Scientific Game

Macau’s entertainment dilemma

Monday, 08 May 2017 08:50
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In an insightful interview, former Melco Crown Entertainment executive John Raczka explains why Macau must overcome some difficult hurdles if it hopes to fulfill the government’s dream of boasting world-class non-gaming attractions.

If you ever wondered who drove the development of the cutting edge attractions “DreamPlay” by DreamWorks Animation and Pangaea Ultra Lounge at City of Dreams Manila – as well as Batman Dark Flight, Warner Bros Fun Zone and Franz Harary’s House of Magic among others at Studio City Macau – meet John Raczka. The entertainment executive has held key roles with the likes of Hanna-Barbera Productions, Turner Home Entertainment, Sony Pictures Entertainment, BT Openworld and most recently Melco Crown Entertainment as Vice President of Entertainment Development & Operations. Inside Asian Gaming caught up with John to ask him just how far entertainment diversification can be expected to evolve in Macau.

 

Inside Asian Gaming: Thanks for your time John. First of all, how diversified do you envision Macau’s entertainment menu becoming in the future given the government’s push for broad diversification among Macau’s integrated resorts?

John Raczka: I would first say that expectations have to be realistic. There are a number of realities in the marketplace beyond the control of the IRs that will directly impact this.

 

IAG: Can you provide more details on some of these realities for us?

JR: Sure. The level of entertainment consumption sophistication among Chinese consumers varies greatly across different Chinese provinces, with most hosting indigenous-skewing entertainment vehicles with modest production values. So asking mainland Chinese to embrace more sophisticated state-of-the-art entertainment offerings and pay a premium price for it requires totally new experiences, spectacle scale if possible and thematic ties linked to national heartstrings or highly prized foreign intellectual property franchises for added bonus – none of which is brought to life cheaply or in short order.

Also, when it comes to live entertainment events, especially concerts, competitive frame dynamics with performance venues in Hong Kong skews in Hong Kong’s favor from some perspectives. Besides the convenience factor for Hong Kong citizens to see shows that are only a taxi ride away as opposed to having to take a ferry to Macau, promoters are not limited to book on coveted weekend dates in Hong Kong and can focus on marketing in Hong Kong alone to fill a show.

When you take this into account – as well as the fact that so many of the Top 15 Cantopop revenue-generating artists 10 years ago are still among the biggest revenue-drivers today, leading to significant repeat artist bookings – it is obvious that Hong Kong is a substantial live entertainment competitor to Macau.

If trying to draw a comparison with Las Vegas, one would reasonably ask why is it popular for Americans to travel from major US feeder markets to Las Vegas to see a touring show instead of seeing it more conveniently at home? But if you think about what the “Vegas Concert Trip Experience” includes, it is broader than just seeing a concert and having dinner. It would likely be a two or three night versus a one-night stay and include multiple nightclub visitations, possibly a pool party during the day and other gaming and non-gaming activities throughout the stay that could not be experienced locally.

The density of non-gaming entertainment offerings in Macau has yet to reach a required scale to more closely mimic this multidimensional entertainment experience in Las Vegas. To be sure, the psychographics of Macau’s visitor base, local weather and other factors would require a different mix of entertainment vehicles than that in Las Vegas for similar dynamics to exist here, which is why we have to keep putting innovative experiences in front of the consumers and learn by their responses. Not everything to be built will work, but things like research won’t help much in providing guidance in this area, for the customer is a rear-view mirror, not a guide to the future. So findings would be largely based on what already exists regionally which is not that robust in leading edge entertainment deployments, creating a great opportunity for Macau.

 

IAG: You mention nightclubs. Wynn Palace didn’t open with a nightclub despite previously announcing a plan to do so and there’s no word of anything coming from MGM in Cotai. Will we ever have a similar percentage of nightclub-generated contribution to the IR revenue mix as that in Las Vegas?

JR: Shenzhen and Hong Kong are obviously both vibrant club and lounge markets and Taiwan is not short of either amenity, so can Macau theoretically mimic the Las Vegas weekend clubbing migration experience with young adults visiting from its feeder markets like that enjoyed by Las Vegas operators? Without a critical mass of state of the art clubs in Macau we won’t ever know, as clubbers typically want to be able to choose from multiple destinations each night out and expect an experience not available back home if they have to travel.

Having said that, clubbers visiting Las Vegas for the weekend from LA, Phoenix, San Diego or San Francisco are primarily all Americans who can visit spontaneously, not needing to apply for a visa. They are pretty homogenized amongst each other, creating a different operating scenario than a club to be filled with guests from Hong Kong, China, Taiwan and elsewhere, which creates a whole host of different dynamics to manage. This would hold true from marketing to operations, music programming and so on. To be fair, committing to significant space and investment for such social real estate is not an easy decision for a Macau IR to make.

IAG: The Parisian opened without a resident show in its new theatre. Why aren’t there more resident shows in Macau?

JR: Two big contributing factors would be marketing costs and once again the entertainment consumption maturation curve already mentioned. In the US, a new resident show of significant production values would have a heavy marketing up-spend during the first year to launch the show, but it would then largely benefit from national word-of-mouth dynamics in subsequent years to allow marketing costs to fall to maintenance levels. You see the show and call your mom in Chicago or your old college roommate in Miami and say, “You have to check out this show the next time you’re in Las Vegas!” Each domestic ticketholder becomes a potential advocate of your product on a multi-market level from one coast to the other.

But we don’t have that same word-of-mouth carriage reach from Hong Kong to Taiwan, Japan or South Korea, let alone opposite sides of China, so you have to extend more marketing dollars to educate distant inbound markets over time. The other item is the big unknown of currently how many resident shows in Macau, with its particular visitor demographics, can simultaneously sell out five or six days a week?

 

IAG: Steve Wynn stated at last year’s Wynn Palace launch that, “A hotel is not diverse if it puts up a rollercoaster. Hengqing has the rollercoaster, but you don’t put the rollercoaster in the casino. They tried that in Las Vegas and it didn’t work.” Do you agree?

JR: The roller coaster at New York New York continues to be a profitable amenity for the themed property. It’s an iconic element on the Strip, which first-time visitors especially support and also contributes to the property’s theme. Circus Circus has two popular roller coasters in its 5-acre Adventuredome indoor amusement park, which first opened in 1993. I believe if well integrated into the resort’s overall design with a good location, a standalone ride can perform financially well and wear a few different hats of purpose being on the property.

 

IAG: More broadly, what do you believe to be the definition of diversity of entertainment as it applies to Macau, and are Macau IRs getting it right?

JR: With Macau increasing its mass market visitor base, I am a fan of an IR possessing an entertainment ecosystem that has a mix of complementary experiences that address multiple key constituencies versus programming narrowly, demographically speaking. This diversity can be defined by a range of entry level versus premium priced experiences, as well as by consumption type, meaning interactive versus passively consumed offerings, like a ride versus a theatrical show.

Some operators are already supporting this philosophy at different levels, which is great since it promises more to come as different entertainment vehicles find traction with Macau’s visitors, instilling greater confidence that the market will reward further investment in non-gaming entertainment. The wick has been lit, which is key.

IAG: The Cotai Strip has long been a work in progress but is now nearing completion in the sense that, with most properties now open, the entertainment cluster that Sheldon Adelson originally envisaged now exists. Does this change the dynamic for operators and should they be working more closely together in marketing the entire area as an attractive entertainment hub?

JR: I think the current disparity of non-gaming entertainment investment levels across the operators, and therefore the prioritization of their respective marketing focus, makes this a challenge. However, Macau being marketed as an entertainment hub obviously needs to encompass all of Macau, not just the IR properties. I have always been impressed by the level of support Singapore’s public agencies, including its Media Development Authority, extend to entertainment vehicles that promote the market on an umbrella basis, which in turn helps the tax-generating leisure industry companies perform even better than they would with their own level of marketing. It’s a win-win dynamic.

 

IAG: How much are sponsorship brands playing a role in influencing touring shows to play in Macau?

JR: From a programming perspective, very little. It is well known that Macau events do not garner the same level of sponsorship hard dollars from advertisers compared to events in larger “entertainment heavy” markets. Perhaps the Brand Manager in Shanghai feels he or she is already reaching Macau’s Chinese visitors across the border and the Hong Kong Brand Manager knows the majority of Macau’s daily visitors are from mainland China, not Hong Kong. In any case, this is one of the reasons why you don’t see a number of large, off-property perennial events that are broadcast-worthy and putting Macau more significantly on the Asia-wide lifestyle and entertainment map.

For example, it would be great to have a Macau Fashion Week to cross promote all of the IRs’ great designer-laden shopping malls, or a Macau equivalent to the “Coachella” music and arts festival, which could grow in scale year after year until it becomes social folklore among the musically inclined. Government-owned venues like the Macau Dome and Macau Stadium can be helpful in providing a neutral event location among partnering IRs, but without a strong sponsorship landscape, additional financial support would also be needed because it’s challenging for the IRs to carry all the hard costs for such events alone.

 

IAG: On a macro basis, what would you like to see Macau mature into as an entertainment destination?

JR: Macau and Hengqing Island, in principal, can collectively offer consumers a Las Vegas/Orlando-like hybrid experience due to their distinct entertainment offerings and close proximity to each other. But this will require better travel logistics between the two, fostering a stronger mass market visitor base in Macau as a result.

If the Macau IRs continue to push entertainment experience envelopes, China will further stand to gain by the number of its citizens experiencing world class entertainment, who will in turn vote with their dollars for greater quality entertainment offerings when returning home, spawning entire entertainment ecosystems of local investment in entertainment productions and support service businesses across the country. This will generate even greater demand for non-gaming entertainment experiences in Macau as well in a healthy, 360-degree fashion.

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