With 5 words, the most powerful casino mogul in the world showed us he’s living a Macau delusion.
“Supply will create the demand,” said Las Vegas Sands CEO Sheldon Adelson at a conference in New York City on Wednesday.
That’s the delusion right there.
What Adelson is saying is that despite a Chinese government crackdown on gambling that has decimated casino revenues over the last year, he believes that if he and other casino moguls build more casino resorts, they (the gamblers) will come.
But that’s not the case. The casinos that will be built will look nothing like the ones that turned Macau into the gambling capital of the world. They cant. President Xi Jinping won’t allow it.
Since last summer Xi has been clear about the government’s plans for Macau. It is to be transformed into something that looks more like Las Vegas — a family friendly place more focused on dining and shows than high-rollers and baccarat. The VIP rooms are disappearing, officials are cracking down on prostitution and organised crime, there’s a smoking ban in the works for casino floors.
“We are making Macau into another shopping city,” Adelson said at the conference.
It sounds promising — turning Macau into the Paris of Asia, as Adelson said. But that’s not even close to happening yet. Gaming itself still makes up 90% of the revenue that comes out of Macau casinos. That’s not going to change quickly. In the meantime, Wells Fargo estimates another miserable month for casinos, with revenue down almost 40% in May from the same time last year.
There’s more uncertainty to process in this story too. Xi capped the number of visitors of the Chinese mainland to the island to “rebalance” the quality of life of those who live there. That means it will be impossible for retail gamblers to make up for lost high roller revenue with sheer numbers.
And in a few weeks, Galaxy Entertainment is slated to open two new casinos. It’s unclear, however, how many tables the government will permit Galaxy to build within their $US3 billion projects. It’s unclear how many tables will be permitted in Macau in 2016 in general.
In the midst of all this, Adelson’s Las Vegas Sands is looking for a China CEO who understands Beijing. His former China CEO, Steven Jacobs, is suing the company for wrongful termination in what might be called the casino case of the century.
In his suit, Jacobs has claimed that Adelson did business with China’s Triad organised crime group, allowing them to operate VIP rooms through junket companies among other transgressions. Las Vegas Sands’ attempts to get the case dismissed and keep certain documents out of the trial have failed.
Adelson himself took the stand earlier this month, and he admitted Jacobs tried to stop doing business with the Triad.
“He wanted to throw out 50%, 60% of the income by throwing out the junkets,” said Adelson, according to The Guardian. “This was insanity. He purposely tried to kill the company.”
Of course, throwing out the junkets is a great deal of what the Chinese government is doing right now. That’s a challenge Adelson can do little about — a challenge for his next, hopefully incredibly resourceful CEO.
“I have 10 resumes in my brief case,” Adelson said at Wednesday’s conference.