Macau's answer to the Las Vegas Strip enters a new phaseTuesday, 15 June 2010
When will Cotai, the wannabe extension to Macau's traditional downtown gaming industry, really come of age? The moment could be as significant in Macau history as when the centre of gravity in Las Vegas entertainment shifted from the Downtown area to the Las Vegas Strip.
Both the Cotai Strip and the Las Vegas Strip are essentially inventions of the human imagination rather than 'real' places. The latter was built out of desert not already conquered by Las Vegas' creeping urban sprawl. The former was literally dredged from the waters of the Pearl River Delta—not so much terra incognita as terra ad absurdum. Both places set out to challenge the status quo of the existing traditional gaming zones in the world's two most famous gambling cities because they have the space for the industry to grow outward not just upward. They have already provided integrated resorts—one stop shops for legal adult entertainment—everything you could ever need; from gambling, hotel accommodation, restaurants, shopping, theatres, nightclubs and sports events, all under a single roof. And there's a lot more to come—especially on Cotai.
In late May, Sands China, the local unit of Las Vegas Sands Corp, announced a deal for a 30,000 square foot Playboy Mansion Macao as part of the company's next phase of development on Cotai. That next phase, known as Parcels Five and Six, or 'Cotai Five and Six' is currently scheduled to have a first phase opening in the third quarter of 2011, says Sands China.
As to whether Cotai as a whole could currently be called a 'mature' tourism destination depends on how we define the term. One could argue that Macau itself isn't yet a 'mature' gaming market, given that around 75% of its entire revenues are dependent on high roller baccarat. Last year the casinos on the predominantly massmarket Cotai Strip—The Venetian Macao, The Four Seasons and City of Dreams, the resort from the joint venture Melco Crown Entertainment (Nasdaq: MPEL), between them recorded gaming revenues of US$2.46 billion. That's only 16.5% of the US$14.9 billion gross gaming revenues recorded by Macau as a whole in 2009. (CoD only opened in June that year.)
Given the VIP-skewed nature of Macau's gaming market, a more reliable indicator of the business health of Cotai may be the numbers of people arriving from mainland China via the Lotus Bridge, just a few hundred yards from The Venetian, and via the Pac On Ferry Terminal at neighbouring Taipa. In the first four months of 2010, arrivals to the Taipa ferry terminal rose 24.9% to 1,107,183, according to DSEC, the territory's Statistics and Census Service. By contrast, arrivals by ferry to the Outer Harbour next door to Casino Oceanus on Macau peninsula rose by only 4.6% during the period to 2,160,671.
Visitor arrivals by land (including the Border Gate on Macau peninsula as well as the Lotus Bridge) increased by 13.9% year-on-year to 4,261,467 in the first four months of 2010.
In appearance, Cotai still has a raw, unfinished look—rather like those vintage photographs of Hollywood from the early 1920s. Cotai doesn't yet have the 'stickability' of the Las Vegas Strip in terms of offering a place for people to stroll and take in the sights and the lights. That's what Dr Ambrose So, the Chief Executive of Stanley Ho's casino operating company SJM, meant earlier this year when he told Inside Asian Gaming that Cotai doesn't yet have "critical mass".
SJM has been adopting a 'wait and see' approach to Cotai. It doesn't currently have any land gazetted for casino use there, but there is a piece of land on Cotai that if developed will depend on a gaming sub licence purchased from SJM. That's the MGM site to the east of the Strip behind Sands China's plots five and six.
SJM itself was supposed to have had land on Cotai at a rock bottom price following a land swap deal in 2006. In the deal, the Macau government indicated it would allow Shun Tak Holdings—a shipping and property conglomerate providing most of the ferry services from Hong Kong to Macau that Pansy Ho leads as Managing Director and Dr Ho chairs—to exchange a 1.1 million square feet piece of land it acquired in Taipa in 2002 for a plot on Cotai by paying HK$500 million. Following the arrest, trial and imprisonment for corruption of Ao Man-long, a former Macau secretary for transport and public works, land swap deals went out of fashion in Macau, and public tender for land sales at going market rates became all the rage. SJM was pretty vague in its IPO prospectus in 2008 regarding its plans for Cotai, referring only to "preliminary plans for two mixed—use developments".