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Daily Business Review: Gambling proposal could bring sea change

Monday, December 05, 2011

As legend has it, when a devastating frost struck Palm Beach in the 1890s, Miami pioneer Julia Tuttle took the opportunity to send some fresh orange blossoms to Henry Flagler, to prove the tiny settlement on Biscayne Bay was a warm and fruitful place to do business.

The story may be apocryphal. But there is no question that Flagler’s Florida East Coast Railway was soon chugging into town. And things were never the same again.

If past is prologue, then Tuttle’s orange blossoms beg a question regarding casino gambling: Is Miami — indeed, all of South Florida — having a Flagler moment? The multibillion-dollar bet Genting Group is making on downtown Miami, where casino gaming could play a vital role in a massive resort, could prove as transformative as the arrival of the Florida East Coast Railway.

“A world-class destination resort with a gaming amenity will raise the city’s international profile — serving as a catalyst for attracting millions of new tourists, spurring new levels of investment and providing much-needed relief for the local and statewide economy,” Christian Goode, president of Resorts World Miami, said in a statement.

Perhaps. But if the state permits three massive casinos in Miami-Dade and Broward counties, as the enabling legislation proposes, the region’s economy will likely be catapulted into an abruptly changed future. The types of jobs future South Floridians hold, the kinds of tourists the region draws or repels, and the ability to build non-gaming sectors like tech and finance may very well be shaped by the outcome of the casino issue.

In that sense, this high stakes issue isn’t just about gambling. It’s a moment in time when South Florida bets on the direction of its future.

“I do think this is a pivotal moment,” said Armando Codina, a powerful developer who, in the 1980s, chaired the successful “No Casinos” ballot referendum. “We need to evaluate its long-term impact on our community.”

Given the gravity, it’s only appropriate to ask an important question about Genting. Specifically: Who are they?

Genting’s OriginS

On the southeast coast of China, Fujian Province, directly facing Taiwan, was long considered one of the most remote areas of the world’s most populous country. It got a railway nearly 60 years after Miami did.

In 1918, a son named Goh Tong was born to the Lim family. In his late teens he moved to Malaysia in search of opportunity.

He found it. Lim made his first fortune as a heavy machinery dealer after World War II. Then, in 1965, Lim built a self-contained resort in the jungle-covered hills outside Kuala Lampur, near a small town named Genting Sempah (or Sempah Pass).

Genting Highlands opened in 1971, and eventually made Lim a billionaire. It includes amusement rides, upscale shopping and a whopping 10,000 hotel rooms.

That set in motion the events that would eventually bring Genting to downtown Miami. Flush with cash, the company expanded into the cruise business, buying Hong Kong’s Star Cruises.

From there it was a natural progression to the cruise capital of the world, Miami. Under K.T. Lim, son of the founder, who died 2007, Genting bought Norwegian Cruise Line, of which it still owns half. K.T. Lim visited Miami dozens of times.

Under the son, Genting is rapidly expanding its gaming business, in Singapore, Manila, the United Kingdom and, most recently, a racino at New York’s Aqueduct racetrack. When a different deal to buy the Miami Herald property fell through, Lim and Genting made their move, paying $236 million.

Multiple companies trade under the Genting name on different stock exchanges. The most recent financial statements of Genting Berhad, the holding company of Genting Group, show revenue of just under $3 billion in the first half of the year, with profits of $831 million. The company nearly doubled in size in 2010, thanks to the opening of the Resorts World Sentosa in Singapore, which incorporates a Universal Studio attraction.

And it is quite easy to spot similarities between Miami and the other cities where Genting has made heavy investments. Hong Kong, New York, Singapore and Miami are all international cosmopolitan crossroads, with strong tourism, trade and financial sectors and culturally diverse populations. Singapore, for instance, has four official languages.

“Our decision to invest in Miami was fueled by the city’s strong tourism industry, diverse business base and vibrant cultural landscape,” said Goode, of Resorts World Miami. “We are now working with local stakeholders and community leaders to ensure Resorts World Miami will leverage and showcase those assets.”

State Of Mind

For most of the 20th century, Florida was not just a state, but a state of mind. With its vast tracts of raw land and its unflagging ability to draw drifters, dreamers and, admittedly, sometimes schemers, South Florida particularly held a special place in the American imagination.

Besides Flagler, other visionaries included aviation executives like Juan Trippe, who pioneered international flight when he created what would become Pan Am, famed for years for their flying boats. Pan Am was joined in the skies by Eastern Airlines, led for decades by Eddie Rickenbacker.

And through the years the region made room for arrivals from innumerable diasporas, among them Haitians, Holocaust survivors, Cuban exiles and Jamaicans.

The sheer size of Genting’s proposal, which would include more than 5,000 hotel rooms, puts it on a path to have a similarly seismic impact, said Scott Brush, an independent hospitality consultant in Miami. The aftershocks will be even stronger if a Genting casino were joined by two others.

“You really are talking about a game-changer,” Brush said. “Overall, you’ll have a lot more people coming to South Florida. But I don’t want gambling to be the reason people come to Miami. Gambling is everywhere, so you can’t base your economy on it.”

Stuart Blumberg, the longtime president, now retired, of the Greater Miami & the Beaches Hotel Association, isn’t concerned. There are casinos in London and Moscow, “but nobody says, ‘I’m going to Moscow to gamble,’ ” he said.

He also rebuts those who say casinos would poach from the existing hospitality industry. “We’re going to add another attraction,” he said. “That’s the way I look at it.” Indeed, Miami didn’t stop being a tourist town when it also became a financial center. It’s stayed a party town even as it amassed cultural prowess with advancements like the New World Symphony, the Miami Book Fair International and Art Basel Miami Beach.

“We’re never going to be a gaming destination,” Blumberg said.

The Genting project dazzles. Arquitectonica’s buildings, inspired by tropical fish and corals, draw on Miami’s heritage of whimsical architecture, whether it’s Glenn Curtiss’s Arabesque structures in Opa-locka or the Atlantis condominium on Brickell, another Arquitectonica project famed for a hole in the middle.

Like Tuttle’s orange blossoms, they would convey a message about Miami to the outside world. But the playfulness plays into Miami’s image as a frilly, fast-buck kind of town, said Arva Parks, the local historian and author of “Miami: The Magic City.” She doesn’t hide her disdain of casinos. “I think we’ve been becoming a real place,” she said, with the cultural infrastructure of older, established cities.

The Genting complex, by contrast, would cast a symbolic shadow on the Adrienne Arsht Center across the street. “The architecture [of the Genting casino] doesn’t seem real,” Parks said. “We have a bad habit of saying to anyone, ‘Have your way with me.’ Miami would do anything to please tourists.”

An unobtrusive LEGACY

Historically, that included turning a blind eye to gambling. Miami was always a great place to place a bet. Julia Tuttle’s son turned her homestead into a gambling establishment called the Seminole Club. Pan Am’s former Coconut Grove terminal, now Miami City Hall, was leased for a while to a restaurant that got raided. And the Quarterdeck Club, an original Stiltsville structure, was far enough offshore to preclude a surprise visit from the law. That perhaps explains why no evidence of gambling turned up in a 1949 raid.

This was home base for Meyer Lansky, the mobster whose casino interests included the Colonial Inn in Hallandale and the Hotel La Nacional de Cuba in Havana.

In recent decades, legalized gambling like the ‘cruise to nowhere’ industry and Indian casinos brought gambling out of the shadows. A state seal of approval came courtesy of the Florida Lottery. Yet, the legalization has produced a crazy-quilt pattern of regulations that resulted in some form of gambling in virtually every corner of South Florida. Three multibillion-dollar casinos would elevate the economic profile of gambling to heights it never held before.

“I don’t think we need it,” Parks said.

Lost Construction Jobs

Some 24,700 construction workers might beg to differ. That’s how many construction jobs have been lost in Miami-Dade since peaking at 56,100 in 2007. Genting says its plan would create 15,000 direct and indirect construction jobs. If three are built, South Florida could theoretically have more construction jobs than at the peak of the boom.

In that sense, Genting joins a procession of visionaries who historically helped relieve Miami’s notorious real estate busts. The transplants who resuscitated South Beach in the 1980s are a case in point.

But dreams don’t always work out. In the 1950s there was a proposal for a futuristic Inter-Americas exhibit, akin to a permanent world’s fair, along the bay in North Miami. The “Interama” project never got built due to financing problems. A more recent example is Blockbuster Park, which Broward billionaire Wayne Huizenga — who at one point owned the Dolphins, Marlins and Panthers — envisioned as a massive pro sports venue and theme park. At one point, the Florida Legislature was set to consider a special taxing district comparable to the Reedy Creek Improvement District that gave Disney government-like powers over its vast Central Florida holdings. Nicknamed Wayne’s World, it sparked environmental objections, and then died out altogether after Huizenga sold the Blockbuster video rental chain.

But if Genting’s Resorts World Miami does get built, what then?

“During construction, that’s new jobs and that’s money coming into the area that will have a positive impact,” said Earl Grinols, a Baylor University economist and author of “Gambling in America: Costs and Benefits.”

“But this deal is for the rest of time.” Genting, he said, “may actually shrink the local economic base” if its guests don’t explore the rest of the city.

Guy Trusty, president of Lodging and Hospitality Realty Advisors in Coral Gables, said the sheer scope of Genting’s hotel component would affect the all hostelries. “From a revenue standpoint, I don’t think there’s any way we won’t be affected,” Trusty said.

“In the long run, it could be a benefit,” he said of Genting. “But short-term, say five to 10 years, there will be tremendous rate competition.”

Tourism Strong

An economic irony is that tourism is one of the few local industries firing on all cylinders. So far this year, Miami has the fourth-highest hotel occupancy rate in the country, at 75.8 percent, and fourth-highest daily room rate, at $115.79, according to Smith Travel Research. Both are records, bettered only by New York, Oahu and San Francisco.

“Tourism is doing very well,” said William Talbert, head of the Greater Miami Convention and Visitors Bureau. Miami-Dade’s leisure and hospitality sector provided 109,300 jobs in the historically slack month of October, 2,500 above last October. It’s up 8,900 positions in the last five years.

Genting says its project would add 30,000 permanent jobs once its resort is finished. But the GMCVB is officially neutral on the issue. “We’re on a listening tour,” Talbert said.

Eunju Suh, an assistant professor at FIU’s Chaplin School of Hospitality & Tourism Management, said she believes Genting would create a new class of visitor. “I don’t worry that much,” she said. “Gaming would be just one entertainment component. Because Miami has an established identity, we have to differentiate ourselves from Las Vegas.”

Since the days of Tuttle and Flagler’s railroad, Miami’s existence was dependent on the arrival of new generations of dreamers. At an estimated cost of $3 billion, there’s no doubting the size of Genting’s dream.

What’s yet to be determined is the role, if any, of destination resorts in the destiny of South Florida. “This is a huge issue,” says Paul George, the local historian. “The city has always been able to reinvent itself. This could be one of those great moments.”

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