Scientific Game

Political Designs

Macau’s first resort opening since 2012, Galaxy Phase 2 and Broadway Macau, reflects government pressure to diversify beyond gaming

Monday, 22 June 2015 14:38
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In a Macau where government decisions are considered the main reason for the yearlong decline in gaming revenue, Galaxy Entertainment Group’s US$3 billion expansion delivers much of what the authorities say they want. Now we’ll see if it’s also what customers want.

Galaxy Macau Phase 2 and Broadway Macau kicked off the next wave of Cotai resort openings on 27th May. The expanded property provides one of the market’s broadest array of non-gaming attractions. New features improve Galaxy’s strengths, including its VIP appeal and wow factor Grand Resort Deck, while adding new dimensions. Three new hotels boost the resort’s room count to more than 3,800. Other key additions include a 3,000-seat theater, ESPA joining Banyan Tree as a second destination spa, plus vastly expanded retail, food and beverage options, including signature Macau items.

The resort will provide a test case of how much Macau’s slump is attributable to the lack of new attractions, particularly on the mass market side, and how potent non-gaming attractions can be to draw traffic and boost revenue.

“We have a firm commitment to contribute to the diversification of the region’s leisure and entertainment industry,” Galaxy Chairman Lui Che-woo said on opening day. “We also promised to develop and nurture local talent and promote local culture to support the economy. Rooted in Macau, we are aligned with the central government’s vision to help the territory fulfill its potential as a world center of tourism and leisure, contributing to Macau’s long-term growth.”

In case anyone missed the message, Mr Lui added, “Galaxy is a patriotic company,” fully behind Beijing and Macau authorities’ vision of diversification.

Mr Lui’s son, Galaxy Vice-Chairman Francis Lui, said that during the first decade of post-monopoly Macau, rapidly expanding gaming revenue fueled strong growth. “In the next two or three years, we’ll see whether [Macau] can be more like Las Vegas, where non-gaming revenue represents more than 50% of their business.”

“The long term projection for this particular property, and for Macau really, is now tourism for the mass market,” Galaxy Macau Director of Operations Richard Longhurst says.

LOYAL TO THE CORE

While expanding its mass market and non-gaming appeal, Galaxy’s second phase makes a major commitment to its core customers, VIP players, and reaches out to the coveted premium mass segment. The 254-key Ritz-Carlton Macau is the chain’s first all suite hotel, each suite measuring at least 85 square meters (900 square feet), glistening with marble and gold. “[W]e would go so far as to argue that the Ritz-Carlton room product is currently the best in Macau,” Union Gaming Research Macau says.

The Ritz-Carlton Macau also aspires to high service standards, with in-room check-in, personalized stationery, and complimentar limousine drop offs, as well as aiming to become Macau’s top wedding location. The 51st floor Cantonese restaurant Lai Heen boasts a chef from Ritz-Carlton Hong Kong’s Michelin two-star Tin Lung Heen and the largest round table in Macau. The Ritz-Carlton Bar on the same floor is already approaching landmark status, the tower’s decorative grillwork on its windows evoking Fritz Lang’s classic film Metropolis.

The 51st floor also houses Sky 88, a key initiative to expand Galaxy’s share of the premium-mass market. This exclusive gaming area for top tier GEG Privilege Club members, designed to offer the cachet and ambience of leading VIP rooms to premium-mass players, “will be the best play destination anywhere in Macau,” Galaxy Chief Marketing Officer Kevin Clayton promises. “We will be assertively competing in this market.” Sky 88 occupies the top rung of a yearlong effort to revamp the Privilege Club program, Mr Clayton adds.

Phase two includes premium-play destination Horizon for Privilege Club members at the tier just below the top and a new Jinmen Premium Club for direct VIPs. Galaxy has also put a GEG Privilege Collection “luxury brand store” in the middle of the expanded main gaming floor, showcasing premiums and rewards for club members. In the VIP segment, junket promoters Tak Chun, Suncity and AG have new gaming suites in Phase 2 that include balconies in anticipation of the potential full smoking ban.

ALL ABOUT M-I

Asia’s largest JW Marriott, with 1,015 rooms, makes Galaxy a more viable contender in the MICE (Meeting, Incentives, Conventions and Exhibitions) segment. JW Marriott’s pillar-free 1,920 square meter ballroom accommodates up to 1,650, adaptable for events from boxing to banquets. “It puts the M-I in MICE for us,” Mr Clayton says. The ground level ballroom can be divided into three separate areas, and six flexible meeting rooms on the second floor can host groups from six to 216. 

Galaxy’s retail area has grown into a full-fledged shopping mall dubbed The Promenade that seamlessly rings the gaming floor and links the three hotel towers. The mall now has 200 outlets, skewing toward luxury, including 30 brands new to Macau, and measures over 100,000 square meters. It’s far more easily navigated than Venetian Macao’s Grand Canal Shoppes, though signage could be more helpful.

The expanded main gaming floor has the bulk of the additional 150 tables Macau authorities granted Galaxy, along with about 400 gaming machines, and is firmly fixed on the premium-mass segment. The new gaming area blends into the existing casino but has a more intimate feel; the sense of grandeur grows as you approach the middle of the floor.

Galaxy’s 75,000 square meter Grand Resort Deck atop the podium housing the casino is now a comprehensive water park. Joining the original wave pool with its 150-meter white sand beachfront, Skytop Adventure Rapids runs 575 meters through white water, geysers and waterfalls. A mountain cavern holds three nine-meter tall water slides, one of them transparent and 30 meters long. There’s also Kidz Island, poolside cabanas, five F&B outlets catering to bathers, gardens and a full schedule of activities for all ages, plus roving entertainers. The pool area is open to hotel guests only, as is the case at Asia’s most famous rooftop pool at Marina Bay Sands in Singapore.

Linked to Galaxy via an enclosed footbridge with moving walkways, Broadway’s 3,000-seat theater gives Galaxy a live entertainment venue that can draw visitation to the property, filling the gap between Venetian Macao’s 13,500-seat Cotai Arena and the 1,700-seat Venetian Theatre. Broadway’s theater will feature regional acts, international touring shows and even sporting events.

MACAU ON BROADWAY

Overall, Broadway is a groundbreaker for Cotai, aimed squarely at the middle market with hotel rack rates starting at HK$888, a 38-table mass market casino plus retail, food and beverage in a street market setting featuring local Macau small- and medium-sized enterprises, activated with roving live entertainers and a mobile stage for musical acts on weekends. “Broadway is distinctive as a product and as an experience, built in mind with what is the best in Macau,” Mr Clayton says.

Broadway was created from the Grand Waldo casino hotel that Galaxy bought and closed in 2013, investing an estimated HK$5 million to remake the property. “Galaxy acquired Grand Waldo because we saw it as a way to increase diversity of services for customers,” Mr Clayton says, even though “it was a bit off strategy” for Galaxy and for Cotai. “We had the indulgent Galaxy service. But people also want to have a different experience. We want Broadway to be a destination. The casino isn’t central to Broadway.”

“The positioning of Broadway is unique in Macau,” The Platinum Ltd Managing Director Mary Mendoza says. “Broadway, like when you say Paris, there’s an instant perception. That’s good for gaining mindshare of the market.” The Macau native marketing consultant adds, “I love the gaming floor. It reminds me of old days Macau.” The casino has street-level picture windows looking out toward Galaxy that, along with its compact layout, lends it a boutique feel. In its first four and a half days of operation, Broadway’s gaming floor reportedly tallied HK$5.3 million in gaming revenue.

Investment bank analysts have also been impressed with Galaxy Phase 2 and Broadway. Galaxy “nailed it,” Union Gaming Macau Managing Partner Grant Govertsen and Analyst Felicity Chiang write. “The expansion will enable Galaxy, for the first time, to fully compete across all market segments, and to provide a much more meaningful IR experience. This should allow the company to be a near-term market share taker across all gaming segments.”

Credit Suisse Research Analysts Kenneth Fong and Isis Wong praise Galaxy’s range of products catering to the high-, middle- and low-market segments, the “wide variety and uniqueness of nongaming offerings that help diversify Macau and lengthen players’ stay” and “traditional local brands that not only support SMEs but preserve Macau tradition.”

The report warns, “Despite our full confidence in management’s solid execution and the product, the current weak demand, especially high-end demand which Phase 2 focuses on, may create a challenging backdrop for the new property to ramp up.” Unless the expanded resort stimulates new demand, Galaxy’s expansion “may raise investors’ concern over ‘industry over-supply’ and may trigger a sector de-rating. We remain cautious.” Credit Suisse’s review of May gaming revenue estimates Macau’s average daily revenue rose during the week of the Galaxy opening to MOP691 million from MOP625 million the previous week.

Whatever customers, analysts and investors may say, Galaxy seems convinced that giving the authorities more of the non-gaming amenities they want will pay off in the long run.

Editor at large Muhammad Cohen also blogs for Forbes on gaming throughout Asia and wrote Hong Kong On Air, a novel set during the 1997 handover about TV news, love, betrayal, high finance and cheap lingerie.

 

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