SINGAPORE (May 29): The gambling magnate Stanley Ho, who died in Hong Kong on Tuesday at the age of 98, had 17 known children. But his legacy was not restricted to his children. He was also the unacknowledged father of the Singaporean gambling industry.
Ho made his fortune in the Macau gambling industry. He arrived in the former Portuguese colony in 1941 as a teenager with HK$10 in his pocket. He was from a prominent Hong Kong family that had been ruined by the Great Depression. Hong Kong had just fallen to the Japanese.
The young man had precocious skills as a kerosene trader during World War 2. He was a millionaire before he was 20. He traded kerosene and other essential goods across the Chinese border, defying trade sanctions. He continued to apply his Midas touch during the region’s next calamity — the Korean War.
He was a confident communicator who mastered Chinese, Japanese, Portuguese and English. As the scion of a Eurasian family in the height of the colonial era, he handled the authorities with confidence.
But Ho’s calling was in gambling, not trading kerosene. In 1961, his persuasive powers with Macau’s Portuguese rulers secured him a gambling monopoly. Along with a group of investors, he formed a company called Sociedade de Turismo e Diversoes de Macau (STDM). STDM won exclusive rights to run casinos in Macau.
STDM’s revenues surged in the 1980s. A new class of high rollers emerged in China, which was then in the early throes of capitalism.
Ho concocted a lucrative strategy of subletting VIP rooms to entice frequent gamblers. These subcontractors were tour agents in cities such as Shanghai, Shenzhen and Guangzhou. Ho shared the spoils with the subcontractors, creating a tight nexus between Macau and the mainland.
Casinos were not only the only game in town in Macau, but Ho was its undisputed king. His companies employed a quarter of the territory’s workforce and provided three quarters of its revenue.
Ho’s influence went beyond Macau. In the early 2000s, Singapore saw that its export-reliant success had its limits. The city-state was looking to diversify its economy.
Singapore drew inspiration from Ho’s vision. The city-state’s location and infrastructure is an ideal setting for casinos.
In 2005, Singapore offered licenses for two integrated resorts (IRs). The two IRs, owned by Genting and Las Vegas Sands, have proved a game-changer. Singapore has shed its sterile image and is now part of the playground for the privileged.
Singapore has averaged 15 million tourist visitors per year for the last five years. Tourist revenues have averaged US$25 billion (S$35 billion) in that period. This is despite severe austerity measures in China designed at curbing corruption.
Singapore adopted several of Ho’s measures. One was the practice of creating a web of subcontractors in China. These agents provide the fuel for the junkets.
Other measures include the marriage of gambling with other forms of entertainment. By the early 2000s, Macau had diversified its entertainment options. Singapore followed suit in its IR programme. Resorts World has a Universal Studios theme park, as well as an artificial beach. Luxury shopping provides visitors with handbags and watches priced in the thousands. Waitresses hand out tea and coffee like the free booze that is on offer in Macau. Gambling is a sideshow for some of the visitors.
Today, the casinos in Singapore and Macau are desolate. Both IRs have been shut since April 7. There is no sign of them reopening even after the circuit breaker.
Investors should take solace in Ho’s resilience. Ho faced far worse obstacles than a lockdown. His father went bankrupt during the 1930 stock market crash. The family went from prosperity to penury, forcing Ho to become a telephone operator.
After the Portuguese ceded control, his vice-like grip on Macau’s gambling scene was diluted. The Chinese licensed deep-pocketed Western competitors like Sheldon Adelson’s Las Vegas Sands as competitors. Many doubted whether Ho could survive.
In fact, he thrived with competition. His profits more than doubled between 2000 and 2010. Though his slice of the cake was smaller, the size of the cake was much larger. Macau became the world’s biggest gambling destination by 2006.
Ho never gave up. Investors should persist with the gambling business — a field where the house always wins.
Nirgunan Tiruchelvam is head of consumer sector equity at Tellimer (Exotix Capital)
