Scientific Game

The Best is Yet to Come

Monday, 15 June 2015 20:24
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In the 1950s and ‘60s, Frank Sinatra and the other members of the legendary Rat Pack performed regularly on small stages and at dinner theaters in Las Vegas casino hotels. Tickets to the shows, often including a sumptuous multi-course meal, were either given away or priced far below break-even level. The casinos bore the cost as a means to draw gamblers.

As the years went by, the approach to entertainment shifted under new ownership. The Rat Pack era coincided with the height of mafia involvement in Las Vegas, then from the end of the ‘60s the mob was driven out and replaced by public corporations intent on ensuring transparency and generating shareholder value. Another factor was the emergence of destination-scale resorts that drew a new breed of visitor in search of a more diverse experience to that offered by the casino hotels of old.

By the ‘90s, the concept of entertainment in Las Vegas had been transformed. “Yesterday’s loss leaders have become today’s profit centers,” remarked a 1997 Wall Street Journal article describing the entertainment scene on the Strip.

It’s the concept Sands China brought to Macau. So although entertainment spectacles such as this month’s Katy Perry concert at The Venetian Macao’s Cotai Arena provide huge marketing value as well as a revenue boost to the property’s casino and other departments, the approval of any such event must begin with an assessment of its financial viability on a standalone basis. “Because obviously we’re a public company,” notes Sands China Senior Vice President of Marketing Scott Messinger. “We don’t want to actively lose money on the event itself. We can’t, for example, say Katy Perry is going to attract a lot of our casino customers, so we’ll factor in what the increase in casino win will be, and say it’s OK if we lose a bit of money on the show because we’ll make it up in the casino. But internally we do produce models that suggest what we think the impact on gaming will be. More importantly, what we think the ancillary lift will be on the property, whether it be in terms of hotel sales, F&B and retail.”

Among major non-gaming departments, retail is a standout for Sands China, with over 650 duty free shops across its Cotai properties—including The Shoppes at Four Seasons, ranked the highest-grossing mall in the world on a per square foot basis—having become a major profit generator. To some extent, the company has been ahead of the market with its entertainment initiatives, and Mr Messinger acknowledges it has ploughed resources into “bringing great entertainment here maybe before it became fashionable.”

When the Macau government decided to liberalize the gaming industry and award new casino-operating concessions in 2002, it was primarily with a view to diversifying the local economy. With the current plunge in gaming revenue and concern about receiving adequate table allocations at their upcoming Cotai resorts, it’s become decidedly fashionable for Macau’s casino operators to emphasize their commitment to non-gaming offerings. Yet Sands China took that commitment seriously from the outset. “It accelerated obviously with the opening of The Venetian Macao in 2007,” says Mr Messinger. “One of the quotes our chairman, Sheldon Adelson, famously made at the time of the opening was he was finally realizing the dream to help make Macau the capital of entertainment in Asia for Asians.” 

That mission is supported by the rapidly evolving tastes of China’s middle class. Chinese consumption patterns are poised for a dramatic shift with the coming of age of the generation born after the mid-80s in the era of economic reform and the country’s opening up to the world. They’re westernized, savvy, and beyond gaming and retail, will be hungry for world-class entertainment and dining experiences. And that’s what Mr Adelson’s integrated resort model promises to deliver. “It’ll be shopping, great dining, coupled with entertainment that makes Macau a true destination for leisure and business travel.

Sands China has helped put Macau on the global entertainment map. The 15,000-seat Cotai Arena has been graced by international headliners like Katy Perry, Rihanna, Justin Bieber, and The Rolling Stones, as well as Asia’s biggest stars, including “Eason Chan, Hacken Lee, Alan Tam, and all my favorites in the K-pop world like Girls Generation, 2NE1, Super Junior, Big Bang,” adds Mr Messinger.

Pollstar, a trade publication devoted to the worldwide concert industry, publishes an annual ranking of the world’s top 100 arenas based on ticket sales. “Every year for the past four years, our Cotai Arena has appeared on the rankings, reaching 68th place last year. It’s a very rigorous standard so it only includes actual cash ticket sales. So it’s not comps, it’s not giveaways, it’s actually literally tickets sold for cash. We’re the only venue in Asia that is ranked in the Pollstar 100. And we’re literally only 1,000 attendees below a major arena in Las Vegas. So it’s kind of proof positive of the kind of programming we’ve put into that venue.” 

Of course, Macau still has a way to go before it can lay claim to the title of Asia’s entertainment capital. The effort will be aided by greater critical mass as Macau’s other casino operators get in on the act. The coming expansion in the supply of high-quality hotel rooms will also help greatly. “We’re the only property, frankly, with our 9,000 rooms that actually has a significant number of rooms available for sale to casual customers,” says Mr Messinger. “Heretofore, most of the rooms at other properties had been reserved for gamblers. Now you’re going to see more and more rooms on the Cotai Strip, which will make it more viable for people to stay over.”

The upcoming Cotai resorts will also elevate the city’s ambience, creating the appropriate setting for an international entertainment hub. Sands China’s new contribution to the landscape, The Parisian Macao, is scheduled to open next year with a half-sized replica to the exact bolt of the Eifel Tower.

Despite the uncertain prognosis for Macau’s gaming sector, for its entertainment scene, as Frank Sinatra crooned in his last ever song in public, it’s safe to say “The Best is Yet to Come.”

On the eve of Katy Perry taking the stage at the Cotai Arena, Inside Asian Gaming spoke with Mr Messinger about Sands China’s expansive entertainment program, and what goes into making it possible.

IAG: What are the differences between booking Western acts and Asian ones?

It varies, obviously. For the Western acts, you have to wait for the tours to come through the region. Because obviously to go after Katy Perry, for example, and say we want you to do a one-off show in Macau and bring that rather elaborate stage setting and all the equipment, would almost be prohibitively expensive. One of the things we’re always conscious about with anything that we put on in our arena or our theater is that we want to make the ticket pricing or scaling affordable. It doesn’t do us any good to bring the world’s best entertainment and for it not to be affordable for people to attend it, particularly people within our community. We’re always mindful of having affordable ticket prices. So with Western acts the prevailing wisdom is that it has to be part of a tour. It’s very rare that we’ll try to do a one off. We often try to act in concert if we can with our colleagues at Marina Bay Sands. So if Katy is coming, we’ll see if we can do it in Singapore as well as here, so we’re bidding for multiple shows rather than just one show here, which perhaps give us some leverage. Because of what we’ve been doing in Macau, we get calls to let us know about tours forming in the region and ask us whether we’re interested in booking a particular artist that’s passing through.Four years ago, it was us having to pick up the phone and call people continuously to arrange the acts. 

   

The Asian acts are less tied to specific tours. It’s when they’re available, when we think we want a program in the arena. A lot of them are working through promoters. So it’s a different business model and it’s very successful and it’s a good business model. What we do with all entertainment is we’ve done a lot of research in terms of what our customers want to see, both Western and Asian. We also talk extensively through our internal constituencies here, the different business units to see whether or not the show makes sense. Because there may be someone I personally would die and go to heaven if they came here to perform, but I could go into a room with younger colleagues here and they’d look at me like “huh, who’s that person?”

And then as the discussions unfold in terms of what either the Western or Asian show is looking for in terms of price, we then try to determine whether we can scale the arena to match the expectation of that price point, or if we don’t think we can do a full 13,000- seat show in there, it’s a 7,000-seat show, we then have to have a serious discussion as to whether we think the cost modelmakes sense against that.

You’ll see a range of shows in there that literally go from 4,000 seats up to 13,000 seats. And with the appropriate cost modelling against each of those instances. The same thing takes place in the Venetian Theater as well—shows like the China National Ballet, the Philadelphia Orchestra go into that, and the challenge is there you’re programming a 1,700-seat venue versus a large arena venue. But we have a lot of enquiry after the Venetian Theater because it’s probably one of the most technologically advanced venues in the region, simply because it was built out initially for a rather spectacular show that required a lot of technology.

When you’re deciding whether to book a show, obviously you need to make a prediction of how many tickets you might be able to sell. How does that work?

Over the last four years, the people we have in place have become really good at judging what they think the market might bear for a certain performer. For the tours coming through the region, the promoters themselves have a good sense, and we might know how someone’s done previously in the region, in Shanghai, Beijing, Singapore, Japan, etc. A lot of the Asian acts, they’ve been here multiple times so we have our history. So we know now how Alan Tam and Hacken Lee do here, even when they’re here either just the two of them or they’re here as part of the Wynners. Grasshopper have been here so many times that I joke with them we’re going to rename our arena the Grasshopper Arena. So we have a good sense of how they all will do. We’ve had the K-pop here multiple times. We have our own track record of how they might perform.

 

We also are mindful of things around us. So, for example, if an act that we really want may have played Hong Kong prior to us, or are going to be going there three months after, it may impact our decision because we’re getting a lot of our audience from Hong Kong and they may not go twice. By turns it’s art, by turns it’s science. It’s fortunate that we have some really good people in those roles. The people who head up our box office operation are a strong factor as well. They watch continuously the acceleration and the pace of ticket sales, which we look at every day to see how we’re doing. That helps us gauge our marketing of the events and to know whether to turn on the tap or turn it down in terms of support. Whether it’s through offline advertising, online advertising, social, additional PR, etc. There are shows that hardly need marketing. Sammi Cheng is a good example. In the amount of time it takes for me to say we’re putting on a show, she’s sold it out. In the time it takes me to say we’re putting on a second show, it’s sold out as well. So there’s very little need to do any form of advertising or marketing behind that. I wish every show were that way, obviously. We carefully track how things are unfolding and we also look at past history to suggest whether I should be nervous now with the pace of sales. Or I look for causal explanations. For example, is there a particular holiday going on at the moment that’s making people think about something else, so they’re not thinking about buying tickets at that moment. In which case we’d expect it to pick up again immediately coming out of that particular season, at which point maybe we’ll goose it up a little bit with some additional marketing support to reignite the sales.

We had great success with Cats, which was 13 performances over 9 days. And the interesting phenomenon with Cats was the pace of ticket sales actually picked up each day during the run. It had great word of mouth, and it picked up considerably to where something like 94% of all tickets were distributed, and the gratifying thing is 89% of tickets were sold for cash. Three of those performances were mid-week, which traditionally was a bit of a slower period, and that gives us confidence now as we go into summer with Beauty and the Beast, which is going to be here for six weeks from June 13 to July 26, when there’ll be 18 midweek performances of that show. Beauty and the Beast is, I think, the most valuable property in the Disney theatrical canon, it was one of the most successful shows on Broadway over a course of 13 years. Obviously it’s a great family show, and we have great optimism as to how that’s going to do. But nevertheless we keep tracking how things are unfolding.

Ultimately, you do have to take a chance when staging events. Which is the case with any business. 

When you transplant successful shows on Broadway to Las Vegas, some of them do very well and some fall on their face. So there are no sure things in this. You do the best you can. The thing we keep striving for is bringing new and diverse entertainment experiences to Macau. Bringing a true Broadway show to Macau was an important addition to our entertainment portfolio, which is why we did Cats. We’re extending that with Beauty and the Beast. Our colleagues at Marina Bay Sands have been doing Broadway entertainment since they opened. Shows like the Lion King, Wicked, Beauty and the Beast is there now, so it’s something that we’re adding to our repertoire here in addition to the concerts, the sporting events, the award shows, the movie filming, the movie premieres. We’ve been fortunate the last four DreamWorks animation films, like How to Train Your Dragon 2, Turbo, they all did their premieres here. As part of fun events like the Asia Pacific Film Festival, a year ago Andy Lau debuted Firestorm here. The year before that we had Jackie Chan’s Zodiac 12. Those premieres are very meaningful. We love being able to give our guests the opportunity to see up close and personal these great stars.

Last year with the seventh anniversary of The Venetian Macao, we not only had UFC in for fight night around the anniversary, but we also did a special VIP screening of the Expendables 3 and the red carpet and screening was attended by Rhonda Rousey—who was in the movie and was also here with Dana White for the UFC event—and obviously there was Arnold Schwarzenegger and Sylvester Stallone. People were lining up for 7 hours before the red carpet to see Sly and Arnie. And we had the premiere for From Vegas to Macau, when Chow Yun Fat, Nicholas Tse, the entire cast walked the red carpet here. For our guests and our customers, the premieres can be truly wonderful experiences. And it’s also good for Macau because people are taking selfie photographs and posting and sending them back into China, so it’s showing a different Macau experience. The big wins for us are the broadcast events from the property. Whether it be the Top Rank boxing, the China Music Awards, Sing my Song, The Voice of China, not only is it an amazing experience in the arena, but for events like the Showdown at Sands with Zou Shiming in March, CCTV 5 chose to broadcast it continuously for four hours, as opposed to 90 minutes, and something on the order of 400 million people had the opportunity to look at that fight. It offers a different view of Macau in China. It helps the overall mission to expand Macau’s image as a great leisure destination.

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