Las Vegas Sands, MGM Mirage face new Macau competition

At one time Chinese billionaire Stanley Ho owned the casino business in Macau. But after the Chinese government extended licenses to outside operators such as Las Vegas Sands (NYSE:LVS) and MGM Mirage (NYSE:MGM), Ho's Sociedad de Jogod de Macau (SJM) casinos have dropped to 63% of the market, much of the loss in the high-roller segment. JPMorgan forecasts SJM's share will drop to about 25% within three years. Although SJM owns 17 casinos in Macau, many are aged, run down, and away from the center of development for the coming mega-casinos on the Cotai Strip.

Now Ho has struck back with his biggest, most opulent casino, the almost $400 million Grand Lisboa Hotel. The ostentatious design, even by casino standards, was inspired by the Faberge egg and built in the form of a golden lotus flower topped with long, frond-like plumes.

The magnitude of the project, while huge in comparison with Ho's earlier casinos, pales in the light of the Galaxy Entertainment's planned Coati Mega Resort, Melco PBL's Crown Macau, the Sands' Macau Venetian Casino Resort and whatever the Virgin Group decides to do with the 20 hectares acres they have purchased.

2006's lush returns only hastened development projects in Macau, but with all the huge investments underway, one has to wonder if the customer base will expand quickly enough to pay off. While new investors offer the glitzy, modern facilities, Ho's fortunes are tied to aged properties. Will the Grand Lisboa be enough to keep him in the game?