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Macao Heating Up Again as Developers Gamble on Erecting Billion-Dollar Casinos
(MACAO, CHINA) -- Whether you spell it Macao or Macau, the world's largest casino market once again is attracting big-name developers eager to cash in on what they see as a resurgent gaming era beginning in 2011.
Here is what is happening:
- Macao has 36 projects totaling 26,209 rooms in its development pipeline, according to Lodging Econommetrics of Portsmouth, NH.
- 83% of the planned rooms are already under construction and will soon open.
- Most of the new projects will carry luxury brand names such as InterContinental, St. Regis, Marriott, Hyatt, Hilton, Four Seasons, Shangri-La, Mandarin Oriental and Banyan Tree.
- Competing casinos so far include Las Vegas Sands Corp. (NYSE: LVS), Wynn Resorts (NASDAQ: WYNN), Melco Crown Entertainment (NASDAQ: MPEL) and Hong Kong-based SJM, controlled by Stanley Ho.
- The total number of planned guest rooms in Macau, Shanghai and Beijing is huge - exceeded only by new development in Las Vegas, Washington, D.C. and Dubai.
- Sheldon Adelson's Las Vegas Sands Corp. expects its $3.3 billion initial public offering to begin trading Nov. 30 on the Hong Kong Stock Exchange. The share price will be fixed Nov. 21.
- About $500 million will be used to re-start construction on Sands Casino and Hotel Macao, Shangri-La Hotel and Sheraton Hotel on Macao's Cotai Strip, five miles from the city's Downtown sector.
- The first phase of the project will cost $2 billion and is scheduled to open by June 2011.
- About 12,000 workers will be hired on Adelson's new project.
- Adelson also plans to later build more casino hotels that will bring his total number of hotel rooms in Macao to 20,000.
- Adelson forecasts profits before interest, tax and other adjustments to rise this year to $803 million from $686 million in 2008. The company's debt load totals $11.8 billion.
- Adelson's IPO marks the second Hong Kong IPO from an American casino operator this year. Las Vegas billionaire Steve Wynn completed a $1.63 billion IPO in October.
- Billionaire developers Lawrence Ho of Hong Kong and James Packer of Australia opened their $2.2 billion, 7.7-million-square-foot City of Dreams casino June 1 on the Cotai Strip, directly across from Adelson's Venetian Macao casino hotel.
In a video conference with the media Sunday in Hong Kong, Adelson said he expects Macao "will evolve into the same type of business model that the integrated resorts on the Las Vegas Strip have evolved into."
The billionaire investor-developer said he anticipates Macao and his projects will attract a wider variety of visitors, other than the usual one-day trippers and high-stakes gamblers.
Adelson said he expects an estimated $819 million of the anticipated $3.3 billion IPO proceeds to go towards paying off his company's $11.8 billion debt load.
Adelson and his family invested millions of their own money last year to stave off a bankruptcy filing for their companies, according to the Associated Press.
Despite Adelson's positive profit outlook for the near future, he will be contending with Macao's current gaming industry statistics. Macao government sources say gaming revenues fell 13 percent in the first quarter of this year and revenue for all of 2009 is expected to fall 8 percent.
The bulk of the gaming revenue came from Downtown Macao casinos, not from the Cotai Strip, official sources state. But that fact, apparently, isn't worrying developers Lawrence Ho, 31, and his partner, James Packer, 41, who are operating their City of Dreams casino on the Cotai Strip.
Ho recently told BusinessWeek his Melco Crown Entertainment company had plenty of cash on hand after listing its shares on NASDAQ in 2006 when the stock market was hot.
"We have managed our balance sheet very carefully, so instead of having be-equity ratios of 5 to 1, ours is more like 1 to 1," Ho told BusinessWeek.
Still, says Aaron Fischer, head of Asian property and gaming research at Credit Lyonnais Securities Asia, a 23-year-old firm based in Hong Kong, the City of Dreams project will become "a tipping point" in the development of the Cotai Strip.
"We would be happier if City of Dreams was opening on the Peninsula (Macao proper)," Fischer writes in an analysis of Melco.
Melco Crown Entertainment lost $2.4 billion on sales of $1.4 billion in 2008. Fischer expects Melco to lose $152 million on sales of $1.47 billion in 2009, largely because of startup costs for the new casino.
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