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Economic Insights ... ...
    Gambling empire bets on rebranding

2004-07-30 06:18

Having enjoyed an absolute monopoly in Macao for nearly half a century, Stanley Ho's gambling empire is now entering a new phase - learning how to co-exist with some of the strongest competitors from Las Vegas. At the vanguard of this fight for survival and to protect the interests of one of the richest and most colourful families in Asia is Pansy, a daughter and heir apparent.

In an exclusive interview with China Daily, Pansy Ho expounds the family's strategy that involves a fundamental restructuring of its many gaming and tourism assets to focus more specifically on different segments of the market. Those assets, grouped under Hong Kong-listed Shun Tak and privately-held STDM, or Sociedade De Turismo e Diversoes De Macau, include several casinos, numerous hotels, the world's largest ferry fleet, office and residential properties and interests in the Macao airport as well as Air Macao.

In the past, little effort was put into branding and marketing because "everybody who came to Macao knew about us", Ho says. That's hardly surprising as more than 80 per cent of the 10 million or so visitors to Macao each year were from Hong Kong where Ho senior and "Po King," as his flagship casino - Lisboa - is called in Cantonese, have become household names.

But now this is all changing. The Closer Economic Participation Arrangement (CEPA) with the mainland has opened the door to Macao for a flood of tourists from the many cities and townships in neighbouring Guangdong Province. "We expect at least 6 million, or about half, of the 12 to 13 million visitors to Macao in 2005 will be from the mainland," Ho says. "This large influx of mainland tourists is expected to fundamentally change the way business is being done in Macao," she says.

Moreover, Ho says she expects the opening of the new US-operated casinos to attract many more visitors from the US, Europe and neighbouring countries in Asia, particularly Japan and South Korea. "Unlike the past, we are going to have tourists coming from a much greater variety of sources," Ho says. "They also have vastly varied needs and requirements.".

A much more aggressive marketing and branding strategy will be needed to attract the different groups of tourists coming to Macao, Ho says. STDM already owns a range of hotels from luxury resorts to budget inns and the company also has casinos that appeal specifically to big gamblers and those that cater to the casual player.

"But we believe that there is a need for us to market and brand our properties differently to tell our potential customers in various market segments of the full spectrum of our products and services," Ho says. The opening up of the gambling industry in Macao has "created a bigger draw effect" which has helped greatly expand the business opportunities in the one-industry town, she says.

The retail sector stands to benefit from this change, Ho believes. Having at one time made a high-profile foray into the fashion business in Hong Kong herself, Ho says that although Macao has no shortage of luxury hotels, gourmet restaurants and glittering nightclubs, it has only one department store and this is neither particularly large nor well-stocked. "I think there is a lot of room (in the retail sector) for growth," she adds.

Through her connections in Hong Kong, Ho is confident that she can entice some of the top international names in fashion to open stores in Macao - preferably in prime properties in which STDM has an interest. "Macao needs a shopping mall that can rival the best in Hong Kong," she says.

Understanding that Las Vegas was not built solely on the whims of a few swashbuckling opportunists, Ho says that Macao must make concrete plans to diversify its economy into more stable growth areas like leisure and tourism. "Like Las Vegas, we should go for the convention-and-exhibition business to attract a largely corporate clientele," she says.

Tourism, and even gambling, can be highly cyclical, she says, explaining that the sector is very dependent on worldwide economic trends and a myriad of other external factors such as air fares, the environment and even politics. In an economic downturn, people start tightening their pursestrings and tourism is usually the hardest-hit sector of the economy. "There are just too many ups and downs in the tourism industry," she says.

What's more, the popularity of a tourist destination is not always assured. Tourists' preferences change, sometimes for no particular reason, Ho says. These were some of the considerations that prompted the major operators in Las Vegas to go after the convention business. And they have succeeded in a big way. "You have to give those people in Las Vegas credit for being courageous enough to be willing to explore different business opportunities instead of settling down on a set pattern," Ho says. "The business model they have established is worth noting by us," she adds.

Ho calls for all casino operators in Macao to try to expand the "pie" by promoting the image of the territory abroad. This, she says, can be achieved either through a concerted effort or individual initiatives.

Because of its comfortable catchment area which comprises visitors from Hong Kong and the mainland, Macao has never really tried to develop its international links, according to Ho. Without a critical mass of foreign visitors coming directly from the US, Europe and other Asian countries, there are few incentives for the major international and regional airlines to operate regular flights to Macao.

Understandably, the airport is under-utilized and, because of that, efficiency suffers, making it even less enticing to foreign airlines. As it is now, most foreign visitors go to Macao as a side trip while visiting Hong Kong. Success in building up a convention-and-exhibition business would help change that tourism pattern. Meanwhile, "we would need to concentrate on improving the tourism logistics."

It is with that in mind that Shun Tak has begun operating a regular ferry service between Hong Kong's international airport at Chek Lap Kok to Macao. The trip, on one of the company's fleet of jetfoils, takes less than 45 minutes. A more ambitious plan for the company is to establish its own Macao-based airline, in addition to Air Macao, in which the group has a minority interest.

"We are looking at various options," she says. But she says that she will likely go for a budget airline, perhaps in a joint venture with an existing operator. That would make more sense than to compete head-on with the well-established carriers such as Cathay, Singapore Airlines or Dragon Air.

Looking back, Ho says that losing the monopoly and coping with all the changes that have taken place in the past several years has not been that difficult. "These changes have forced us to think more critically about our future," she says. And in the process, "we have identified many new opportunities that were not there before."

(HK Edition 07/30/2004 page20)