In February, Sheldon Adelson, the man who created Comdex, the world's largest computer convention, and built the spectacular Venetian Resort in Las Vegas, was awarded one of three gambling licenses in the former Portuguese colony of Macau. The territory, which has been a part of China since 1999, is on the southern tip of mainland China, just an hour's ferry ride from Hong Kong.
With partners from both Hong Kong and Macau, Adelson has committed to spending more than $1 billion to transform what many consider a seedy gambling enclave into a destination resort (see BW, 10/7/02, "Macau: Family-Style Casinos for Sin City?"). His partners in Galaxy Casino, which holds the license, include Macanese lawyer Peter Ho On Chun and Hong Kong-based developer Lui Chi Wo and family. Adelson recently spoke with BusinessWeek Asian Correspondent Frederik Balfour in Hong Kong about this plans. Edited excerpts of their conversation follow:
Q: Macau has a rather unsavory image. Do you think you'll be able to turn it into a leisure destination?
A: The fact that Macau's image needs some burnishing is why the opportunity exists. It has built its own reputation as purely a gambling location. We're going to completely transform it. It's challenging. If we provide a full range of adult activities -- a Disneyland for adults -- then we'll have duplicated the success [of Las Vegas].
Q: Have you got the land situation figured out?
A: I think commitments have been made [on our side and the government's]. We think we were selected as one of the successful candidates [for a gambling license] not just because we have had success in Vegas, but because of my organization's experience and talent with conventions. If you will allow me to sound immodest, I do have a reputation for being able to organize conventions.
Q: What do you have in mind?
A: A convention center. We're building a quarter- or half-million square-foot place that can go up to a million square feet. We will duplicate a lot of things from the Venetian in Vegas.... We'll have a shopping mall with a canal with singing gondoliers who are operatically trained. We will have a Canyon Ranch day spa, 16 celebrity-chef restaurants, a 13,000- to 15,000-seat indoor arena for concerts, different sports, kick-boxing, whatever.
Q: But in Asia, spas are often synonymous with prostitution. How will you keep these elements out?
A: We're highly regulated operators. We cannot engage in that activity.
Q: What about the dominance of organized crime in Macau, which controls much of the prostitution?
A: I'm very much concerned. But the Macau and Chinese governments are absolutely committed to cleaning up Macau. They're not going to sit by and allow organized crime to pervade the economic scene. I don't know if the cleanup will take place in 12 months, [but] certainly [it should be] in three years. We can't be involved with organized crime no matter what.
Q: Aren't gambling habits very different in Asia than they are in Las Vegas?
A: Slot machines have not been exploited here in Macau. There are only 200 to 300 [among 11 different casinos,] and they're relegated to back corridors. One school of thought is that it's cultural -- the Chinese don't like them. Another theory is that Stanley Ho [whose 40-year-old gambling monopoly ended in February] and company can make much more money out of table games with a limited amount of floor space. That's the difference between a downtown casino and a strip. We're looking to grow the market to make slot machines as big as tables [which now account for 95% of gambling revenues.]
Q: What are your immediate plans?
A: We hope to have the initial casino in the city of Macau. We need more critical mass to attract people to Cotai [the proposed site of the future Venetian]. We hope by next July to have a 200,000-square-foot casino. We don't have time to build a hotel. [The casino] will cost about $150 million...and will be called the Las Vegas Sands. The Venetian is planned for construction on reclaimed land joining two islands off Macau.
We're talking $500 million to $600 million to build the Venetian. We'll need financing there and are confident that profits of the Sands casino can be plowed back into the company to help finance the Venetian complex.
Q: What's your target market?
A: There are 92 million people in Guangdong [the mainland Chinese province bordering Macau] and 60 million more within a two-hour drive of Guangdong. That 60 million has the highest percentage of middle-class income of any province. We're not looking for the peasants and factory workers. And there are more millionaires than you can shake a stick at in all of China.
In addition, there are 150 million middle-class people, most of them on the east coast [of China]. It's a no-brainer as far as we're concerned to go into Guangdong province and work with local tour operators to put together packages. There are also 24 million people in Taiwan -- virtually all middle class -- and there are another 5 million visits from Hong Kong to Macau every year. Within a three-and-a-half or four-hour plane ride, there are 125 million from Japan and 60 million from South Korea.
Q: You expect to attract them too?
A: Absolutely they will come. This will be the only destination resort in all of Asia that has all of these features -- conventions, exhibitions, entertainment, and gaming. We don't want to be known just as a gambling resort, but as the Asian Las Vegas, with all the features and bells and whistles that Las Vegas offers as an entertainment destination for adults.
We're starting off with 1,500 rooms at the Venetian with provision for 1,500 more, and there will be five or six other hotels averaging 1,000 rooms each to begin with being built at the same time we're building on our property. [He expects to have the Venetian open by 2005.]
Q: What if Asian property developers and hoteliers decide to watch and see how your plans go and enter the market later?
A: They won't be able to, because the land, all the [plots of land] will be taken.
Q: Any names [of hotel chains looking to build with you] spring to mind?
A: I can't mention those names.
Q: Are the hotel chains both international and Asian?
A: Yes. They want to expand in the Asian market. In the U.S., they missed out in Las Vegas. When it first started, the chain brands didn't want to come to Vegas because gaming was one of the sin activities. And now when gaming is recognized as a legitimate form of entertainment, they see this is as an opportunity to get in on the ground floor of an Asian Las Vegas.