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Rod Smith

Las Vegas Casino Interests Open New Era in Macau

19 May 2004

An estimated 50,000 gamblers and curiosity seekers Monday helped Sheldon Adelson open Macau to "an exciting new era" for U.S. investments in China's multibillion-dollar gaming market.

It took just minutes for an overflow crowd of about 30,000 to rush in and pack Adelson's Sands Macau casino after it opened its doors for the first time Monday night.

The $240 million, 1-million-square-foot Sands Macau casino and entertainment complex is the first of several U.S.-owned-and-operated casino projects planned to open in the Chinese enclave over the next several years.

In addition to the Sands Macau, Adelson, who owns The Venetian's holding company, Las Vegas Sands, plans to develop a $10 billion gaming destination resort complex on Macau's Cotai Strip.

Industry sources are calling the opening of Macau to U.S. gaming companies the most significant event for the Las Vegas operators in 25 years because of the size of the potential market.

Las Vegas Sands President Bill Weidner said Macau is the most opportune developing gaming environment his company has ever seen. Macau's casinos raked in an estimated $3.6 billion last year, and could bring in nearly $5 billion this year, he said. That would surpass the revenue from Atlantic City's casinos and rival those from Las Vegas' casinos.

More than 1 billion people live within an easy plane flight of Macau, he said, and the World Travel Organization estimates that China will grant 100 million worldwide travel visas in 2020, up from 10 million in 2002.

"We believe we can help bring a major portion of those (travelers) to Las Vegas," Weidner said.

As many as 80 percent, especially high-end players, will have the resources to visit Las Vegas if the bait set in Macau is tantalizing enough, he said.

Deutsche Bank analyst Andrew Zarnett said Macau represents a great opportunity for Las Vegas Sands because it is the greatest untapped market today and because Asians love to gamble.

"Added to that, it's a great cross-marketing opportunity to entice Asians to The Venetian (in Las Vegas), not just high rollers, but a lot of midmarket players, too," Zarnett said. "That creates opportunities to bring those players to Las Vegas."

Ron Reese, spokesman for Las Vegas Sands, said lines before Monday's opening stretched from the new casino's front doors to the ferry terminal, a distance equivalent to the Strip from The Venetian's porte cochere to the Bellagio.

No reports on the actual volume of play in the casino were available late Tuesday, although one Las Vegas gaming source said an estimated 50,000 people visited the Sands Macau during its first day of operation.

Industry sources in Las Vegas and Asian media also described near-riot conditions as security agents tried to control the unexpected crowd, tempted in part by incorrect reports that players would get free casino chips.

Industry experts said the potential for Macau, which is just off the Chinese mainland, surpasses even the recent performance of the China economy, which grew at an average rate of 14 percent over the past decade.

Some estimate China's gaming market could soon amount to hundreds of billions of dollars, compared with the U.S. market, which was just less than $70 billion in gaming revenues in 2002.

Adelson was one of two U.S. operators, along with Las Vegas developer Steve Wynn, who were awarded gaming concessions by China authorities two years ago, ending Macau casino magnate Stanley Ho's nearly 50-year monopoly on the former Portuguese colony's gambling market.

"It's fortunate we own the concession. It's our vision to develop a (Las Vegas-style) Strip," Adelson said.

The top management at The Venetian said the key to the development, and its real value, lies in the allure it will create for Las Vegas and the added visitors it will bring here.

Weidner said the Macau development in the long run will both breed new customers for Las Vegas and help China compete for visitors with other destinations in Asia.

"Our vision was to literally build a version of the Las Vegas Strip on the doorstep to China," he said.

Adelson's new resort is just the first phase of a planned project to turn a 700-acre strip of reclaimed land in the Special Administrative Region into a huge resort complex of several hotels and casinos that will be patterned after the Strip. His plans include working with at least five other hotel developers who will build and operate about 20 hotels, while his company will build and operate accompanying casinos and showrooms, including one that will be a replica of The Venetian.

It took 4,000 construction workers to build the Sands Macau, and ultimately the Cotai Strip will employee 150,000 workers, almost doubling the total work force of Macau, Las Vegas Sands Executive Vice President Brad Stone said.

"We're creating whole new industries: laundry, produce, meat," he said. "It's a huge undertaking for a relatively small community."

Weidner said the business models for the developments in Macau differ somewhat.

The Sands Macau was developed to serve today's visitors to Macau, which Weidner likened to downtown Las Vegas or Reno, and feed customers into The Venetian, which already gets 42 percent of its qualified table play from Asia.

"The Cotai Strip will be developed around tomorrow's Macau. It'll look more like Las Vegas with more guests staying over several nights. We see it developing more like the Strip," he said.

The business plan for The Venetian in Macau, part of the first phase of the Cotai Strip, will be similar to the business plan for The Venetian, Weidner said,.

"Demand in Macau is weekend and holidays. It's midweek that Macau can use demand help (with), so we'll develop convention and meeting rooms in order to bolster visitation and occupancy to the Cotai Strip," he said.