Singapore stands by its Sands.
Monday, 3rd November 2008
Source : Destination-Macau.com
The Singaporean government could probably make more money from the Las Vegas Sands Corp by getting Temasek to buy LVS stock right now and wait for a year until the Marina Bay Sands is ready to open.

More money, that is, than the taxes the government is likely to reap from the integrated resort in its first year. But that's not the way the Singaporean mindset works.

Instead, the Lion City has decided to throw its weight behind the world's most aggressive gaming company by ensuring that it has the wherewithal to open its US$3 billion complex. And then it will stand back and let LVS do what it does best - within certain limits, of course.

The Singapore Tourism Board is in discussions with LVS to "facilitate" the project's success and ensure it opens towards the end of next year. We would not be surprised if this includes guaranteeing its loans, which are mostly from Singaporean banks. The result, as always with any project the Singaporean government undertakes, is that the Marina Bay Sands is an odds-on favorite to become an outstanding success over the next decade.

By contrast, the original vision of the Cotai Strip is looking decidedly blurry at the moment. No one from the MGTO is coming to the aid of LVS to finish Lot 5 and 6. This is even though the collapse of the project, which is supposed to house such global brands as Shangri-la, Sheraton, St Regis and Traders hotels, would be an unmitigated disaster for Macau.

Besides the loss of potential jobs (equal to about the current total number of unemployed in Macau), it would certainly result in a loss of investor confidence in Macau that would be very difficult to restore. And it would hammer the city's international image among tourists - both present and future.

So, what will Macau do?

Well, we know what the Macau government won't do. It won't allow the Venetian to sell off its apartments in the Four Seasons development as condominiums. That much was made clear by the Lands, Public Works and Transport Bureau this week when it issued a statement calling on the Venetian to "obey the wording of its leasehold and to comply with all its obligations".

But the Venetian has already said it doesn't plan to sell its units as condos - i.e. in a strata-title development. Instead, it will sell them to shareholders within a company that owns the Four Seasons apartment-hotel. So for the government to come out and warn the Venetian not to do what it has clearly said it is not going to do ...

We're not sure what any of this means, sorry to say. We think it would be really nice if the Venetian and the government would hold a joint press conference, but that might be hoping for a bit too much.

Maybe Wynn can help out ...

As expected, Wynn Macau put in a terrific performance in the third quarter, with Ebitda rising 15 per cent year-on-year to US$106 million. For a company that spends next to nothing on advertising, it's an amazing demonstration of the resilient power of a brand amid a weakening overall market environment.

VIP revenues jumped 36 per cent to US$13.3 billion, and the company had a good hold rate of 3.1 per cent. Moreover, mass-market drop jumped by 20 per cent to US$568 million, and the casino held 20 per cent of that.

With Wynn shares trading at around US$47, and LVS shares well below US$10, Wynn has overtaken his nemesis, Sheldon Adelson, in the boasting stakes for who has the most valuable gaming company. In a conference call with analysts, he said his cash reserves were more than adequate to cover the opening of Encore in Las Vegas at the end of this year, and he saw no cause for concern amid the global financial crisis.

"I think that right now Las Vegas is seeing pretty much some of the worst of it," Wynn was quoted by Bloomberg as saying. "People will relax and return to their habits, sooner I think than later."

Investment is a many-splendored thing

Meanwhile, the contribution of the investment of the concessionaires, including LVS and Wynn, to Macau's economy - indeed, to its economic diversification - was made clear this week by the release of statistics showing the impact of the city's new hotels.

For those of you who, like us, are attention-challenged by long lists of numbers, here is an attempt to make sense of them.

First, employment: the addition of new hotels in 2007, which added about a quarter to existing inventory, boosted employment in the hospitality sector by a whopping 65 per cent. Talk about a multiplier effect.

Second, the money brought into the economy by these investments, in pure financial terms, was MOP14.23 billion, nearly 50 per cent higher than the previous year.

Third, almost all that money stayed within the local economy: revenues for the sector were up 86 per cent over the previous year, but expenses were up by even more (88 per cent).

Finally, the most impressive measure of all: "gross value added", or the benefit to the economy from the sector, rose 50 per cent over the previous year.

Beijing to the rescue?

Premier Wen Jiabao gave Hongkongers cause for cheer this week when he declared, while on a trip to Russia, that the central government will do whatever it can to help Hong Kong through the challenging economic times ahead. This would include pushing more mainland tourists into Hong Kong by expanding the Facilitated Individual Travel Scheme to other cities on the mainland.

No mention was made of what the central government could do for Macau, needless to say. A ban on travel to Macau by mainlanders visiting Hong Kong has hammered the ferry services since September 1 ... or rather, it has hammered one of the ferry operators.

Yet it must be wondered at what stage the central government is going to start easing its grip on the Macau visitors' market. The last thing a new chief executive needs, a year from now, is to take office while the city is in the midst of a crisis - unless he has the tools to solve the crisis and thereby appear to be a godsend.

Stay tuned.

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