Problems Mount For Packer In Macau

Sydney Morning Herald

Saturday November 15, 2008

Vanda Carson

JAMES PACKER'S Macau casino joint venture has forced hundreds of staff to take as much as six months unpaid leave amid a downturn in the world's largest casino market.

Melco Crown Entertainment announced the cuts as rival US gaming giant Las Vegas Sands said up to 11,000 construction workers would be sacked after it pulled the plug on a casino development close to Crown Macau on Macau's Cotai Strip.

Lawrence Ho, Crown's chief executive officer, said the company planned to save $US25 million ($38 million), or 10 per cent of its salary base, at Crown Macau by forcing the staff to stay at home until next year.

The cuts are a response to falling gambling revenue due to fewer gamblers visiting from mainland China, following Beijing's tightening of visa restrictions five times over the past year, and the impact of the global financial crisis.

Crown Macau has also lost up to 10 per cent market share since April, with gamblers defecting to other casinos amid fierce competition.

Melco Crown yesterday posted a loss for the three months to the end of September of $US21 million, or 5c a share, which was below analysts estimates of a loss of 1c a share.

VIP revenue was down 23 per cent in the quarter, compared with the previous period.

The company is yet to post a profit but hopes the opening of its City Of Dreams 1400-room hotel and 500-table casino in the first half of next year will turn its fortunes around.

Melco Crown, which trades on the Nasdaq, hit $US18.15 ($27.72) a year ago. It is now trading at $US3.75, having fallen 5 per cent on Thursday. Its slump is nearly twice as steep as the broader index, which is down 40 per cent.

Mr Ho said while he was "cautiously optimistic" that the visa restrictions would be eased before it opened the first phase of its $US2.4 billion casino, the downturn could continue. "We will prudently plan for the worst and hope for the best by aligning our overhead structures to current market conditions," Mr Ho said.

"We need to prepare for fact that visa restrictions might not be loosened," he said.

The company, and others in the industry, had hoped the restrictions would be lifted to help ease the relentless pressure on casino companies as gambling revenues fall.

He said the staff forced to take leave from Crown Macau were likely to find jobs at City Of Dreams, which will have between 5000 and 7000 staff.

Greg Hawkins, the City Of Dreams chief, said the downturn meant he was now likely to hire fewer staff at his casino.

Chief financial officer Simon Dewhurst said trading at Crown Macau in September was "pretty horrible" as it lost customers to rivals who were luring them away with generous gambling credits.

Its market share slumped in September but trading had improved in October and November

Mr Dewhurst also announced the company would be changing the marketing of Crown Macau to avoid City Of Dreams "cannibalising" its sister property.

© 2008 Sydney Morning Herald

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