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Four Seasons Macao, Cotai Jets, Junket Finance and More

The main advantage of perusing the quarterly earnings reports and analyst calls the casino companies host is that they generally leak a couple of tidbits of information somewhere in the margins of the discussion. Listening to bizwigs yammer about numbers is a certifiable yawnfest, but the most recent call from Las Vegas Sands Corp (Venetian Macao, Sands Macao etc) had a couple of interesting nuggets, in addition to execs becoming infuriated about the technological breakdown of the analyst Q&A phone system they contracted out.

Four Seasons Macao is scheduled for a July 2008 (or Q3) opening. According to LVS, the opening will be "proper" - not the infamous soft opening, where bits of the property are rolled out, partially completed. Their use of "proper" confirms our belief that soft openings, a la Las Vegas Palazzo's spectacularly messy birth, are extremely "improper." There is nothing 'soft' about paying full price for hot and cold running mudrust, missing or still wrapped furniture, failing electricity and scads of boo-boo tape.

The Four Seasons Macao is intended to be a 'boutique experience' somewhat in the vein of Crown Towers, Taipa (doubtful). The casino will feature premium, direct marketed play on the ground floor, two floors of junket play casinos and - get this - 19 luxurious apartments which will have small casinos in them. Bedside baccarat baby!

Operation of the Four Seasons will require no new headcount. Which is a way of them saying that the Venetian Macao isn't doing the business they thought it would and they're going to repurpose extra people power.

The Hong Kong Transportation Bureau has yet to approve night runs of Cotai Jets between the Pac-On terminal and the ShunTak terminal in Hong Kong. They hope to have ferry service running every 15 minutes, 24/7 starting in August 2008. They seemed to express a belief that the Cotai Jets were being purposefully thwarted by the HKTB - I smell a lawsuit.

Regarding the 'no new concessions/no new casinos' edict from the Macau SAR via Beijing, the LVS execs didn't seem particularly surprised at all. They believe that current projects on Cotai will be unaffected, although the growth in VIP gambling halls and the number of slot machines permissible at each property may be scaled back. They project that the total number of casinos in Macau will not exceed 40, and no more than 10 on Cotai.

In an effort to fight the AMAX VIP deal, Venetian Macao and Sands Macao will begin to offer credit to junket operators and (oh my) directly to premium customers based on collateral. From what I can discern, the rules for failing to repay gambling loans is a bit of a gray area in Macau as the casinos have never ventured into offering credit directly to players, the risk has historically been carried by the junket operators. Junket operators generally vet their players ability to pay before making loans to them, and if the players fail to pay the loss is part of the expected risk absorbed by the junket aggregator (AMA for example) who finance a stable of junket operators. Note: there are many methodologies for how junkets finance players, this is just one example.

One shred of good news on the business end of LVS' call is that the mass market play - folks like us who walk in and gamble a bunch then leave - is up, unlike VIP market share pummeling, which the execwigs described as "clearly an unsatisfactory result."


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