Two Way Hard Three | Las Vegas Casino & Design Blog

From the Macau Daily Blog (via Brian Fey - thanks!), it looks like all the construction activity in Macau has caused costs to sky-rocket.

The article cites Las Vegas Sands' Cotai projects and Adelson's discussion of how costs are rising.

Update: Thanks again to Brian for posting this video of Cotai development:

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Read archived comments (4 so far)
March 6, 2007 11:07 PM Posted by Chris B

As much as I really hope Cotai and Hengqin turn out just the way Sheldon has envisaged (disclosure: I just signed an agreement for the sale of the apartment I bought in Taipa a couple of years ago, but still own shares in a HK listed company that owns a large tract of land on the north side of the main road connecting Macau airport to the Venetian), I think there are far more risks (particularly for Hengqin) than Sheldon seems to acknowledge, and the enormous increases in construction costs is just one of those.

I still hear stories from reliable sources about senior government officials in the mainland requesting large payments in overseas accounts in order to secure approvals (which is hopefully something that LVS would never bring itself to do - not least because of FCPA ramifications), though after what happened with Ao Man Long I think the Macau government would at least be going out of its way to protect against any further corruption smears. Rest assured if money is to be made in Hengqin that no shortage of Chinese interests are mobilizing themselves to try and get a cut of that money whichever way they can. Then there are problems like the almost not existent infrastructure presently in Hengqin, the lack of skilled labour / quality managers, a generally poor level of quality control in China (for example, even some of the glossy new buildings in Shanghai don't stand up to much scrutiny on closer inspection), foreign exchange regulations, potential changes in Chinese tax laws, typhoons, and outright criminal theft of company funds etc etc. Its also impossible to rule out, and perhaps highly likely, that a Chinese (or other foreign) entrepreneur / company secures an adjacent tract of land in Hengqin (or even part of the land that LVS has its eyes on) and creates something that dilutes the appeal of LVS' developments (or at least provides some competition that reduces LVS' margins). I also wouldn't be surprised if LVS gets asked to use particular contractors (that may, for example, be closely affiliated with certain government officials or their families) to carry out work in Hengqin at prices that may not truly reflect the market (though it would be easy to claim that given Hengqin's unique circumstances, there is no apples-to-apples market comparison). In short, there are an enormous number of uncertainties that would need to be factored in to any potential forecast of how much LVS will make.

A lot of the positive stuff coming out of Sheldon (who, lets not forget, has little experience doing business in mainland China) is in many ways no different to the stuff spouted by hundreds of predecessor foreign businessmen who have looked at China and proclaimed what a huge, insatiable market it would be for their products, only to find it extremely difficult.

What Sheldon does have going for him is that he now has a well-established brand. I was walking along a street in Shanghai last week (I think it was Zi Zhong road, running east-west behind Xintiandi) and saw a restaurant called "The Sands" which used the same logos, font, colors etc as The Sands in Macau and seemed to be doing a decent business - when your name starts getting ripped off in mainland China you know your brand has developed a good degree of consumer recognition!

March 9, 2007 10:36 AM Posted by BillyInLasVegas

I was talking to one of the people working on MGM Grand Macao and they said that there is such a shortage of people to work in the casinos that they're automating a lot of the "back-of-the-house" systems.
The coolest example is their uniform department, you swipe your card and out comes a fresh uniform!

March 13, 2007 1:04 PM Posted by BrianFey

Looks like Melco, owners of Crown Macau are suffering the same problem. They issued a statement yesterday that gave an update on their construction status, and also mentioned that the project will come in 14% over budget. I guess that's not really too bad considering all the action over there.

March 14, 2007 7:39 PM Posted by Ollie

What is amazing that China with such a huge population is not allowing Mainlanders to work in those casinos.

Just wondering what the motive is!