MACAU (MarketWatch) -- Among the casualties of the global credit crisis, add Macau's casino arms race.
Harder times in the global credit markets mean it's now unlikely there will be a repeat of the development-at-light-speed building frenzy in the Chinese gambling capital, according to the 32-year-old co-chairman and chief executive of Melco Crown Entertainment, Lawrence Ho.
"I don't see major resorts opening for the next couple of years now," Ho said.
He said the days of easy credit, which helped fund his own $2.4 billion casino are over, adding that banks won't be so willing to fund the ambitions of the next player any time soon.
The new mood is a huge reality check after the last three years.
"People were blindly chasing market share without any regards for margin." Ho said.
"The good thing that came out of the financial crisis is that, while the market was booming, the competitors looking at this industry were more concerned about ego and market share than creating value for shareholders," he said.
On the other hand, Ho believes the tighter credit situation could pay dividends for those developers who rolled the dice when times were good, as the dearth of new casinos brightens the prospects for a market that has shown worrying sings of overcapacity.
Ho said his casino's return on capital looks set to improve, as competitor's projects remain frozen.
"Liquidity in the banking market is not going to be as free as it was from 2005 to 2008, so with these massive projects, if you don't have the proper balance sheet and financial structures, it's impossible to build," Ho said.
Ho, the Toronto-educated son of 87-year-old Macau gambling kingpin Stanley Ho, spoke with MarketWatch at the City of Dreams, a casino and hotel complex kitted out with the latest multimedia technology.
City of Dreams was the brainchild of Ho and his Australian joint-venture partner James Packer. It is operated under Ho's U.S.-listed Melco Crown unit /quotes/comstock/15*!mpel/quotes/nls/mpel (MPEL 6.82, -0.21, -2.99%) , with both Ho and Packer sharing the title of co-chairman.
The casino is located on Macau's Cotai Strip, China's answer to the Las Vegas Strip, built on land linking outlying islands and connected by bridge to the main Macau peninsula.
Cotai is located well off the traditional center of Macau's casino industry, and partly because of this, many analysts saw the City of Dreams as a risky bet when it opened in June. See story on the opening of City of Dreams.
But given the recovery in the enclave's gambling industry, Ho and his peers seem to be doing better than many expected just months ago.
Revenues in the former Portuguese colony contracted during the first half of the year, falling 12%, but in July, the territory's six casinos concessionaries reported year-on-year gains in revenue, and in August, they were the highest on record. September's revenue was up more than 50% from a year earlier.
Ho doesn't expect a double-dip in the Macau casino industry, even if China eases back on its pro-growth fiscal and monetary policies.