About an hour from Hong Kong by hydrofoil, Macau has for decades been the gambling capital of Asia, and the glaring symbol of that distinction is the Lisboa Casino and Hotel. Built decades ago but continuously renovated, the Lisboa is all bright lights and gold-plated garishness, its cylindrical tower dominating the skyline of the former Portuguese colony. Inside, labyrinthine passageways of black marble and gilt all seem to end in a honeycomb of quasi-private gambling nooks — so-called VIP rooms — or in subterranean encounters with one of the army of hookers trolling the hotel's ground floor. Owned by multibillionaire Stanley Ho's Sociedade de Jogos de Macau (SJM), which for 40 years enjoyed a monopoly on the casino business, the Lisboa is still something to see.
But there is plenty more to see in Macau these days. Not a pataca's throw away from the Lisboa, directly across the Avenida Da Amizade (ironically, the “avenue of friendship”), looms the Wynn Macau, U.S. casino tycoon Steve Wynn's latest temple of fortune, a 9,000-square-metre slash of brown against the sky, housing tasteful furnishings, Vegas-style stage shows and — since its opening in September 2006 — lots and lots of gamblers. It is cutting Stanley Ho's grass, on his home turf.
The Wynn Macau is just the most visible example of the American invasion here. Las Vegas billionaire Sheldon Adelson got the war rolling in 2004, with the opening of the Sands, and more U.S.-style casinos are coming. The Americans are betting billions that the Vegas way of doing things is the future. The stakes are high. Macau — a special administrative region of China since 1999, comprising a peninsula and two islands — is poised to capitalize on the world's biggest potential market and its burgeoning middle class. A report from UBS Investment Research estimates Macau will have a US$12.2-billion gaming market in 2010 — up from US$3.5 billion in 2003, eclipsing Vegas as the gambling capital of the world.
No wonder West and East are butting heads in Macau. But if one man can be said to straddle both worlds, it is Lawrence Ho, the chairman, CEO and largest shareholder of Melco International Development Ltd. Born 29 years ago and based in Hong Kong, he is one of Stanley Ho's 17 children. (The elder Ho, 85, is, by the way, almost universally known as “Dr. Ho.”) As a scion of one of the region's most powerful families, Lawrence is firmly ensconced in the area's civic and political life. But he is also a Canadian citizen. He came to Canada at age 9, and was educated in Toronto from Grade 3 to his graduation from the University of Toronto (with a commerce degree) in 1999. His ties to his adopted homeland remain strong — for instance, he and his family return to Toronto every year for Christmas. “I consider myself,” Ho says, “a Canadian working in Hong Kong.”
He may be an heir to Dr. Ho's throne, but he has his own plans for striking it rich. (Or, rather, richer: based on his 35% stake in Melco, whose share price has more than doubled on the Hong Kong Exchange in 2006, his worth on paper is an estimated $866 million.) Those plans involve a joint venture between Melco and Australia's Publishing and Broadcasting Ltd., run by James Packer, son of now-deceased billionaire Kerry Packer. The JV, called Melco PBL Entertainment, plans to build three casinos in Macau, the first of which is set to open in early 2007.
But Ho is not simply following in his father's footsteps. In fact, his approach to the industry is a departure from the “old” Macau way of doing things. His goal is to couple an intimate knowledge of the Asian gaming market with a western business sensibility — taking advantage of what could be called his trans-Pacific heritage.
Ho bought Melco, a family-held distressed asset listed on the Hong Kong exchange, in November 2001. (His father remained chairman and a significant shareholder; this year, however, Dr. Ho resigned as chairman and sold his personal stake.) Lawrence had his sights set on gaming from the start, and began looking for international partners in 2003. The Americans he spoke to left him unimpressed. “I'm a big believer in the North American way,” he says, “but when they started saying things like, 'Let's drop flyers to every person in China,' I thought, well, this is just stupid.” The Australians at PBL were “more like, 'Let's try to understand the local culture and respect the local differences,'” Ho says. “That's why the joint venture has worked so well.”
To understand Melco PBL's strategy, it helps to know something about Chinese gambling habits, and about Macau. First: the Chinese bet big. The average wager in Macau is at least double that in Vegas; you won't find any $5 tables in its casinos — a typical table minimum is 200 Hong Kong dollars (about $30). And the real money has always been (and still is) at the VIP tables, where ultra-high-stakes baccarat is the game. Macau's status as a high-roller destination has made it a wealthy little corner of Asia — and turned Dr. Ho into one of the world's richest people, with a fortune Forbes magazine pegs at US$6.5 billion.
But most casinos in Macau are anything but ritzy. Small, dingy, noisy and raucous, they have more in common with Chinatown gambling dens than with the big, high-security trading floors of the Las Vegas strip. Ho points to the Lisboa, SJM's flagship, as typical. “People still go to the Lisboa because of history and heritage,” he says. “But other than that, it's a pretty crappy environment. And the other casinos are much, much worse.”
Under the Portuguese, Macau acquired a seedy reputation — a place to which “the Chinese go for the gambling and the Hong Kongers go for the brothels,” as one observer puts it. Organized crime was active and visible; the casinos had become settings for sometimes brazen violence — not exactly places to bring the kids for a weekend. In the run-up to the handover to the People's Republic of China in 1999, Beijing made clear that it expected Macau to clean up. (A month before the handover, a Portuguese judge sentenced Wan Kuok-koi, a.k.a. Broken Tooth — one of the colony's most flamboyant Triad leaders — to 15 years in prison.)
It was equally clear Dr. Ho's monopoly was going to end. The way China did that was instructive, says John Wang, director of capital markets for Melco. Rather than dissolve gambling — a practical impossibility in any event — the government let in new players to compete with SJM. In 2002, it granted two licences, one to Wynn's company and the other to Hong Kong-based Galaxy, which had a joint venture with Adelson. (Those gambling concessions have since been subdivided for sale; Melco PBL bought the last available subconcession from Wynn this spring for US$900 million.) “It was a major thing to give out those two new licences, but what's more interesting is, they were given to Americans,” says Wang. “It can't be because China loves the Americans. The obvious reason is that they want to transform Macau into something like Vegas.”
Why? Simply put, the growth of the Chinese middle class will create a huge demand for the services Macau offers. Ho says the Chinese coming to Macau now are from the richer capitals — Shanghai, Beijing, and Guangdong province. But the future is the other 90% of China. “So the concentration of high rollers will be smaller,” Ho explains, “and these people will be more the tour groups and the leisure-and-entertainment crowd.” UBS estimates table games geared to the mass market will grow more than threefold from 2006 to 2009, compared with less than twofold for the VIP market. Meanwhile, UBS expects slot machines to grow in number to more than 32,000 in Macau by 2009, from fewer than 6,000 today.
Hence Melco PBL's three-pronged strategy. For the low end of the market — the so-called grinders — it has Mocha Slots, started in 2003, a coffee-and-gambling operation modelled after Australian slot clubs. Next spring, it will open the Crown Macau, a $250-million casino and hotel offering high rollers a new level of luxury and pampering. “I think for us,” Ho says, “this is a no-brainer.” Then, in mid-2008, the joint venture is scheduled to complete the billion-dollar City of Dreams — a 2,000-room hotel and gambling complex featuring a 40,000-square-metre underwater-themed casino.
With it, Ho and Packer will go head-to-head with Wynn and Adelson for the Macau mass market. Ho is confident it will succeed. “The way we think about things is very different from our competitors,” he says. “While they believe that whatever works in the U.S. works for Macau, we try to combine the best of both worlds — international management philosophy and local know-how.”
Ho's aspirations don't stop there. In partnership with a Las Vegas hotel group, Melco PBL has launched an 11th-hour bid for a hotly contested casino licence in Singapore. It also has plans to build a third casino in Macau, on the main peninsula. And market watchers are widely expecting Melco PBL to float a billion-dollar IPO in North America soon, probably on Nasdaq. If those gambles pay off, Lawrence Ho won't just be a rich Canadian with big dreams — he'll be a global player.