Times are tough, how’s business ?

Alan Ho – We were in a competition situation and we still are. Three years ago we had just over nine thousand rooms, today we have almost double that figure and by 2011 possibly over 30,000 rooms, so basically there is a lot of pressure on our performance. But one must remember that a lot of casino hotels – the new five stars – have rooms set aside for gamblers, infact guaranteeing over 60 percent and in some cases almost 100 percent of their rooms in this way. I think the casinos will continue to operate this way.

Is STDM considering new strategies to deal with the global situation?
I can’t speak for the gaming side, but on the hotel side STDM is very different from the other operators. We are different because we were here before them and already had junkets and VIP gaming-room operators. They (the VIP operators) have a slightly different policy in that they did not guarantee our hotels rooms. This means we have to fight for our market share. However, I don’t intend to do anything special. We have established sales offices in China, of course, but one must remember that a lot of hotels drop their prices when things are tough. But if you sell a room for MOP$600 today and a month later you charge MOP$1000, the customer is going to guage the value of your room at the earlier price – when it costs MOP$1000 he won’t be willing to pay. He’ll probably go to another hotel, even if it’s not as good as yours simply because of the lower price.

So, how will you deal with this?
We just have to have enough financial stability and strength to weather it. You could give in and drop your prices and do promotions, but in the end, the reputation and perception of the quality of the hotel are tremendously important. Luckily, we don’t have to slash prices.

What about your construction plans? Any of them on hold?
We are not postponing anything. Even the transformation of the old YaoHan building is not postponed. The only reason we haven’t started is because we are waiting for the work permit! We don’t have any liquidity problems at all for that, certainly not for such a small project. A few days of our casino turnover is more than enough to handle a project like that. Everything in Macau has slowed down after the Ao Man Long case. Normally, the law states that within two months of making your proposal you must receive an answer. In our case, it has been seven months and we are still waiting!

Variety – the spice of life

You said you are different from the rest, why?
We are very different. We offer a variety that our competitors cannot provide. At the very, very top, we have the Pousada de Sao Tiago, a 13-suite hotel which is extremely exclusive and then we have the Grand Lisboa, a five star deluxe operation. Then we have the Lisboa and the Sintra at MOP$700 room. Down on the chain we have the Regency with MOP$400 rooms. We can suit a number of different client budgets.

The Venetian will do that, one day…
(Laughs) One day, when they start working on it.

How did the arrival of The Venetian change the way you manage your day-to-day operations?
It did not. To tell you the truth I don’t see the Venetian as competition. I don’t look at the marketing of the casinos, I look from the infrastructure point of view when we decorate a place and rebuild it, whereas Adelson looks at the general market, much more to the mass market. I consider Wynn to be a lot closer in terms of marketing strategy. When we talk about the gambling side, it is totally different. We have a very strong Chinese market and Wynn has a reasonably strong Hong Kong market.

Are you worried about the global financial crisis?
You do have to look at the world economy because whatever happens out there happens to you, but I think Pansy [Ho] is right when she says Macau will be the first to get out of the crisis. Basically, our problems come from the permits for mainlanders to come to Macau, not so much from the world recession. This makes our problem is much easier to resolve. The rumours say the permits situation will be relaxed in the middle of next year and, assuming that there is some basis for these rumours, we can actually look forward to an improvement in the situation.

Who are the guests at your properties?
We have a strong Chinese customer base, with the Hotel Lisboa always representing a strong brand. We suffered a lot in the Hong Kong market because in the early eighties the Lisboa was old and needed renovation. It takes a long time to wash out a bad impression, but we were lucky enough that when China started to relax travel policies, we had already renovated the Hotel Lisboa. The experience of Chinese travellers coming to the hotel was much more positive than that of Hong Kong people, so we have a very strong market in Mainland China.

The perfect casino

The Grand Lisboa is regarded by some as a ‘strange’ building. What do you see when you look at it?
You know, let me tell you what the creator and designer of the original Lisboa – a distant relative by the way – told me when I went to visit him during a Chinese New Year in the 1990s . He was quite old and he said: “A lot of people tell me that I created a very ugly building, like a bird cage, but you have to realise, Alan, that a casino has to have an impact to attract people so that they remember the building and are curious about it and come back to see it. In this respect I created a perfect casino’’. Well, I have to agree with him. Extrapolating this theory to the Grand Lisboa, I must say it is the same. You can have efficient buildings, square, like matchboxes, or you can compromise a little bit and have a curve, but it is still a simple and efficient building. Then you have an iconic building, which is outrageous and lavish. This building captures people’s imagination and curiosity. People come to look at it. It cost a lot more to build, it is much less efficient in terms of space and the company that was supposed to put the antennae at the top went bankrupt in the middle of the job (laughs)! But these are the prices you have to pay to have an iconic building.

Were there many concerns with its ‘feng shui’?
Frankly, people say a lot of things about buildings. They said a lot of things about the old Lisboa being a birdcage and so on. I’ll tell you the truth: it wasn’t on anyones’ mind during the design of the building. It was only afterwards that people started to comment. It is not really a concern.

Are your restaurants profitable?
I could make them profitable if I wanted to by cutting back on quality, but how many chefs are you going to put in there? If you allow the chef to hire the people that he says he needs you always lose your share. It is a conscious decision that I have to make in letting them have more chefs than they need in order to be able to allow them to do their cooking. You have to realise that you have the marketing people seeing things the way I do and the financial people on the other side. You cannot look at each restaurant as a profitable unit by itself. It is very difficult. The overheads and the staffing are so enormous. By the time you are done with the staffing it is almost impossible to be profitable. And if you want to be a fine dining restaurant, it is even worse. The only restaurants that really make a lot of money are the noodle shops because they are very simple, well executed and keep staffing and wastage to a minimum. But that is not what you want in a hotel. Do you ask the rooms to subsidise the restaurants by attracting customers to the rooms or are you going to make each unit a separate profit centre and force them to be on their own?

Initally Crown decided to close its French restaurant Aurora and the Japanese Kira and turn the floor area into a karaoke. Then they did a U-turn…
There is no such thing as right or wrong in business. Whatever decision you take always makes sense when you create the strategy. It is afterwards that you begin to realise that maybe it was not the smartest thing to do. For example, when I go to Vegas and have to choose a hotel, what do I do? I ask which hotel has the best restaurants and shows because I might as well eat while I am staying or see the show, and of course which hotel has the best rooms. These are the three things I ask. I believe that if you have the best restaurants, why look for a car and all that? Why not go to a hotel with the best rooms, restaurants and shows?

So, where do you stay in Las Vegas?
(Hearty laugh) I usually end up at Wynn. In Las Vegas, lets make that clear!

Do you stay often in your own hotels?
You just have to be seen, try the restaurants all the time to check on service and see if food has changed and be on the floor to see whether they are cleaning it. In fact, I cannot sit still for more than two hours anyway. I work two hours at my desk and I go for a look round and come back. It is good for me anyway!

What is the thing that makes you proud at your facilities?
Lets take the Grand Lisboa. I think we are the first to put a steam room in every single room. The corner rooms have the steam and a dry sauna. In addition, I also believe that a comfortable shower is very important so I chose the best shower I could find, which is a huge 60 centimetre diametre rainforest shower. You can drown in there!

Professional pride

How is STDM coping in terms of personnel?
Well, I’ll start with quality of service. It is something that goes up and down, depending on the level of your restaurants and hotels. The higher the level, the greater the expectations and therefore the greater the need for great service. And at the very highest level you have to import from around the world.
Macau cannot produce it because Macau doesn’t have it. You have to have locals who see how the real professionals operate for two or three years before they rise to their level. I remember very well when I started Robuchon. I went from A Galera to Robuchon and Galera was already well known for having the best service in town. But one day I was told that the service at Rocuchon was just not good enough and I asked why. I was told it was not good enough because expectations had raised. People expect service to match the quality of the food and the name of the chef. It was then that I realised I was going to have to import labour. It is always like that. Right now we are getting so many five star deluxe hotels that we don’t have enough locals to run them at the level required.

But that is not how local’s think. They want the jobs…
At the very highest level you need to import. And not only just from Hong Kong. I ask search companies to look worldwide. I look for the top people. Locals are good in the sense these are the people you can count on to be here for six to seven years on the trot, so you have to develop the relationship, but on the other hand you have to have these top professionals to train them. Frankly, I discovered that if you have one professional and six unprofessional waiters they are not going to learn from you. You have to have an almost equal number for the ones who are not trained to begin to feel this is the normal way to do things and build up your team.

Are local higher education schools not training them?
It doesn’t work. You have to have professionals leading. If 50 percent of your people do the right thing, the other 50 will follow. If only 10 percent do the right thing, the other will call them the weirdos and do things the other way round. It is quite a desperate situation right now, especially with the (financial) crisis the government is very worried about job losses and is trying to protect the locals. The first thing they are doing is to stopping (overseas labour) quotas. At some point the trade and the government must get together and solve the situation. We are not yet being affected, but we are worried.

by Joyce Pina