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Cotai Questions

With the opening of Wynn Palace, what's in store for Asia's most important gaming destination?

Cotai Questions

We are, to use that wonderful business cliche, at an inflection point.

The opening of Wynn Palace last month and Las Vegas Sands’ Parisian on September 13 will be the two most closely watched casino openings in Macau’s history.

Early success could drive up the price of both stocks and help lift those of other Macau casino operators, as well.

Weak openings could drive those stocks down to the levels of the dark days of pessimism of several months ago, and maybe below that.

To date, we’ve had few tea leaves to read, but one source of intelligence is the sound and body language of the two CEOs, Steve Wynn and LVS’ Sheldon Adelson, on their second-quarter investor conference calls.

Adelson nearly pounded the table on Macau, saying the market had bottomed out or close to it. Further, Parisian will be an iconic must-see property and, with all the company’s hotels soon to be connected, the 13,000 rooms will be the largest such complex under one roof in the world.

The next day, LVS stock shot up 6 percent.

Steve Wynn got to report rising EBITDA. It was thanks to high table hold, but it was positive EBITDA, nonetheless.

Then Wynn did what he does best. He spun a story. In this case, all about how the new property not getting the hoped-for allotment of table games is OK, because two-thirds of VIP tables lose money.

Such rallying cries of great leaders can be critical to success on the battlefield or on the athletic field, but they won’t drive a middle-class Chinese family or VIP player to Macau, or change the fact that 15 percent more capacity is being added to what has been a contracting market and what might, even if it has bottomed, be a static or slow-growth market.

And we have something better than tea leaves to analyze when evaluating the impact of new capacity. We have a track record. Over the past year, that track record hasn’t been great.

Galaxy Phase II and Studio City also were two ballyhooed, multibillion-dollar projects. Like Wynn and Parisian, they boasted of their non-gaming amenities built to broaden the Macau market to be more like Las Vegas, and at least partly to placate the national Chinese and local Macau governments.

The result: Macau gaming revenues continued their declines, and hotel rates and occupancy fell throughout the city since their openings last year.

Now, we hear, perhaps more hopefully than with conviction, that Wynn Palace and Parisian will be different. That Wynn Palace will be so extraordinary that it will become the property of choice for high-end players. That Parisian will be so iconic, and affordably priced for the middle class, that people will flock to it.

Those predictions could prove true, but will they be true at the expense of other properties, including Wynn Macau and LVS’ various resorts?

And then, a few months later, MGM Cotai will open, adding yet more capacity to the market.

We soon won’t need to speculate and debate growth vs. cannibalization. The facts will speak for themselves.

Personal Notes

This is a personal note about two CEOs who operate in different parts of the gaming equipment world — Gavin Isaacs of Scientific Games and Bart Shuldman of TransAct Technologies.

I first met Gavin Isaacs when he was fresh off the plane, having landed in Las Vegas to take over the American operations of Aristocrat, which had stumbled in counting its chickens before they hatched, or more accurately, counting the revenues of slot machine sales that didn’t materialize.

Isaacs, in his inimitable combination of enthusiasm, common sense and common touch, righted the ship. He then became COO of rival Bally Technologies and then, after tiring of waiting for the top job to open up, became CEO of little Shuffle Master.

As fate would have it, Bally bought SHFL, and there was Gavin Isaacs free to enjoy a year of non-compete.

By then, Isaacs had become perhaps the most respected executive on the supplier side of the gaming industry.  Everyone knew he would be back in action at first opportunity.

That didn’t take long. Scientific Games came calling. In quick succession, Sci Games bought No. 3 slot maker WMS, then swallowed Bally.

Isaacs then began what might be one of the greatest achievements in the history of the modern gaming industry. He combined into an integrated whole what had been four companies with four separate cultures, with primary operations in three separate regions of the country.

Now, Sci Games has brought on former Norwegian Cruise Lines CEO Kevin Sheehan as CEO, and Isaacs has moved to vice chairman of the board.

The day of the announcement, Isaacs said he would work full-time through this year introducing Sheehan to customers, then work part-time after that.

I don’t know Gavin’s intentions. Maybe he plans to kick back now that he’s accomplished so much. But I wouldn’t bet on it.

TransAct CEO Bart Shuldman was waxing about this company’s 20 years as a public company during his second-quarter earnings call. He gave a bunch of thank-yous to people at TACT who had made a difference to the company and to him.

Then, out of the blue, he thanked me, though I can’t imagine what the heck I’ve done to deserve notice.

Nonetheless, the mention was flattering, and it got me to thinking about the enthusiasm that is Shuldman’s hallmark, and how TransAct has survived in a printer world dominated by giants like HP and Toshiba.

The answer is by finding niches that giants don’t, like gaming, where the intrusive licensing process is not worth the bother to many big companies.

Put another way, Shuldman has evolved TransAct into the Wee Willie Keeler of the printer industry—Hit ‘em where they ain’t.

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