Five years ago, the casino company that is now Harrah's Entertainment Inc decided not to bid for a gambling license in the booming Chinese enclave of Macau while its competitors pushed in their chips.
Now, the world's largest casino operator faces the prospect of being shut out of Asia -- regarded as the world's most dynamic gambling market -- after losing its bid last week to build a new resort in Singapore's Marina Bay.
Wall Street hailed bid winner Las Vegas Sands Corp, a company that earned credibility in the Far East by becoming the first North American casino company to open shop in Macau in May 2004. Las Vegas Sands now boasts nearly double the market capitalization of Harrah's, around US$25 billion, primarily because of its Asian growth prospects. Jefferies & Company analyst Lawrence Klatzkin increased his target for Sands' shares by US$8 to US$88.25 after the Singapore license win. Sands now trades around US$71.
Meanwhile, Harrah's is playing a game of catch-up in a region in which its Las Vegas-based competitors, Sands, MGM Mirage Inc and Wynn Resorts Ltd, are plowing billions of dollars and counting on rich returns.
"It's a concern," said Harrah's spokesman Alberto Lopez. "It's an area of concentration. It's an area where we know that we need to move forward deftly, if you will."
Analyst Dennis Forst of Keybanc Capital Markets said the loss puts Harrah's in a difficult position.
"It is a hole in their portfolio and something that they are probably spending a lot of time analyzing how to get into both Macau and other places in the Far East," Forst said. "It puts them obviously at a disadvantage in that part of the world."
Some observers say the game is almost up.
Wynn's US$1.1 billion Wynn Macau resort is set to open on Sept. 5, followed by a second Sands project, the US$1.8 billion Venetian Macao next year. Also, an MGM-Pansy Ho joint venture, the MGM Grand Macau, costing about US$975 million, is scheduled to be completed late next year, while others are in the works.
Macau is not likely to expand the number of gambling concessions and sub-concessions -- there are six -- at least through 2009 after overturning a monopoly in 2002, according to University of Macau law professor Jorge Godinho.
That leaves a second Singapore license -- on the resort island of Sentosa -- the only remaining opening in Asia for what could be a decade.
"Any contenders for that concession are all fully aware that it's a make-it-or-break-it decision," Godinho said.
"If they fail to get a license there, well, that's it. They would have to explore other markets in Europe or other parts of the world in the immediate future," he said.
Before the government in Macau handed out new casino licenses in 2002, many casino operators were hesitant to enter the former Portuguese colony, which once was rife with gangsters and had recently reverted to Chinese control in 1999.
Lopez said Harrah's decided not to bid partly because it could not offer the upscale Caesars brand, which it acquired through a megamerger last year. And even after Wynn won a Macau license in 2002, the company stalled construction over concerns about regulations that prevented casinos from extending credit.
But when the Sands Macao opened, casino companies came to a collective realization: Asians like to gamble.