MACAU—Macau scion Lawrence Ho has just done something nearly unimaginable in this Chinese gambling hub: He opened a casino-resort without a VIP gambling room.
His $3.2 billion Hollywood-inspired Studio City also stands out from its Macau counterparts for what it does have, including a figure-eight Ferris wheel embedded in its Art Deco facade, a Batman flight-simulation ride, a three-theater magic complex and a television recording and broadcast studio. Also, its Hollywood-hefty promotional effort—a short film directed by Martin Scorsese and starring Robert De Niro, Leonardo DiCaprio, Brad Pitt and Mr. Scorsese himself.
One other outstanding feature: incredibly poor timing.
“We picked the worst year in gaming to open,” joked Mr. Ho in an interview. Mr. Ho is chief executive and co-chairman of casino operator Melco Crown Entertainment Ltd., the other co-chairman being Australian billionaire James Packer. Melco Crown, which already has a number of casinos in Macau, owns 60% of the resort, while U.S. investment firms Oaktree Capital Management L.P. and Silver Point Capital L.P. own the remaining 40%.
Studio City Tuesday opened its doors as Macau, which last year raked in gambling revenue of $44 billion—seven times the take of the Las Vegas Strip—battles an unprecedented slump that’s 16 months long and running. Compared with the same period last year, revenue this year is down 36%—a drop of $12.5 billion—as Beijing’s crackdown on corruption and capital flight cripples the city’s once-booming VIP business.
The territory’s six casino operators are also battling local government authorities over the best way to meet Beijing’s demands that the city diversify its economy—at the moment, gambling is its only industry—by raising the entertainment quotient. One of the most contentious government policies is a limit on the total number of gambling tables that is cramping casino operators’ $20 billion-plus expansion plans. Studio City is the second multibillion dollar resort to open this year, following Galaxy Entertainment Group’s major expansion in May. U.S. operators Las Vegas Sands Corp., Wynn Resorts Ltd. and MGM Resorts International, along with SJM Holdings Ltd.—founded by Mr. Ho’s father—all plan to open multibillion-dollar resorts in the next two years.
Last week, after learning it would get just 250 gambling tables instead of the 400 it had promised Studio City’s lenders, Melco Crown said it would “proactively engage” those lenders to amend the terms of the loan.
Property president Jay Dee Clayton said the company also quickly decided to cancel earlier plans to allocate 100 tables to VIP gambling salons, becoming the first major resort in Macau to eschew partnerships with VIP junkets. Junkets, which historically dominated Macau’s VIP business, bring high rollers to casinos, lend them money and then collect debts back home—generally in mainland China. As executives and analysts question whether the junkets’ withering operations will ever recover, Studio City is hoping eventually to create its own VIP program dealing directly with the high rollers, said Mr. Clayton.
Mr. Ho said he considered himself lucky to get as many tables as he did, given that Macau’s casino operators are fighting over a finite number.
“It’s no secret that for a long time the rumor was we were going to get 150 tables. Were we flipping out? Of course we were flipping out. But we never went out publicly. There’s no arguing with City Hall. There’s no arguing with the government. There’s only begging and lobbying and more begging,” he said.
“Fairness is hard to judge. After all, I came from a very complicated family,” said Mr. Ho with a big laugh, expressing an understanding of the many issues weighing on the government’s policy decisions.
Lawrence Ho is one of 17 known children of Macau casino mogul Stanley Ho and four women he calls his wives. The younger Mr. Ho has always made a point of saying he is not involved in his father’s businesses, and in 2011 he took no public part in a major family dispute over control of the multibillion-dollar empire.
Taking on the government policy earlier this month, Wynn Resorts Ltd. chief executive Steve Wynn tried less delicate diplomacy than Mr. Ho, using his company’s hour-long earnings conference call to launch a tirade against Macau authorities over limits on gambling tables and restrictions on foreign labor that are making it difficult for him to manage his next resort, whose opening is planned for next year.
Shouting at times over barking dogs and the sound of doorbells, his voice cracking, Mr. Wynn called local policy “so ludicrous that it defies rational conversation,” declaring five times that he had never dealt with anything similar in his 45 years in the casino business.
Within days senior government officials called local Wynn executives to a meeting, and the day after that the government issued a public statement reiterating their policies and expressing regret over Mr. Wynn’s comments.
On Monday, Macau officials said they are investigating Wynn for possibly violating government smoking restrictions. The casino operator said it may have misinterpreted the law, according to the government statement. A Wynn representative declined to comment on Mr. Wynn’s comments or on the company’s recent interactions with the government.
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