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Mass. must vie with Asia for casino investors

Growth abroad changes industry

Daniel J. Groshong/Bloomberg News

Sheldon Adelson’s Sands Cotai Central resort rises in Macau, off mainland China.

As far as casino proposals go, this is as big as it gets: A $4 billion resort with three hotels, more than 90 luxury retail stores, and enough slot machines and table games to fill a pair of Walmart supercenters.

It is the latest creation of casino mogul Sheldon Adelson, and it is nowhere near his native Massachusetts.

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Adelson is building his Sands Cotai Central resort in Macau off mainland China, the epicenter of a rapidly expanding Asian market where he and other US casino operators have made billions of dollars in recent years.

The growth in Asia has caused a seismic shift in the gambling industry, leaving Massachusetts competing for limited investment dollars not only against its Northeastern neighbors, but also against a powerhouse across the world that is churning out bigger resorts and promising much bigger profits.

Macau alone is projected to generate about $30 billion in revenue this year, five times the $6 billion expected from casinos on the Las Vegas strip. Massachusetts has attracted proposals from a wide array of casino operators, but success here depends on the state’s ability to translate that initial interest into the kind of large-scale resorts that will generate the most jobs and tax revenue.

“There is a market in Massachusetts, but you’re not going to see the kind of investments happening in Asia,’’ said Mark Nichols, an economics professor at the University of Nevada, Reno. He added that the rise of Asia has even dented growth prospects in large US markets like Las Vegas.

“A lot of the high-rollers that used to come to Vegas are now going to Macau or Singapore,’’ Nichols said.

Still, many industry specialists said that Massachusetts remains a top US market and will probably get significant investments. The question is whether the state will ultimately benefit from a competition between Adelson and Steve Wynn, the industry’s two biggest operators, and generate enough additional interest to ensure that, if one or both drops out, the state will still get proposals in excess of the $500 million minimum set by state lawmakers.

“Competition is key to the success of casino gaming,’’ said Denise von Herrmann, a provost at Oglethorpe University in Atlanta who has tracked the gambling industry for two decades.

She said Massachusetts offers large casino companies a chance to diversify operations so they are not invested too heavily in a single market. On the other hand, she noted, it is a smaller market where state officials have pledged to keep a tight lid on the number of facilities and how much they are allowed to grow, which could discourage bold, expensive proposals.

The state also faces competition from potential gaming expansions in New York and Florida, and governments in Asian countries such as Japan and South Korea are also considering legalization of new gambling resorts. The market in Japan alone is estimated to be worth $44 billion.

Those opportunities are generating intense interest from an array of US gambling companies. Wynn, who has proposed a $1 billion casino across from Gillette Stadium in Foxborough, is preparing to build his third casino in Macau and has even floated the idea of moving his company headquarters there from Las Vegas. He is also lobbying for gambling expansion in Japan, as is his longtime rival Adelson, who said in a recent conference call that Asia is his “first choice’’ for development of casinos.

“Everyone knows we are the most probable winner of any competition [in Asia],’’ Adelson said in the Oct. 27 call, adding that his firm is “not that enthused’’ about potential opportunities to build resorts in Massachusetts and Florida. Adelson grew up in Dorchester.

The call was a few weeks before Massachusetts approved a gambling expansion, and a spokesman for Adelson’s company, Las Vegas Sands Corp., has since said the firm is still considering development opportunities in the state. “There are a variety of factors that go into it, and we’ll continue to follow our process as it relates to Massachusetts,’’ the spokesman, Ron Reese, said. In 2007, when expanding gambling was gathering momentum on Beacon Hill, Adelson pitched the idea of a casino in Marlborough.

The extent of competition here will begin to become much clearer in the months ahead. The state has legalized construction of three casinos in separate geographic regions, and one slots-only facility that could be built anywhere in the state.

So far, the most intense battle is shaping up in the Boston-Worcester region, with Wynn going up against a $1 billion proposal at Suffolk Downs in East Boston and another large proposal in Milford. Several other operators, from Mohegan Sun to Ameristar Casinos Inc. to Hard Rock International, are proposing to build in Western Massachusetts, while a few would-be developers, including the Mashpee Wampanoag tribe, are looking at locations in Southeast Massachusetts.

Meanwhile, the opportunities for growth in Asia appear boundless. Macau’s projected $30 billion in revenue is a record for that market, and several analysts have estimated that it will increase by as much as 25 percent next year.

Las Vegas Sands, Wynn Resorts, and MGM Resorts International are the only three US companies operating in the former Portuguese colony, which has more than 30 casinos. In its most recent earnings call, an executive with Wynn Resorts said the market’s expansion is just beginning.

“Macau is probably in the third or fourth inning of development,’’ said Matt Maddox, chief financial officer for Wynn Resorts, which generated about $2.8 billion in revenue in Macau this year. “Five years from now, we think that the market has continued growth underneath it.’’

Adelson next year is planning to open the first phase of Sands Cotai Central, which is eventually slated to include 5,800 hotel rooms, 300,000 square feet of gaming space, 92 retail shops, and 20 restaurants. The biggest proposals in Massachusetts are about one-fourth that size, with hundreds of hotel rooms and smaller retail components.

In his third-quarter earnings report to stock analysts, Adelson and other executives emphasized the firm’s strong financial performance at resorts in Asia. For example, the company reported a total of $388 million in operating income at its three Macau casinos. By contrast, in Pennsylvania, where Adelson and partners developed the $800 million Sands Bethlehem, operating income for the quarter was about $25 million.

Casey Ross can be reached at cross@globe.com.
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