Stanley Ho's SJM makes fresh start with new Macau casino
MACAU (Reuters) - Macau gambling kingpin Stanley Ho helped put the former Portuguese colony on the map 40 years ago with the fluorescent, onion-shaped Casino Lisboa. Now, the pioneer of old Macau is creating a new landmark - a $3.9 billion resort that will be one of the final projects to open on China's booming Las Vegas-style Cotai strip.
The 92-year-old Ho, through privately held company Sociedade de Turismo e Diversões de Macau (STDM), presided over much of Macau's development as a casino city, shielded by a four-decade monopoly on gambling until 2001 when the door was opened for U.S. casino moguls Sheldon Adelson and Steve Wynn.
Built for gambling purists, Ho's seedy, windowless halls have been superseded by the entry of flashier resorts over the past decade. The five other licensed operators have opened non-gaming attractions including grand convention spaces, gondola-filled lagoons and luxury retail plazas. Even so, Ho's 17 Macau casinos still rake in the most revenue each year.
Now home to 35 casinos, Macau is one of the world's fastest growing economies with more than 80 percent of government revenues derived from the gaming industry.
But new regulations forcing casinos to diversify into non-gaming tourism are shaking things up. Over the past two years, Beijing has made clear that the semi-autonomous southern territory needs to balance gambling with more leisure and family-focused attractions.
For SJM Holdings Ltd(0880.HK), the Hong Kong-listed entity and main asset of STDM, the changes mean its new Cotai resort - introduced as Lisboa Palace at a groundbreaking ceremony on Thursday - cannot rely on the old pure-gaming model.
"SJM's only problem is it has only ever been a gaming company. It is a company so ingrained in gaming that it could be a limiting factor," said Macau-based David Green who heads Newpage Consultancy, an advisor on the gambling industry.
Casino operators' efforts to diversify are likely to be a key consideration in renewing gaming licenses which start to expire in 2020, industry experts said. Secretary for Economy and Finance Francis Tam has said discussions on the renewal process will start next year.
Under the new rules, Macau is only granting gaming tables to casinos based on their non-gaming facilities - the more activities they offer to general tourists the more tables they will be allotted.
SJM responded by allocating 90 percent of its new 70,000 square meter (753,500 square feet) resort to non-gaming facilities including a wedding pavilion and multi-purpose theatre.
Design renderings of the resort depict an ivory-colored facade modeled on the palace of Versailles, Chinese motifs such as imperial gardens of the Summer Palace, and cultural relics from the 16th and 17th centuries.
The 2000-room Lisboa Palace also includes a 270-room, six-star hotel by Italian fashion house Versace.
"We are mindful this is a new area we have come into, in which we compete with the other operators in Cotai," Ambrose So, the 39-year veteran and chief executive of SJM, told Reuters in an interview in the company's minimalist offices above the garishly adorned Casino Lisboa.
"Ten years back the main thing for them (customers) was really gaming-centric. They just wanted to go to the casino and were glued to the tables. We have seen there is a gradual change."
The Lisboa Palace represents a significant upgrade to SJM's most lavish property, the Grand Lisboa, a 54-story tower shaped like a lotus flower which remains a Macau landmark 7 years after its opening.
QUALITY, NEW EXPERIENCES
The targeted demographic is also vastly different from the chain-smoking punters who frequent SJM's dimly lit casinos.
"The customer type is looking for more quality, entertainment and new experiences," So said, adding that the company was close to finalizing a deal with another fashion house to develop a 270-room hotel.
Until SJM finishes construction in 2017, the company is likely to continue ceding market share to competitors, analysts said. Once the sole player, SJM's share has slipped to less than a quarter of the market.
By the time Lisboa Palace opens, Macau is expected to have a light rail service and a bridge connecting the tiny territory, one sixth the size of Washington D.C., to Hong Kong and Zhuhai.
While Ho no longer owns a tangible shareholding in STDM or SJM, the company still has a huge presence in Macau, with stakes in everything from luxury hotels to transport services, real estate and horse racing.
As Macau continues to transform rapidly, SJM looks set to remain rooted in the vision of its founder. Angela Leong, known as Ho's fourth wife and former ballroom dance teacher, is also deeply involved in the business.
"We should always remain authentic and local, preserving our own characteristics. We really integrate into society. We are a local company interwoven with society," So said.
(Editing by Stephen Coates)