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HOME > NEWS > Investor News > Revenue from Macau casinos enriches industry billionaire

Revenue from Macau casinos enriches industry billionaire

19 March 2014

By Howard Stutz

LAS VEGAS -- It’s been eight years since Macau surpassed the Strip in annual gaming revenue.

So it makes sense that the region — the only location in China with casinos — is creating more gaming industry billionaires than Las Vegas.

The recently released Forbes 2014 List of the World’s Billionaires shows a large proportion of the wealthy who cite gambling, gaming or casinos as the source of their income also name Hong Kong, Macau, Japan, Malaysia and other international markets as their country of citizenship.

In years past, Los Angeles-based financier Kirk Kerkorian, founder of what is now MGM Resorts International, was regularly a top name on any Forbes list. Today, at age 96, and with his once-controlling stake in MGM Resorts down to one-fifth of the casino company’s overall shares, Kerkorian is No. 328 among the world’s billionaires, with a net worth of $4.5 billion.

Pansy Ho, a Hong Kong businesswoman and partner/investor in MGM Resorts International’s MGM China subsidiary, ranks above Kerkorian at No. 212 with a net worth of $6.4 billion.

“Generally speaking, I suspect that it is a fair concept to say that the future should see more Asian gaming billionaires rather than Americans,” said Union Gaming Group Managing Director Grant Govertsen, who is based in Macau. “Asia, without a doubt, is where the growth in gaming is.”

David Schwartz, director of the University of Nevada, Las Vegas’ Center for Gaming Research, said it’s a telling sign when eight of the top 10 names among the world’s gaming billionaires have a connection to Macau. The region produced $45.2 billion in gaming revenue in 2013, almost seven times more than the Strip’s $6.5 billion.

Macau, he said, is the world’s best gaming growth market and rankings reflect that reality.

“This speaks to the dominant position that Macau in particular and Asia in general will continue to hold in the gaming world for the foreseeable future,” Schwartz said. “The domestic gaming industry does not have anywhere close to the growth prospects that Macau does, which is driving the increase in stock prices that is underwriting much of this wealth.”

Fantini Research CEO Frank Fantini said Macau, which opened to widespread gaming in 2003, initially attracted businesspeople who were successful in other ventures.

“The rise of the Macau billionaires reminds me of one of those old Wall Street sayings, ‘To become wealthy, you have to concentrate your investments. To stay wealthy, you have to diversify,’ ” Fantini said.

MACAU MARKET

Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson topped the new gaming list with a net worth of $38 billion, good for No. 8 in the world. After adding $11.5 billion to his worth in 2013, Adelson, 80, landed among the top 10 of the world’s billionaires for the first time since 2007.

The credit for Adelson’s rise goes to Asia.

In 2013, about 65 percent of Las Vegas Sands’ $13.77 billion total revenue came from the company’s cluster of Macau casinos. Another 21.2 percent came from the Marina Bay Sands in Singapore. Adelson and his family own 53 percent of Las Vegas Sands.

Adelson’s closet gaming competitor on the list is Lui Che Woo, 84, of Hong Kong, founder and chairman of Galaxy Entertainment Group, one of Macau’s original casino concession holders. Listed at No. 28 with a net work of $22 billion, Lui’s net worth doubled in 2013 as Galaxy’s share price soared on the Hong Kong Stock Exchange.

Galaxy, a Hong Kong construction giant, opened the Galaxy Starworld in Macau in 2006, added a string of smaller gambling clubs to the market, and unveiled the Galaxy Macau on the Cotai Strip in 2011.

“The rise of Macau has reduced Galaxy’s original construction business to just a small part of the company,” Fantini said.

Adelson and Lui have the same vision — build massive resorts on Cotai to capture an outsized share of Macau’s mass-market gamblers coming from Mainland China.

But that’s where the similarities end.

Adelson has been a lightning rod in the U.S. for his political views — he donated more than $100 million to Republican causes in 2012; world affairs — he suggested the U.S. send a nuclear missile into the Iranian desert as a warning sign; and gaming matters — he broke from industry ranks and wants to ban all forms of Internet gaming.

Meanwhile, Lui keeps a low profile.

“You would never know his stance on a hot-button issue, which is the opposite of Mr. Adelson,” one observer noted.

Wynn Resorts, Limited Chairman Steve Wynn, 72, also benefited from his company’s two Macau casinos. Like Adelson, Macau was the primary reason for his wealth, with 74 percent of Wynn Resorts overall $5.62 billion in 2013 revenue coming from China.

Wynn landed at No. 396 on the list with a net worth of $3.8 billion.

At least one other American in the top 100 — hedge fund operator John Paulson — benefited from his investments in a company with Macau holdings. Paulson, 58, owns 6 percent of MGM Resorts, as well as shares of Boyd Gaming Corporation and Caesars Entertainment Corporation He came in at No. 78, with a net worth of $13.5 billion.

Las Vegas Sands, Wynn and MGM Resorts are building multibillion-dollar resorts on Macau’s Cotai Strip: the $4 billion Wynn Paradise, the $2.9 billion MGM Cotai and the $2.7 billion Las Vegas Sands Parisian. All three are expected to open by 2016.

Other Asian markets — such as South Korea, the Philippines, Taiwan and Japan — are considering adding gaming or expanding their casino base in an effort to replicate Macau.

Japan, which is exploring legalizing casinos as a way to fund infrastructure necessary for the 2020 Summer Olympics in Tokyo, could surpass Las Vegas and Singapore in terms of gaming revenue potential. Most of the major companies have their sights set on the market.

“Think about Japan, for example. If gaming enriches any Americans there, it could very well be the same ones who are already on the richest lists and are currently operating on the Las Vegas Strip, like MGM, Sands or Wynn,” Govertsen said. “However, it is also likely to make billionaires out of many Japanese as well.”

HO HOLDINGS

One prominent name on the billionaire list was Ho.

In addition to Pansy Ho, her brother Lawrence Ho, 37, CEO of Hong Kong-based holding company Melco International, joined the list at No. 551 with a net worth of $3 billion. Ho’s company is a partner with Australian billionaire James Packer in Melco Crown Entertainment, which operates Altira Macau, City of Dreams Macau and a casino in the Philippines.

Pansy and Lawrence are two of Hong Kong billionaire Stanley Ho’s 17 children. The elder Ho, 92, is a controversial figure. His Macau casinos are alleged by international law enforcement officials to be pawns of Chinese organized crime triads.

Her father’s reputation was the subject of lengthy Nevada gaming regulatory hearings in 2007, when Pansy Ho was found suitable to be a business partner for MGM Resorts in Macau.

New Jersey regulators thought otherwise and MGM Resorts pulled out of Atlantic City in 2009.

Nevertheless, through SJM Holdings, Stanley Ho remains the top player in the Macau market with 18 large and small casinos. He has been in ill health for the past few years and in 2013, he divided his gambling empire among his four wives and children.

Angela Leong, 52, his fourth wife (although they never officially married), gained control of SJM Holdings and is No. 609 on the list with a net worth of $2.8 billion. SJM says it will spend $3.2 billion on a new resort on Cotai to compete with the Nevada-based rivals. The hotel will be in partnership with Gianni Versace, the Italian fashion house.


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Howard Stutz
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