NY Times: Macao, Famously Seedy, Now Bets on Vegas Plush

The New York Times, May 25, 2004 pC1 col 03 (34 col in)

Macao, Famously Seedy, Now Bets on Vegas Plush. (Business/Financial
Desk) Keith Bradsher.


When Las Vegas Sands Inc. opened the first American-operated casino in
the People's Republic of China here last week, the scramble of
would-be customers was a reminder of this former Portuguese colony's
chaotic past.

Drawn partly by false newspaper reports that the Sands Casino would
hand out $25 chips to the first bettors on opening day, a mob
estimated by the police at 20,000 knocked over crowd-control barriers
and ripped doors off their hinges in a rush to get inside. But when
people were told that there were no free chips, they quickly settled
down to gambling.

The incident underlines Macao's recent transformation from a place of
seedy gambling dens to something more like the Las Vegas of the East.

Heavily tattooed members of Chinese gangs known as triads have stopped
shooting and bombing the police, gambling regulators or one another.
East European prostitutes no longer openly solicit business on casino
floors. Many new regulations are being drafted, including a new
money-laundering law to replace the very weak statute now on the
books.

In the late 1990's, gang killings were so frequent here that a top
police official tried to reassure tourists by telling them they were
unlikely to be caught in the cross-fire because the city had
''professional killers who don't miss their targets.'' China began
cracking down on the triads in 1999, the year Portugal handed over the
colony, stamping out most violent crime and making Macao safe instead
for an invasion by American gambling companies.

Beijing also broke the monopoly on gambling in Macao that Stanley Ho,
a Hong Kong billionaire with a dozen small casinos here, held for four
decades. With gambling illegal in most of East Asia, including the
rest of China, Macao's casino industry is set to grow rapidly, with
plans under way for a Vegas-like strip of 20 large casino resorts and
60,000 hotel rooms. The local government accepted bids for new
gambling licenses in 2002, and the Sands is the first to open.

The wealthy Lui Chi Wo family of Hong Kong, the partner of Las Vegas
Sands in the Sands Casino, is scheduled to open another here this
summer. Wynn Resorts, led by the Las Vegas entrepreneur Stephen A.
Wynn, plans to break ground this summer for a much larger casino, a
project that had been delayed in part by a dispute over Macao's laws
on extending credit to gamblers.

The big question now is how Mr. Ho's gambling empire, known here as
S.J.M. -- short for the company's Portuguese name, Sociedade de Jogos
de Macau -- will respond to the new competition.

Manuel Joaquim das Neves, the director of Macao's gambling regulatory
agency, said in an interview here on Monday that he expected S.J.M. to
conclude some kind of corporate alliance soon with MGM Mirage, which
did not win a gambling license of its own here. ''I think very
probably we will get an agreement, and we will get another operator in
Macao,'' he said, adding that MGM might be allowed to open casinos as
a subconcessionaire using S.J.M.'s gambling license.

S.J.M. had no immediate comment Monday. A spokeswoman for MGM Mirage,
Yvette Monet, said it was ''very interested in Macao -- if anything
should become finalized, we will announce it accordingly.''

Before the Sands opened, there were questions about how many hard-core
gamblers in the Chinese market would be willing to leave the
low-ceiling haunts they had frequented for years. The Sands responded
by offering dancers in skimpy blue outfits scampering in front of a
soft-rock band, a 65-foot ceiling over the baccarat and blackjack
tables, an indoor tea terrace offering 200 varieties of free tea, and
slot machines that pay off with a triple 8, a lucky number in Chinese
culture, instead of triple 7.

The combination appears to be working. The Sands was packed on Sunday
evening and again on Monday afternoon, and was surprisingly busy even
Monday morning. By contrast, there were more dealers than bettors in
the cramped, smoky Oriental Casino next door on Sunday evening, and at
Mr. Ho's flagship, the Lisboa Casino, on Monday morning.

In a written reply to questions about his new rivals, Mr. Ho struck a
diplomatic tone. ''We welcome competition, as long as it is friendly
and constructive to the economy,'' he wrote. ''We have lots of
confidence in Macao's future, and we believe that under friendly
competition, together we will contribute to the continuing healthy
development of the gaming industry in Macao. The pie is going to be
bigger and bigger, and we all could get a fair share of it.''

A spokeswoman for Mr. Ho said it was too soon to assess the effects of
the Sands on his own casinos.

In truth, Mr. Ho may gain over all even if his casinos falter in the
short run, because his business interests extend beyond gambling to
dominate the broad economy of Macao -- like Hong Kong, a special
administrative region of China. He controls the hydrofoil ferries that
make 80 hourlong trips a day across the Pearl River estuary between
here and Hong Kong; he owns luxurious hotels like the Westin and the
Mandarin Oriental, and the only television station; and he has stakes
in the airport, a local airline, the electric utility and the
racetrack.

If anything, the gambling market here appears likely to expand even
faster than anyone expected because of developments in Hong Kong.
China, trying to use economic growth to defuse a democracy movement
there, has in the last year dropped many of the restrictions against
individual visits by mainlanders to Hong Kong and Macao, while
retaining those restrictions on travel elsewhere.

A result has been a flood of tourists from an economy growing so fast
that regulators are now trying to slow it down for fear of
overheating. The number of mainlanders crossing the land border into
Macao quadrupled the day the Sands opened.

The chairman of Las Vegas Sands is Sheldon G. Adelson, who built the
Comdex computer industry trade show into one of the world's largest
conventions and then sold the trade-show business in 1995 to Softbank
of Japan for $860 million. Macao is now so important to him that he
flies here from Las Vegas every four to six weeks.

He is about to trade in his Gulfstream 3 jet, which must land and
refuel twice each way, for a Boeing Business Jet, a long-range 737
that can make it from Las Vegas to Macao with just one stop, and then
cruise back again with the jet stream on its tail without stopping at
all. Mr. Adelson said he had personally overseen a lengthy fitting out
of the new jet's interior, including his private bedroom.

The gambling industry in Macao still faces problems, among them the
large number of loan sharks. These lenders accompany borrowers to the
gambling table and claim a share of any winnings as well as their
principal and 10 percent interest, according to Fong Ka Chio, the
research coordinator at the Institute for the Study of Commercial
Gaming at the University of Macao. Losers are typically given a week
or two after returning home to settle their debt, Mr. Fong said; after
that, ''how they collect it, you can imagine.''

Mr. Wynn has argued strongly that Macao should start allowing the
casinos themselves to provide credit to gamblers, in the form of
chips. The territory's legislative assembly is close to passing the
necessary legislation, but the bill does not now include provisions
for casinos to write off bad debts against profit -- an important
matter in Macao, which gets two-thirds of its tax revenue from a 35
percent tax and 3 percent surcharge on gross gambling profits. Mr.
Joaquim das Neves said the deductibility question was a difficult one
and that the city would not make a decision on it until next year.

Two senior colleagues of Mr. Joaquim das Neves, who was born in Macao
and educated in Portugal, were shot in the neck in separate incidents
during the violence of the late 1990's. One died instantly, at
lunchtime next to the Lisboa Casino; the other survived.

Next to such incidents, the disorder at the opening of the Sands last
week paled; there were no serious injuries, although a few people were
reported to have fainted in the crush. Mr. Adelson said he did not
believe that any of his rivals in the gambling industry had started
the free-chips rumor. Mr. Ho's newspaper, Jornal do Cidadao, did not
publish it.

Lei Siu Peng, acting commissioner of the Macao police, said in an
interview at the city's aging colonial-style police headquarters on
Monday that his investigators suspected that some travel agents might
have started the free-chips rumor to lure more visitors into buying
tickets to come here. But he acknowledged this would be difficult to
prove.

Just the same, he said, the police are considering buying some
sturdier crowd-control barriers.