Michael Hart

MGM Mirage’s Macau Sacrifice

A while back, I mentioned to a show organizer I know in Hong Kong that I’d been to Macau a couple months earlier and visited the convention and tradeshow facilities at the Venetian Macau.

His response was, “Could you see it for all the cobwebs?”

Although it’s not possible to get anybody at the Las Vegas Sands to comment on much of anything, from the ground level it looks like – though there have been some successful shows held there – the dream that, along with so many other things, Macau would become a robust tradeshow destination has yet to materialize.

Blame it on the global economic downturn if you want, or all the additional exhibit space that has come online in nearby Hong Kong in the last five years or so, or whatever – the truth is there just isn’t a lot going on these days in the 1 million-plus square feet of exhibit space available in Macau.

That does not mean it won’t be the case in the future. Even if it’s not, that doesn’t negate the fact that the big players in the United States have stars in their eyes when it comes to the potential gaming revenue there. The Chinese government might close the spigot once in a while and restrict mainland Chinese gamblers from visiting Macau as often as they want, but it generated 48 percent more gambling revenue in December than it did in the same month in 2008.

The atmosphere in the Macau casinos is quite different from what you have in Las Vegas or Atlantic City – quieter, less alcohol and more serious demeanors. (Chinese gamblers told me they can’t afford the distractions of jangling slot machines or complimentary cocktails. Gambling, to them, is serious business; they stick with tea and orange juice.) American gaming interests figure there’s money to be made there the old fashioned way, by taking it from gamblers.

Otherwise, why would MGM Mirage decide to sell its share of the Borgata in Atlantic City just to avoid problems with New Jersey gaming regulators over its relationship with Pansy Ho?

Right now, MGM Mirage has the smallest footprint of the six licensed casino operators in Macau but, obviously, the place looks promising. Its partner is Pansy Ho, daughter of Stanley Ho, the well-known, if not infamous, godfather of Macau gaming.

New Jersey officials have raised their eyebrows over MGM Mirage’s links to the Ho gaming dynasty (even though regulators in other states have taken a look and found no problems). MGM Mirage is so concerned, it’s willing to make a deal with the New Jersey Division of Gaming Enforcement, offering to sell its Atlantic City interests if the division agrees to not even open an official investigation.

MGM Mirage owns half of the Borgata. Boyd Gaming has the other half. Reports are that when MGM Mirage and Boyd opened the Borgata in 2003, they spent $1.1 billion. They’ve poured a reported $600 million more into the project since then. Yet, MGM Mirage is willing to walk away from that to protect its Macau businesses.

According to a recent report in the Wall Street Journal, MGM Mirage has been asking $700 million to $850 million for its share of the Borgata. Boyd, which manages the hotel and casino for the partnership, has first right of refusal and, so far, is not interested in spending that much.

The Journal also reports unidentified sources say, at best, MGM Mirage’s share is worth half a billion dollars – and, still, it might be willing to make a deal.

That’s how much potential it sees in Macau.

Posted by Michael Hart on February 3, 2010 | Comments (3)