BUSINESS

WHAT HAPPENS IN MACAU...

Lawrence Ho wants to build a gambling empire to rival his father’s

JOHN INTINI September 10 2007
BUSINESS

WHAT HAPPENS IN MACAU...

Lawrence Ho wants to build a gambling empire to rival his father’s

JOHN INTINI September 10 2007

WHAT HAPPENS IN MACAU...

BUSINESS

Lawrence Ho wants to build a gambling empire to rival his father’s

JOHN INTINI

Aside from the occasional Super Bowl bet and about 20 failed attempts at Pro-Line, Lawrence Ho claims he’s never been much of a gambler. Turns out that isn’t entirely true. In fact, the 30-year-old son of one of the world’s wealthiest casino tycoons has plenty on the line right now in Macau—the newly crowned gambling capital of the universe.

As the CEO and co-chairman of Melco PBL Entertainment Ltd, Ho is doing his part to transform the tiny region—the only place in China where casino gambling is legal—into the Vegas of the Orient. In May, his company opened its first hotel casino, the Crown Macau, and has two more glitzy gambling houses in the works. All of which has catapulted the University of Toronto commerce grad into direct competition with his billionaire dad, Stanley, who had the only game in town until 2002 when Macau’s government broke up his 40-year monopoly on the island’s gaming business. That move opened the door for Vegas-strip veterans Steve Wynn and Sheldon Adelson to grab a piece of Macau’s action, and also provided the opportunity for the next generation of the Ho clan to stake a claim of his own—with financial backing from Australian billionaire James Packer.

Once a seedy playground full of hustlers and hookers, Macau has been transformed into a sparkling destination for Asia’s millions of dedicated gamblers, and high rollers from around the world. With US$6.95 billion in gaming revenue last year, the former Portuguese colony (Macau was handed over to China in 1999 after 450 years of colonial control) topped Vegas’s $6.5-billion take. And there’s lots of room to grow. Ian Cooper, an analyst who covers China’s gaming industry, recently reported that the country’s booming economy has resulted in US$1.5 billion in savings “burning a hole in their collective pocket.” And while only 500,000 people live in Macau, a couple billion live within five hours by plane.

The challenge, says Ho, is enticing visitors to stay. In Vegas, the typical tourist sticks around for about four days, he says, and pours half as much into hotels, food and

shopping as they do into casinos. In Macau, the average stop is one day. People come for a few hours, gamble, maybe have one meal, and then leave, says Ho. “A few hotels have opened up in the last couple of years but before then, there were dingy, crappy hotels— so-called five-star hotels that were more like Motel 6.” That might seem a tough way for Ho to describe his father’s business empire, but under the old rules, it made sense. Back in the day, high rollers were easier to please. They didn’t have much interest in amenities, and it didn’t pay to offer any.

The plan now is to make Macau a familyfriendly tourist destination—not just a haven

for the private-jet set who are whisked away the moment they’ve had their fix of baccarat. During the last couple ofyears, Melco, Wynn, Adelson’s Sands Corp., and Ho Sr. have been increasing Macau’s glitz and glamour at a feverish pace. It was recently reported that more than 200 cranes rose above the city’s skyline along the Cotai Strip earlier this year.

Ho’s contribution includes the Crown Macau, a US$500-million six-star hotel opened in May. Next up is City of Dreams—Melco PBL’s current US$2.5-billion project—which will span 27 acres and be an all-out Vegasstyle resort with a 420,000-sq.-foot casino

and 2,500 rooms spread over four hotels: a Grand Hyatt twin tower, a Crown Macau tower for the high rollers, a Hard Rock hotel and casino, and an 800-room condo hotel. Earlier this summer, rumours swirled that the Trump International brand maybe added to the condo tower, which would allow Melco PBL to jack up the prices. Ho, who plans to have a large portion of his City of Dreams open for business by March 2009, understands the importance of having a little something to satisfy everyone. “Even though if I have impeccable taste, some of my customers might not,” says Ho. “So if the customer likes the tackiness then I’ve got to bring back the tackiness.” Ho is also in the process of securing land for another US$700million hotel project.

Melco PBL has also set up Crown Academy, which Ho describes as “the Harvard of gaming schools.” It’s a first-class training facility used to prepare Melco employees for the unique demands of serving the ultrawealthy. There are a lot of “gambling whales” in Macau, says Ho, referring to those who play as much as US$300,000 per hand. And customers with pockets that deep tend to have pretty finicky demands—right down to what types of plants and fruits they require in their rooms.

But top-flight service is only part of the answer to making Macau a true resort destination. A key part of Vegas’s success is the convention business, and Ho is determined to tap into that lucrative market which, until now, has largely ignored Macau due to its lack of facilities. Increasing Macau’s non-gaming attractions—offering world-class restaurants, night clubs, shopping, hotels and live shows—is central to the transformation. Ho recently inked an exclusive deal with Franco Dragone, the creative force behind several Vegas extravaganzas, such as Cirque du Soleil’s “O” and Celine Dion’s “A New Day,” to produce a show in Macau that will cost a few hundred million. With all that’s going on, it won’t be long before cars will be sporting bumper stickers that read: “What happens in Macau, stays in Macau.”

But how did Ho, who spent his formative years in Toronto, end up competing with his billionaire father in the biggest gaming mar-

ket on the planet? Ho moved to Toronto with his family (he has four sisters) when he was nine and lived there for 15 years. During that time he met his future wife, earned a degree, and became addicted to hockey. Even now, living half a world away, he refuses to give up his Maple Leafs season tickets. He and his wife, Sharen, try to get back twice a year during the season—in December and then in May (“if the Leafs make it in the playoffs”)—to enjoy their front-row seats.

But there was never much doubt that Ho would seek his fortune in the country of his

AFTER U OF T, HO WENT OVERSEAS TO SEEK HIS FORTUNE

birth—where the name Ho is synonymous with business royalty. When he moved back to Hong Kong in 1999, he worked briefly for an investment banking company before making a successful bid in 2001 for Melco. At the time, the company owned little more than a jumbo floating restaurant that had been hemorrhaging money for years, and had a market value of less than $10 million. It was “dirt cheap” and provided the young turnaround artist with a stock market listing with which to build a company, rather than relying on borrowed cash. A year later, when Macau’s government made gaming licences available, Lawrence was ready to try his luck in the leisure and entertainment business, but he wanted to break away from Macau’s “hardcore gambling” model. So, instead of setting up row upon row of craps and baccarat tables,

Ho started with a chain of cafés with slot machines. The first opened in 2003. Ho now has six Mocha outlets (a seventh will open later this year) and a membership of more than 100,000 well-caffeinated gamblers. When Ho got started, there were only 800 slot machines in Macau, accounting for less than one per cent of all gaming revenue. In the Mochas alone, Ho has added an additional 1,000 machines. And though many had their doubts at first, it’s catching on: second-quarter revenue, announced last month, was up 12 per cent from a year earlier.

These “Starbucks with slot machines” were just the beginning. And now that he’s plunged headfirst into the hotel business, the biggest hurdle to overcome is climbing out from under the shadow of his father. Stanley, now 85, has reportedly married four times, fathered 17 kids and amassed an estimated US$7billion fortune—he’s ranked 104th on Forbes’ list of the world’s billionaires. People in Macau know him as Dr. Ho (even though he’s actually a university dropout), and one of the city’s main streets is named after him.

Ho acknowledges he wouldn’t be where he is without his dad—

at first all gaming licences in Macau had to be leased from Ho, which gave the patriarch a cut of junior’s café gaming profits. But since then, Ho has been able to purchase his own licence and is now totally independent of his father. Stanley still runs the leading gaming company in the market and, according to Ho, has been very supportive of his son’s efforts. That, at the very least, must make family dinners a little less stressful.

So when it came to paying for their team’s bold development plan, Ho and Packer decided to raise some cash by listing Melco PBL on NASDAQ in December. They sold 18 per cent of the company shares for US$1.3 billion. That cash will come in handy as Melco PBL deals with the bumps in the road that befall all young companies. For example, the company failed to secure licences in Singapore and Thailand. The latter deal fell through last year when the country’s prime minister Thaksin Shinawatra, who Ho and Packer had met with in 2005, was run out of the country. But Ho isn’t letting a few missteps derail his plans. His focus right now is building in Macau but says he may consider moving into Vietnam and Cambodia in five years. “When we’re spending $3 billion on concrete, political risk is very important,” says Ho. “You can’t extract concrete. We want to be very sure of the places where we invest.” Ho isn’t in the business of throwing his money away, which helps explain why he prefers the boardroom to the blackjack table. And it doesn’t hurt that he knows the odds. M