By Bill Rigby
LOS ANGELES (Reuters) - U.S. companies' massive investments in Macau, the Asian gambling enclave, have yet to pay off and their casinos may take a year to get into their stride, top executives told the Reuters Travel and Leisure Summit this week.
The former Portuguese colony, the only place in China where gambling is legal, has attracted more than $20 billion of investment in the past few years as U.S. giants Las Vegas Sands Corp (LVS.N: Quote, Profile, Research, Stock Buzz), MGM Mirage (MGM.N: Quote, Profile, Research, Stock Buzz) and Wynn Resorts Ltd (WYNN.O: Quote, Profile, Research, Stock Buzz) have piled in, looking to turn the peninsula into the next Las Vegas.
Executives are certain their Macau investments will pay off, but said it will be some months before their operations are running at full throttle and attracting hordes of rank and file gamblers known as the "mass market."
"We would hope that we would see that by late this year," William Weidner, chief operating officer of Las Vegas Sands, told the summit on Wednesday. "It's like driving your new Ferrari: you spin the tires when you first get out the gate. You've got to figure out how to have this thing run."
SLOW START
Las Vegas Sands opened the Venetian Macao -- the world's biggest casino -- last August on the Cotai Strip, an empty parcel of reclaimed land adjacent to the main Macau peninsula, only a short ferry ride from Hong Kong.
A larger version of its popular Las Vegas Venetian casino, complete with canals and rows of upscale boutiques, it has so far struggled to live up to the hype.
For the fourth quarter, Las Vegas Sands posted earnings before interest, tax, depreciation and amortization of $269 million, excluding some development and stock option costs. That is well below the $322 million expected by Jefferies & Co analyst Lawrence Klatzkin, who blamed "a slower than expected ramp-up in Macau" for most of the shortfall.
But last weekend, directly after the start of Chinese New Year, the Venetian Macao racked up its biggest attendances, Weidner said, with 126,000 visitors on Friday February 9 and 117,000 the day after.
"We're using those two days as a snapshot of what things will be like after Chinese New Year and what the building can do," Weidner told the summit.
MIRAGE STILL WAITING
MGM Mirage, which in December opened the $1.25 billion MGM Grand Macau casino -- a joint venture with Pansy Ho, daughter of Macau gambling mogul Stanley Ho -- is also waiting to hit gold.
"Our building is still ramping up. It's very early days for us in Macau right now," said MGM Chief Financial Officer Daniel D'Arrigo, speaking at the Reuters summit on Monday.
MGM, like other operators, is chasing the holy grail of the mass market, the ordinary people who tend to lose more of their money than the high rollers and spend like crazy in shops and theaters.
The high rolling VIPs who make up most of the business in Macau at the moment are less profitable for casino operators due to the hefty discounts, incentives and commissions they have to pay to get them in the door and keep them coming back. Continued...
© Thomson Reuters 2009. All rights reserved.
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