No wonder Steve Wynn and Sheldon Adelson love it in China. Where else are you going to find such a compliant media, able to extract a silver lining from the darkest of clouds. For instance, “cost overruns” are something that only afflict us running-dog capitalists in the West. In the Worker’s Paradise, you “invest more than expected.” That’s the Macau Daily Times‘ smiley-face spin on mushrooming construction outlays at Macao casinos. The enclave’s Legislative Assembly Provisional Committee for the Analysis of Land & Public Concessions released cost figures that show how much the various concessionaires budgeted for their casinos in their contracts with Macao vs. what they wound up spending, as follows:
Grand Lisboa/Ponte 16/Fisherman’s Wharf (Sociedade de Jogos de Macau): $528 million/$1 billion
Sands Macao/Venetian Macao (Las Vegas Sands): $540 million/$3 billion
Wynncore Macau (guess who): $490 million/$1.5 billion
Altira Macau/City of Dreams (Melco Crown Entertainment): $492 million/$2.7 billion
MGM Grand Paradise (MGM Resorts International/Pansy Ho): $490 millon/$885 million
Galaxy Resort Cotai (Galaxy Entertainment): $540 million/$1.1 billion
Don’t these companies wish they could get such roseate coverage at home? The MDT would probably describe Harrah’s Entertainment‘s $578 million golf course purchase as “a statement of belief in Macau’s future” or perhaps “an investment in the continued success of Chairman Mao‘s Five-Year Plan, now entering its unprecedented 57th year.”
However, the legislative report seems to have begged more questions than it answered. For instance, Sands Macao was built with un-Adelsonian thrift, for a mere $375 million. Did anyone realistically expect Grandpa Sheldon was going to throw together Venetian Macao on the remaining $165 million? Bluntly put, to what extent did the concessionaires — American, Chinese and Australian alike — lowball the Peking government? If ever there were a case of underpromise-and-overdeliver, this would be it. (However, having covered the progress of MGM Grand Paradise for the Las Vegas Business Press, I can tell you that one definitely took longer and cost more than MGM expected.)
The committee members had a few unanswered questions of their own, writing: “The committee is not familiar with the details of the contracts between the Government and the operators and therefore cannot assess what was the percentage of the total investment amounts used in leisure facilities. The committee believes that there is a need to monitor the various projects, including the actual amounts involved … ” In other words, they don’t know where the money is going and would like more transparency. There are some even uglier subtexts to that verbiage but let’s give the industry the benefit of the doubt.
Besides, the concessionaires have enough to worry about. The Macanese Lege reconvenes on Saturday and one of the hot-button items on the agenda is the potential repossession of casino-zoned land, either to give it to another operator (Stanley Ho‘s people are lurking in the wings) or so the government can re-reallocate it for housing, etc.
The pace of casino development cannot be accelerated without a massive infusion of migrant workers, a can the government would dearly like to keep kicking down the road. The issues raised in the immigrant-labor debate will sound comfortingly familiar to Americans, particularly around election season. The op-ed pages in Macao have carried laments that an influx of residents will dilute the city-state’s distinctive Chinese-Portugese cultural mix and the migrant workers have concerns of their own. Casino operators will need to keep a watchful eye on an allegedly growing disparity of wealth within Macao and on their own propensity to import managerial talent if they want to remain in good odor with Peking.
