Is Macau’s moment of truth approaching?

MACAU – Fortunes are fading for Macau’s casino kings, according to Michael Shuman’ story for Time magazine.

What was once a promising new market for U.S. gaming companies has in the last 18 months become “a money-sucking crap shoot”, Shuman writes.

“Recession and the global credit crisis have turned some bottom lines red, while major new projects have been shelved due to lack of financing and an uncertain business outlook.”

The latest hard-luck story: MGM Mirage. The Las Vegas-based company disclosed that New Jersey gaming industry regulators object to its Macau joint venture partner, raising the possibility that MGM Mirage could pull out of the market.

MGM Mirage opened the US$1.25 billion MGM Grand Macau hotel and casino in 2007 in partnership with Pansy Ho, daughter of tycoon Stanley Ho, who held a monopoly on gaming in Macau for four decades and continues to operate casinos in the city today.

In a filing with the U.S. Securities and Exchange Commission, MGM Mirage said that the New Jersey Division of Gaming Enforcement had deemed Pansy Ho an “unsuitable” partner after a four-year investigation.

The agency recommended that MGM Mirage “be directed to disengage” itself from the joint venture. Company officials didn’t reveal the reasons why regulators disapproved of Ho, and the report itself is confidential.

In a statement, MGM Mirage said that “we disagree with the recommendation” and “we look forward to presenting our position.”

Pansy Ho in a statement said, “I and my advisers will need time to read and consider the contents of the report and decide how best to respond to it.”

Read Shuman’s story in full at http://www.time.com/time/world/article/0,8599,1900109,00.html

The New Jersey commission is expected to hold a public hearing on the matter.

Destination Macau online, which has its ear very close to the ground in Macau, says the New Jersey decision, and other possible follow-up actions against other gaming czars in Macau, “might not yet be Macau’s moment of truth. But the day is coming when the reality of its astronomical growth in gaming revenues since 2004 will be forced into the open. It’s only a matter of time”.

Destination Macau also reports on a US lawsuit pending in a Clark County court involving the Las Vegas Sands Corp.

Three men – Clive Bassett Jones, Dax Turok and Cliff Cheong – claim that LVS owes them US$500 million as reward for putting LVS into its joint-venture with Galaxy Entertainment Group that won the gaming concession back in 2002.

The case begins in front of District Judge Ken Cory on June 1, the day City of Dreams opens across the road from the Venetian Macao.

In a report published in the Las Vegas Review-Journal, an attorney representing the men was quoted as saying, “We’re going to let the jury decide based on the evidence, and the evidence clearly shows what they were promised.”

The men reportedly claim LVS promised them five percent of the value of the licence, which CEO Sheldon Adelson has been quoted previously as saying was worth “billions”.

Macau’s casino revenues recorded approximately US$1 billion in April 2009, around a nine percent decline from a year ago and 13 pecent decline from March 2009.

This was the fifth consecutive month that casino revenues have declined.

Casino business has suffered due to a credit crunch among VIP junket agents and Beijing’s curb on mainland Chinese travelling to the city.

According to statistics from Macau’s Statistics and Census Service, average hotel occupancy rate fell by 3.1 percentage points year-on-year to 72.6 percent in March 2009 with the four-star hotels leading occupancy rate at 86.4 percent during this period.