According to the Macau Daily Times, the city's casino big shot, Stanley Ho, says he's A-OK with Macao CEO Edmund Ho's clampdown on casino-industry growth. (The two men are unrelated.) Which is sort of like me saying the sun has my approval to rise in the East tomorrow. While Ho probably likes seeing his competitors reined in (at the price of some discomfort to himself), it's unlikely his views carry much weight up in Peking. Edmund Ho's edict came as a stark reminder as to who holds the cards in Macao -- and its not any of the casino barons.

“It is no good with all the six operators always fighting together using cut throat measures of getting customers into their casino, this is not correct because there is enough room for all six of us," said Stanley Ho -- quite a turnaround considering his predictions of gloom and doom were anyone to be allowed to challenge his longstanding monopoly on Macao's casinos. “There is no need to do this monkey business, cutting throats, it's the worst thing possible.”

Given who some of Stanley Ho's business associates are, his use of the term "cutthroat" seems poorly chosen. And what are these tactics to which he refers? More of that anon. The first repercussion has been ...

Oceanus is history. Every so often there's a casino project so eccentric and improbable that you want to see it happen, against all odds. Such was the case with Stanley's next attempt at a megaresort: Oceanus, which looked for all the world like a giant snail or slug, majestically turning its back on Macao and heading out to sea. (I'm sure the prospect that Oceanus would impede views of Sheldon Adelson's Sands Macao and interdict foot traffic from the ferry terminal bothered Dr. Ho not one whit.)

Architect Paul Andreu has devoted an entire Web site to this truly one-of-a-kind project, including a 24-page gallery of the surprisingly graceful design, including elevations, cutaways, models and some simulated interior views that show intriguingly designed elevator pods. Who knows, maybe the ancient Dr. Ho actually could have taught those young Vegas whippersnappers a thing or two? We'll never find out now.

(Chuck Monster of MacauTripping.com dissents, describing Oceanus as "a beached whale that would more likely hinder the Macau experience than enhance it.")

In lieu of building Oceanus, Ho will reconfigure the city's oldest casino, Jai Alai, which MacauTripping proclaims "an unadulterated horror to visit" (see review here). Casino Jai Alai was to have met an apparently overdue date with the wrecking ball, to make way for Oceanus, but now Dr. Ho will be content to put some lipstick on the pig and proceed with bidness as usual.

Chuck isn't greatly more enthused about the prospects for the square of Cotai Strip land on which Ho's SJM intends to build a casino, wedged between Melco PBL's Studio City and the back entrance to Venetian Macao. He called SJM's blue-sky revenue projections "sheer lunacy," predicting it would end up with something akin to Vegas' Casino Royale (and not in a good way). "Crumbs that fall from a bag of potato chips are not equivalent to feeding a proper meal to the family dog," was how Mr. Monster put it.

(Geez, I wish I could turn a phrase like that!)

Meanwhile, Harrah's Entertainment watches all this from its now-unflippable/undevelopable golf course, just south of Studio City ... and weeps.

As for the casino freeze, one can imagine Ho manfully suppressing the urge to rub his hands with glee when he said, “I am fully in favour of such an action and I think not only that, we must all agree that in Macau now we have far too many casinos and there is no point of opening up more casinos, more than enough, more than rice shops, so that is something we don't want to encourage.”

Macao's ancient oligarch

It's easy to say that when you've A) got the most casinos in the market, B) have been losing market share hand over fist, and C) have historically defined "far too many casinos" as "any single casino not owned by me, Stanley Ho." The crocodile tears about rice shops are a nice touch, too. The old mastermind hasn't lost any of his smooth moves -- not for nothing is he a ballroom-dancing champion.

Nor is it any surprise that Ho would endorse the government's proposed cap on junket commissions. It's a war that he's been losing; first to Las Vegas Sands, then to son Lawrence's co-owned Crown Macau. Other operators may feel the same: MGM Mirage has opted out of the rat race for VIP players altogether.

A forthcoming Urbino report (previewed in the local papers) depicts "significantly eroded" profit margins, thanks to the commission-fee wars, which leave little room for error in the low-house-advantage baccarat biz. Advance snippets of the Urbino report assert that commissions have gone about as high as they dare, that SJM is having to eke along on 5% of gross revenues (after taxes), and that while they talk tough, Wynn Resorts and LV Sands are as knee-deep in the commission war as anybody.

The report, as previewed, suggests that Peking will widen the Chinese populace's access to Macao. More sensitively, it posits that a guest-worker program will have to be set up in order to keep Macao's casinos stocked with line employees and to give Macanese citizens a chance to move up in the ranks. Right now, it seems, they can't be spared from their current duties.

Most worrisome of all are predictions of a "credit bubble." To wit: 

“Pressure may be exerted on some concessionaires to extend credit to junket operators or even consolidators to continue to fuel the growth in volume at the baccarat tables,” reports urbino.net.
“Thus, while credit risk for concessionaires seems to be relatively insignificant at present, the prospect of a shift in credit risk from junket operators to concessionaires could result in increased bad and doubtful debt coming onto the concessionaires' books.”*
Liquidity from the Hong Kong stock exchange has also allowed junket aggregators to “be more liberal with their credit” and extend “their balance sheet assets” to sub-agents, the report states. In turn this has led to the sub-agents offering “credit with less rigourous principles governing their lending decisions”, it states.

*-- emphasis added

Is it just me or does that sound like the same sort of business practice that led to the subprime mess, the affereffects of which we're feeling most keenly right now. We can't afford a credit bubble in Macao -- literally. There's too much riding on that sliver of land in the South China Sea.