Reflecting on Suncity and premium mass rising [video]

The arrest of Suncity CEO Alvin Chau in late 2021 sent shockwaves through the industry. In this week’s Face-to-Face interview we speak with long-time Asia casino executive Michael French, who had joined Suncity Group Holdings just a year prior to Chau’s detention, which lead to the unravelling of the junket side of his empire. He talks to us about his time at the group, as well as his experiences in Macau, where he helped develop the premium mass model at City of Dreams Macau. 

Transcript

AGBrief 0:08
Hello, and welcome to Asia Gaming Brief’s Face-to-Face series. Today I’m joined by Michael French. He’s now head of consulting firm M.D. French and Associates, and has just returned to the United States after a long career in Asia. He talks about some of his experiences, the openings and the challenges that he faced. What projects were you working on for Suncity.

Michael French 0:35
We had opened Vladivostok and spent a lot of time with Hoiana, because that needed a lot of tweaking as any new property does. And then COVID just really threw all the cards up in the air, Hoiana was no local gambling, and course nobody can enter into the country. So you’re kind of stuck, like what do we do for customers, and so we had some actions to be taken to at least get a little bit anyway. So Hoiana, and then Vladivostok, the Tigre de Cristal, and then Manila was being developed. So I spent time working with the design team and providing technical advice and direction, as well as putting together the operating plans and strategies for that. Manila was supposed to open in 2023, when I first actually 2022, when I first joined, and then it was 2023. And now I think, depending on COVID, it could be 2025 was the last date we looked at.

AGBrief 1:41
It is going ahead?

Michael French 1:43
To my knowledge, I don’t know since I left, I don’t know what the current status is. It’s under a different ownership group. It’s really owned by a company called SunTrust, which is a partnership between Sun City and Travellers is 51/49, I think, and Travellers owns the gaming licence and the land. So I would imagine that SunTrust still exists, it was fully funded, and they will move ahead with the development. It would certainly make sense to me there’s really nothing in the way, other than they need to raise a lot more money.

AGBrief 2:23
So what was Alvin Chau like as a person, even though you could really communicate that much?

Michael French 2:28
I want to say he’s got a real presence to him. So when you’re sitting with him, you feel like this is somebody important. And he was at least to me in the settings I was in, he was casual in his demeanour, but he had this good combination of strong and nice at the same time. So he was considerate and polite for others. He was not a pushy boss at all. He liked to explain why he wanted to do things. So he wasn’t just – go do it and that’s it. So I thought he was quite an impressive guy. When I first had my eye on Sun City about five or six years ago, when I saw they’re moving into operations. I thought, well, this is perfect. They’re all about junkets and I’m all about mass. VIP, from an operator’s point of view, operators don’t do much with VIP, you just deal the games and handle the cage. And that’s it. You don’t get involved in other particulars. That’s what the junket does. So I thought I could bring a whole skill set to them that they didn’t have because they were going to develop this this company and 6 years ago, the world was different. And Alvin looked like he was the Steve Wynn of Asia. That’s what we were all thinking like, hey, it’s all about him. I think the casino business, by the way, it’s an interesting topic, has lost that creative the drive. There aren’t really many entrepreneurs out there, willing to take a risk and do something new, like Sheldon did like Steve Wynn did, things those guys did in the past, no one would ever take that chance. Now, they’re all just too afraid to do it, because there’s too much risk. And most of the companies now are just worried about the quarterly reports, you know, when it does hit the stock, so no one’s going to do sweeping innovation when we thought I thought Alvin could do that.

AGBrief 4:15
Obviously, you were at Suncity most recently and now you’re back in the States. What made you take that decision? Why not stay in Asia?

Michael French 4:24
Well, the US is my home base, and I didn’t have anything to go into because of the surprise nature of Suncity ceasing business. No one was looking for that. It was just a nice Friday evening and here comes all these texts from everyone saying Alvin was arrested. So that changed the game. Nobody knew what to do. The company wasn’t paying anyone at the time. The company didn’t know what their future was going to be and about two weeks later, they officially closed the company. So being there on a blue card, I thought the best thing for me was to go back home to a safe space until things can get sorted out. Certainly not with Suncity because that opportunity is done now,

AGBrief 5:06
How long were you in Macau in total?

Michael French 5:09
In total, I would put it about eight years or so, eight to 10 years, somewhere in there. I first went to Macau in 2007. And then I left in 2012 to join Solaire for Global Gaming Asset Management. We had the contract for Solaire and then I went back to Macau in 2018 working with Paul Baker at the Grand Lisboa Palace. I was overseeing all the pre-opening activities and timelines and things like that.

AGBrief 5:41
So you were there really in the peak times, the real good times in Macau. What did you see?

Michael French 5:55
I was there. The exciting time was at the beginning. I got there in 2007, so that was really Wild West then. Wynn was open, StarWorld was open, Venetian was about to open. I was on the City of Dreams project. I was SVP for all operations, there. I was the first employee for City of Dreams, by the way. I was there two years before opening and my role was to come in and represent operations and be a part of the designing and construction of the project team so that I could give them the details of what kind of services we needed to be able to offer, what kind of facilities we needed to support those services and so forth. So when I got there in 2007, Crown had just opened. I mean, it was Altira what it is now, but then it was Crown. So it was really Wild West days is a good way to put it. There was a new model. Sands had opened in what 2004? I think somewhere around there, but Sands’ opening that really changed the whole game. And of course Wynn was open but he did it in a small way as he was a little cautious. And then City of Dreams. We came up with the big project. And then of course Venetian opened in 2008. So back in those days, it was all about VIP. That was the huge revenues. It was all about junkets, there were no aggregators like Alvin. I think one time, Altira probably had 30 or 40 different junket operators, each of which each of which had their own area, their own window, their own cage, it was really quite bizarre, it was all about that, it was all about VIP. And there was really no focus on mass. No one really cared much about slot machines and Venetian put a lot of slot machines in, but the local, the customers and operators, they didn’t really care much about slots. I don’t think at that time, the local players trusted slots, I think they were they thought they could be fixed. And so they were slow to take up slots. So it’s all about table games, and it was all about VIP. Even in table games, mass market wasn’t considered very important. It was really just pushing all about just the VIP, which is nice from a revenue point of view, I guess. Back in those days, the revenue number was you know, about this long, the the margin is quite low 10 to 13 percent margin, but when your revenue numbers huge like that, that’s all right. And then that shrunk of course, then that’s that’s the problem that we’re in today is how do you supplement that? So over those years, and when I was first here, it was all about VIP. Nobody really cared about mass City of Dreams. If I can tell our story there when we opened it was 2009. And, and at that time, the crisis was a global financial crisis, you may remember that. And so business had really, really come to a super slowdown. And we were just watching any revenue dollar we we could get. So under monitoring our business and we found there were some mass players that weren’t so bad. There were some mass players are playing a pretty good average bet per hand. Now this is in 2009. So we decided to go after that market. We started to develop mass when nobody was talking about it. We actually at City of Dreams, coined the phrase premium mass. And I’ve been arguing with various colleagues from that time forward about that term, because people say there is no such thing as premium mass back then that’s what they said. Now, of course, that’s that’s the saviour for the industry. But then what we found a lot of these players were Hong Kong, people that had lots of cash. They didn’t want to get involved with junkets, they didn’t want to have credit. They wanted to play on their own, but because they were mass players, they were treated as second rate. Second Class Citizens if you will, no mass player could have a private room. Only VIP could get a private room back in a day. So we were the first to take an area and we dedicated it to this premium mass and had private rooms, and we let people play there at a certain limit, and it took off like a rocket. So City of Dreams, really that programme started the whole premium mass movement.

AGBrief 10:13
Where do you see the market going from here?

Michael French 10:17
In most markets, the market dictates where it’s gonna go, you know, the supply and demand thing. In China, the government has a plan, and they can engineer it, and then you adapt to that. So I think the government has an idea where they want it to go. And that’s what they’re gonna continue to work on doing. They’ve been sending these signals for a long time, where you hear the government always saying we want to diversify Macau, we want to diversify Macau, and all the operators say, yeah, that’s nice. So we’ll put on a show, and then the show goes broke. So there’s really no true diversification of experiences. So the government certainly has a plan and that’s getting revealed little by little. The incident with Alvin showed that, okay, look, we’re tired of this. We, we wanted you guys to change your model, you wouldn’t do it. So we took some extreme action on your behalf. What’s the expression in China – the government likes to drop a pebble in the water and then you should be able to read the waves. And if you can’t figure it out and you just ignore it, then you’re going to get caught in a bad situation sooner or later. So they’ve been dropping these pebbles for a while. So here’s what I think Macau can do, it can re-engineer itself to be more of a mass destination for tourists. It can do a lot of the same things. Vegas did, I suppose. Let’s consider Las Vegas for a minute. Las Vegas is in the middle of the desert. No one wants to go there. It’s a terrible place, but now it’s this huge entertainment capital. So it was contrived. It was invented. I was in Vegas from 1995 until 2002. And that was the time where it was shifting from a gaming centric economy to a non gaming, where it became more of an entertainment capital. I worked directly for Sheldon Adelson at the Venetian Vegas, I was in charge of operations. His business plan was all about conventions. And before gaming, that was my background. I was a convention hotel operator. So that was a brilliant plan. Conventions are great sources of revenue. They’re great for the communities. All clean dollars, they pay huge room rates. We made more money from banquet sales than we did from gaming at the Venetian. So Sheldon’s model is perfect. For Vegas, it was really all about the non gaming thing. So why could you do conventions because there was 100,000 hotel rooms. So you have the room capacity. They’re giant properties. You can do groups inside one building, you have a lot of meeting space. And so and people liked the notion of going to Vegas because it was kind of an exciting things to do. So attendance for conventions was always the best when it was scheduled for Vegas. So could Macau do the same thing? I suppose they could. Macau has some of the infrastructure. They have these huge buildings. They have lots of hotels, meeting space. Of course Venetian has plenty. Galaxy is building a lot of meeting space. I think what needs to change for Macau to really become a convention destination is that there’s some laws and have to be changed locally about how samples and products can be brought in for exhibit shows. And the government needs to make the laws a little more convention friendly. The one primary reason conventions don’t work in Macau today is because China doesn’t advocate holding group conventions in a gaming destination. So if the government in China were to say, oh, Macau is an okay convention site for all you guys that would do it. Then they’d have to expand the airport, which I think the way that Macau creates land. I make it sound easy. It’s not easy to do. But they could probably create another couple of runways real quick if they needed to.

AGBrief 14:12
Let’s move on to the Philippines because you were also instrumental in Solaire. Obviously, very different market. What’s your experience there? What were the biggest challenges that you had in in the Philippines?

Michael French 14:25
The challenges in the Philippines are really the the culture of the government. It’s a pretty corrupt place. That’s the reputation that the country has and it’s quite true. So Filipinos know how to do business within the Filipino system. Foreigners can’t really do business. There were a lot of times we would come up an issue where we needed some permits or something from the government. And we as foreigners couldn’t do anything about it. On the positive side from a gaming point of view, and certainly a gaming culture. The locals play. They like playing. It’s much more like the US than it’s like Macau. It’s not at all like Macau quite honestly The Philippines was a US protectorate for a long time. And the locals see us as their standard. That’s what they want to be like. So adapting from the U.S. to Philippines is pretty easy. They like slot machines. They like rewards programmes, everything that works in the States works there. Then on top of that, you have the Asian table games players. You have a good solid base with local slot players, which is great. People seem to forget that it’s really more about slots in the Philippines and it’s about the tables. The property we built was beautiful. The owner had quite a vision. We got to open on time on budget. It was a really good smooth opening and I started a good foundation for them and Tom Arasi and team have done a great job over the years in building into the great property that it is.