Competition Heating Up in Macau

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Gaming revenue in Macau rose 26% in the first four months of the 2012, according to Macau's Gaming Inspection and Coordination Bureau. So it's not a surprise that the largest gaming and hospitality companies around the world are rushing to get a piece of the action. Las Vegas Sands (NYSE: LVS  ) currently sits ahead of the pack, but the competition is moving fast to close that gap.

Waiting for your number to be called
Wynn Resorts
(Nasdaq: WYNN  ) recently had its number called by Macau's government, which approved the Wynn Cotai project. This story has been a long time coming after Las Vegas Sands' Sheldon Adelson apparently wanted Wynn to go to Cotai back in 2002. At the time, Wynn hadn't even started building in Las Vegas and couldn't afford another project without any cash flow. In 2015 or 2016, when Wynn's project in Cotai will be completed, Las Vegas Sands will have a multi-year head start on Wynn.

Fellow competitor Melco Crown Entertainment (Nasdaq: MPEL  ) is also waiting for gaming table approval on a partially built project it recently took over, but Melco has had one casino up and running in Cotai since 2009. MGM Resorts (NYSE: MGM  ) and Asia's largest casino operator, SJM Holdings Ltd., are also still waiting for their chance at Cotai operations.

Time to partner up
Marriott International
(NYSE: MAR  ) recently announced a partnership up with Galaxy Entertainment to bring two luxury hotels to the Cotai Strip. The two hotels, the first-ever all-suite Ritz-Carlton and the world's largest JW Marriott, will be part of phase 2 of Galaxy Entertainment's Macau development. The hotels should be completed in 2015, which can't come soon enough for Marriott.

The hotelier needed this partnership even more than Galaxy; Marriott has found itself as the last man standing outside the most lucrative vacation destination in the world. Hilton, The Four Seasons, Starwood, and InterContinental Hotel Group's Holiday Inn are all on the Cotai strip after partnering with Las Vegas Sands. Marriott deciding to build the all-suite Ritz and largest JW isn't a surprise, either, considering Starwood's Sheraton Macau is not only the largest hotel in the city, but the company's largest hotel in the world. Marriott is arriving at the party late and needs to make a lasting impression when it arrives. This will put more pressure on not only the other hotel operators but also Las Vegas Sands.

Foolish take
Las Vegas Sands has a solid head start, but its frothy multiples may give investors reason for pause. Even after another great quarterly report recently announced by the company, because of the competition really heating up in Macau, I have to put Las Vegas Sands on hold until further notice. As a shareholder, I am fine with Sands holding steady for a while since the company now pays a dividend. If you're interesting in a few other companies worth holding onto with a solid dividend, check out this free report.

Fool contributor Matt Thalman owns shares of Las Vegas Sands and Starwood Hotels and Resorts, but no other companies mentioned above. The Motley Fool holds no financial positions in any of the companies mentioned above. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (3) | Recommend This Article (8)

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  • Report this Comment On May 04, 2012, at 1:02 PM, cp757 wrote:

    Matt thats funny that you say "the competition is moving fast to close that gap". Adelson has the workforce in Cotai and he will build 3,600 rooms on lot 3 with those workers. This is what he said on the CC April 25th 2012.

    "Sands Cotai Central, which, by the way, is the only product opening over the next 3 years, the only product opening. There is no other construction underway."

    "I'd like to also point to something else, because everybody that didn't want the product -- didn't want Cotai in the first place because they didn't think it was either ready or they didn't think it was viable, or for whatever reason, all those people that didn't want to have a piece of land in Cotai, now will cut up their arms to get a piece of land in Cotai.

    I just want to remind everybody, we bought, we paid for and we own Lot 3. Lot 3 can hold 3,600 rooms. We are applying for the government for permission to move forward with that, and of course that will require -- that will usually require an extension of time to build. I might also point out that not in the history as Macau, has the government ever required a piece of land, because somebody didn't build on to. The government is a very cooperative, accommodating government, and the government wants lights. They attribute the change in Macau to a leisure, business, convention destination to Sands China Ltd. and our majority of subsidiary and of course, our parent company, Las Vegas Sands Corporation. And they know that we've done more."

    Back in 2002 Sheldon Adelson asked Steve Wynn

    why don't we build a las vegas strip right here? They stand on an empty strip of land where the Cotai Strip now stands. Steve's response was "that's the stupidest idea I have ever heard in my life".

    Thats 3,600 for lot three and lot 7 and 8 are still in play. No one will catch up they just get to play in Adelsons game for a small percentage.

  • Report this Comment On May 04, 2012, at 1:03 PM, cp757 wrote:


  • Report this Comment On May 04, 2012, at 2:01 PM, spokanimal wrote:

    There are several, inaccuracies in your article.

    First, the competition is "not moving fast to close the gap" in regards to getting a foothold on cotai. Wynn is the first parcel approval to be awarded in years... and likely won't be followed soon by additional go-aheads given the acute, construction labor shortage there and strict, annual limits to the licensing of gaming tables.

    Secondly, Galaxy's resort is not on the "cotai strip". It is on Cotai, but well "off-strip" behind the Venetian.

    Finally, Steve Wynn didn't take a pass on Cotai for lack of resources... he scoffed at Adelson's vision there because he didn't agree with it back in 2002. He just SAYS it was because of competing projects now for the sole purpose of "saving face" for missing out on the success of Mr. Adelson's idea.


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