Studio City opened its doors one year ago this month, and in just the past two months, Wynn Palace and Sands China’s The Parisian Macao have joined the main show in Cotai. Yet, even though they all bring new features to the gaming and non-gaming offering of the city, not all of them are achieving the success they expected.
Carlos Siu Lam, an associate professor in the Gaming Teaching and Research Centre at Macau Polytechnic, says Wynn Macau and Sands China “have had very successful experiences in making use of such non-gaming segments as fine dining restaurants, shopping, entertainment, as well as exhibitions and conventions, to draw patrons to their respective properties to boost their gaming revenue.”
As a result, Mr Siu believes “both Wynn and Sands are expected to be able to attract patrons from the nearby regions,” probably taking away some business from other casinos in the territory.
Studio City, the latest property of Melco Crown Entertainment, is a different story however.
“Relatively speaking, it appears to have been unable to offer competitive non-gaming segments to produce very satisfactory economic results to generate synergistic effects on its gaming revenue,” he highlights.
Other forces
Andrew M. Klebanow, partner at US-based Global Market Advisors LLC, says that in the long term, the properties that comprise Cotai “will have a profound impact on mass market growth – both mass and premium mass – as long as fundamental market forces are allowed to play out.”
However, of three properties mentioned, Studio City is the one that is facing more challenges.
“Studio City opened at a particularly inopportune moment in the history of the Macau gaming industry,” he says, explaining that there is nothing wrong with the property itself. “The property is a very compelling facility and adds a considerable amount of room capacity to the market, along with a good amount of mass market retail. The casino is also a very attractive facility. There is nothing fundamentally wrong with the property, only its timing entering the market.”
Mr Klebanow believes that in the long term, there is “sufficient market demand” for all of the properties to be successful, but the Central Government policy might “discourage visitation and consumption” and “these properties will be challenged from reaching their true potential”.
In addition, local government restrictions on the number of tables allocated to each property also have some negative impact. Macau’s gaming regulator authorised 150 new gaming tables for The Parisian Macao and the same for Wynn Macau’s latest property, which is a considerably lower figure than both expected.
“A casino that is expected to have 500 tables needs a considerable number of restaurants to accommodate players, and those facilities were planned and ultimately built. Then weeks before opening, the government informed the operators that they would only receive a quarter of the number of tables they had planned for. What is the operator to do with that excess restaurant capacity?”
Macau wants to limit the growth in the number of new gambling tables to not more than three percent per year through to 2023, and also plans to raise the contribution of non-gaming revenue in the casino industry to above nine percent, up from 6.6 percent in 2014.
Parisian is right
The managing partner and lead analyst of Union Gaming Research Macau, Grant Govertsen, in a report published last month, said “Parisian is the right product targeting the right market segments at the right time.”
Mr Govertsen says “the property has generally exceeded expectations, and most importantly seems to hit the sweet spot of what a typical mainland mass market visitor generally responds well to (a sense of grandeur, massive scale, European highlights).”
As a result, he expects the growth rate “to accelerate significantly relative to August”.
Over the first days of The Parisian’s operations, Mr Govertsen says “the volume of foot traffic between The Venetian and Parisian, as well as the volume of foot traffic between Cotai Central and all three SCL [Sands China Ltd.] properties on the west side of the Cotai Strip (Parisian / Four Seasons / Venetian) is many multiples of the volume of foot traffic between Parisian and Studio City (same goes for COD [City of Dreams]).”
Furthermore, within a couple months “all four SCL Cotai properties will be physically connected with no need to set foot outside, which is likely to ratchet up wallet share of base mass customers even further with Venetian and Parisian being the greatest beneficiaries”.
And, even though the opening of The Parisian might actually suggest “a net benefit for Studio City as a driver of base mass foot traffic”, considering its location, Mr Govertsen says they’ve “consistently observed more persons walking to Parisian (from Studio City) than to Studio City (from Parisian); in other words, a net migration towards Parisian.”
As a result, if these trends continue, Sands China’s new property may end up “to prove less of a benefit and more of a headwind for Studio City.”
IN BRIEF
Accident at Lisboa Palace
The government ordered the suspension of work involving lifting equipment at the construction site of SJM Holdings Ltd’s casino resort Grand Lisboa Palace, after a fatal work accident. News outlets say one worker at the construction site died after being struck by a falling glass curtain wall. The Labour Affairs Bureau issued a statement saying it had ordered the gaming operator and the contractor to suspend all lifting work at the site and to review and improve safety standards.
Applications pending
Applications for a total of 73 smoking lounges across Macau’s casino market were waiting for government approval as of July, said Health Bureau director Lei Chin Ion in an official statement. The note doesn’t specify which casinos have applied for the smoking lounges. It did state that a total of 86 smoking lounges were designated as government-approved facilities in the casino market as of early July.
Fines for smoking
A total of 394 people were fined in Macau from January to August for smoking in unauthorised areas inside the city’s casinos. This corresponds to an increase of 32.2 percent compared to the same period last year. The majority of those fined – 78.2 percent – were tourists, according to a press release from the Health Bureau.
