpret this as a casino operating under the sea. This is not the case as the cost would be too high,“ he said, adding that Melco planned to use water and digital effects to create an underwater atmosphere. „There will be various versions of entertainment related to water. I can assure you that it will not be just aquariums. We have hired a Hollywood expert to create the special effects,“ he added. The joint venture recently pulled out of bidding for Singapore’s casino project, leaving only bidders from the United States. „It makes sense for US investors to invest in Singapore because at home they only have a 12 per cent rate of return. In Macau, we have a return of about 40 per cent. We believe the rate of return in Singapore would be about 16 per cent to 18 per cent,“ he said. „As a result, for the United States players, their investment in Singapore would be a 50 per cent improvement, but for us it would be more than a 50 per cent drop. I would prefer to spend the billions of (dollars of) investment in Macau and other Asian cities.“ Mr Ho, who identified Thailand and Japan as other potential markets, said Macau would continue to be his key investment destination while mainland tourists flooded in to bet. About half of Macau’s GDP last year came from gambling. „There are increasing numbers of mainlanders who are interested in gaming and entertainment. Macau will improve and develop into the Las Vegas of Asia,“ he said. With so much at stake, it is easy to see why foreign investors and the Ho family are pushing the gaming business. But Mr Ho believes competition, including between members of his own family, is the key to driving Macau’s development. „The Macau market is dynamic. There is room for the six licensed operators. At the end of the day, Macau has improved and transformed itself because of the healthy competition.“.