By Beth Jinks
July 15 (Bloomberg) -- Melco Crown Entertainment Ltd. and Las Vegas Sands Corp. capped the payments some tour companies earn bringing big bettors to their Cotai Strip casinos in Macau, driving up gambling operators’ shares in Hong Kong.
“Our volume has been stronger than ever,” since Melco Crown’s City of Dreams and Las Vegas Sands’ Venetian Macao agreed July 1 agreement to limit commissions to 1.25 percent, Melco Crown Chief Executive Officer Lawrence Ho said. Ron Reese, a spokesman for Las Vegas Sands, confirmed the agreement and declined to provide more details.
The accord is the first example of cooperation since the six Macau casino operators in April form a coalition and pledged to work together in the face of dwindling revenue. Macau is the world’s biggest gambling hub and the only place in China where casinos are legal. The Cotai Strip is being developed as an Asian equivalent of the Las Vegas Strip, the biggest U.S. gambling center.
Melco International Development Ltd., Ho’s joint venture with Australian billionaire James Packer’s Crown Ltd., rose the most in a month in Hong Kong trading today. SJM Holdings Ltd., controlled by Ho’s father, gambling tycoon Stanley Ho, and Galaxy Entertainment Group Ltd., part-owned by Permira Advisers LLP, also climbed.
Melco International climbed 8.3 percent to HK$4.29 at the 12:30 p.m. trading break in Hong Kong, the most since June 17. SJM advanced 3.8 percent to HK$2.99, the stock’s biggest advance since June 19, and Galaxy jumped 6.7 percent to HK$1.91.
Middle Man Squeezed
“Since the two parties, us and Las Vegas Sands, have spent a lot of money in terms of investing and building up these properties, we’ve agreed to set ourselves a commission cap,” Ho said at an Oppenheimer & Co. conference in Boston yesterday. The 1.25 percent accord is “effectively squeezing the middle man,” so-called junket operators, he said.
Las Vegas Sands, Melco Crown and Macau rivals Wynn Resorts Ltd., SJM, Galaxy and MGM Mirage’s joint venture, compete for high-roller gamblers by paying junket operators a percentage of the total betting chips purchased by the gamblers they bring to the properties. Macau’s government has said it plans to limit commissions.
“The Macau government has not been very proactive or effective in terms of implementing it,” Lawrence Ho said. “With the establishment of the casino chamber, all six casino companies being part of it, there’s been a lot more movement the last two months.”
City of Dreams
Melco Crown opened its second Macau casino, City of Dreams, on June 1. The new resort attracted about 1.2 million visitors in its first month of operation, the company said July 2.
Macau’s gambling revenue and visitor arrivals have fallen since January 2008 amid the global recession. Curbs on visits by mainland Chinese to the city aggravated the slowdown.
The earliest visa restrictions may be eased after Macau’s new chief executive begins work in December, Ho predicted today.
Macau’s casino first-half gambling revenue fell 12 percent to 51.5 billion patacas ($6.5 billion) from a year earlier, Portuguese news agency Lusa reported this month.
Melco Crown rose 5 percent to $4.41 in Nasdaq Stock Market composite trading yesterday. The stock has gained 39 percent this year.
Melco International has surged 67 percent this year, outpacing the benchmark Hang Seng Index’s 26 percent. SJM has risen 77 percent while Galaxy is up 80 percent.
To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net
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