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David Chow’s plan for a super sauna may be a sign that ‘old Macau’ is fighting back

Friday, 01 April 2011 17:27
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Old Macau bumped up against new Macau in an interesting fashion recently when local businessman David Chow announced plans to spend HK$500 million (US$64.3 million) on The Landmark Macau Hotel. The cash will come from a HK$1.8 billion syndicated loan Mr Chow is raising for investments in Macau.

The Landmark Macau Hotel is not an old property by Western standards. It was only opened in 2003. But it had a chequered history during the planning stage. Initially the development was due to be luxury apartments only. Then the hotel concept was introduced as a straight swap, until eventually the developers settled on a mix of hotel and luxury serviced apartments.

In the years immediately afterwards, the hotel’s apartment-sized suites and bathrooms and its impressively vast marbled entrance hall made it one of the premier hotels in Macau. It was also one of the first properties in Macau to offer an upscale shopping mall with premium fashion brands (operated by the Rainbow Group). But things change fast in Macau. By autumn 2006 with the first phase opening of Wynn Macau, The Landmark Macau Hotel began to be somewhat overshadowed and ‘out marketed’ by new product from Wynn and the other out of town investors after the casino resort building boom of the mid-2000s.

But there’s still an important segment of the Macau market that wants upscale accommodation with a distinctively Chinese management and service style. That’s arguably the selling point of Mr Chow’s hotel. And it’s not always what’s on offer from the new foreign hotel brands in Macau. Inside Asian Gaming has been told by insiders that one of the major foreign-owned hotels in Macau times its check-in desk staff when they speak to an arriving customer. If the conversation goes beyond the allotted minutes, then the staff member is required to close down the interaction. If the staff member doesn’t do it, a line manager will.

Mr Chow—a Hong Kong-born former Macau lawmaker—apparently understands the market he’s serving. It’s a specifically Chinese one where personal attention and even organizational quirks are valued over scripted greetings and a feeling the guest is merely another link in the corporate sausage machine. Mr Chow is seeking to turn that insight into fresh profits via his refurbishment. The Landmark Macau Hotel complex already houses a casino—the Pharaoh’s Palace Casino. It’s the type of VIP-focused venue operating under an SJM licence found in many of the Macau peninsula’s ‘legacy’ hotels. What the hotel lacked until now was a sauna.

The Chinese hotel sauna is a cultural phenomenon with no real equivalent in the West. It’s something like a cross between a gentleman’s club, a health club and a lap dancing establishment. And they are enormously popular in Macau and Greater China. Some men on 24-hour visits to Macau use the more upscale saunas found in other Chinese-owned and managed properties as virtual hotels in their own right—ordering snacks, taking naps and enjoying a massage between spells at the gaming tables, either onsite or elsewhere in the building.

After The Landmark Macau Hotel renovation, which is scheduled to take a year, that property will boast Macau’s biggest sauna, at 60,000 square feet. That should boost the hotel’s appeal not only to room guests but to a certain segment of Chinese walk in customer, given that it is within strolling distance of a whole cluster of downtown casinos that don’t have such a facility. They include Galaxy’s StarWorld, Wynn Macau, the SJM-licensed L’Arc and Oceanus and MGM Macau.

The Macau casino operators originating from out of town—probably concerned about any negative reactions from regulators in their home markets and worried about protecting their brand image as squeaky clean purveyors of adult and family entertainment—have studiously steered clear of installing Chinese-style saunas in their establishments. Even the quintessentially Chinese casino operator SJM went for the less racy option of a hostess nightclub at its flagship Grand Lisboa property—though it did for a while host a nude Tokyo-style revue show upstairs in an area now turned—almost inevitably—into yet another VIP baccarat room.

The Landmark Macau Hotel has had its share of controversy in the past. It used to be called simply ‘The Landmark’ until Hong Kong conglomerate Jardine Matheson Holdings complained the name was a rather glaring infringement of its own ‘Landmark’ global hotel brand.

Mr Chow is himself no stranger to controversy. His Fisherman’s Wharf scheme, a HK$2 billion leisure project with casino and hotel next to the Outer Harbour, has not been a success since it opened on New Year’s Eve 2005. The scheme—part bankrolled by Dr Stanley Ho—uses a hodgepodge of architectural styles from around the world but is neither theme park ‘fish’ nor shopping and dining ‘fowl’. In early 2009, several international hedge funds including Och Ziff and TPG-Axon accepted a heavily discounted buy out of US$400 million-worth of debt securities they committed to in 2006 for the project. Many Macau observers, however, think the real long-term value of Fisherman’s Wharf is in its land bank—a prime waterfront plot next door to Sands Macao in the biggest casino market by gaming revenue in the world.

It certainly seems unlikely that the HK$1.3 billion balance of Mr Chow’s syndicated loan (underwritten by Industrial and Commercial Bank of China, Bank of East Asia, Banco Comercial Português, Guangdong Development Bank and Banco Comercial De Macau) can put Humpty Dumpty back together again as far as Fisherman’s Wharf is concerned.

Mr Chow did say, though, that at least some of the cash would be spent on Fisherman’s Wharf, as well as on purchasing new limousines, luxury boats and leasing private jets to strengthen his offer to VIP customers. The strategic impact of all these moves—in terms of building up a Chinese entertainment offer in downtown Macau—could be significant. The Landmark Macau Hotel is only a short cab ride away from Macau Maritime Ferry Terminal. The terminal, at the Outer Harbour, is—by passenger volume—still the main sea route for ferry passengers into Macau.

No matter how many investor presentations are made on Macau by overseas operators, one fact comes shining through. If you want to make money, don’t just try and impose Las Vegas on the market—give the customers what they want. Arguably, Mr Chow failed that test with Fisherman’s Wharf. The question is, can he now make amends by spending money on a super sauna and VIP toys? If the gamble pays off, it could be a sign that the old Macau is not so much fighting back, as simply reaffirming its presence. ‘Asia’s Las Vegas’ may have to wait a little longer for its place in the sun. ‘Asia’s Macau’ is still alive and well.

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