IAG 2006-04-05 - Apr- May - page 12-13

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Italian, with a large marble staircase lead-
ing to the entrance andwalls adornedwith
paintings of Italian streetscapes, including
canals thatbringVenice toMacauayear and
a half before the Venetian. Despite the Rio’s
disappointing facade, themainland Chinese
visitors we spoke to seem universally im-
pressedwith its interiors, and there are indi-
cations that thecasino iseating into thebusi-
ness of Hong Kong-based Emperor Group’s
Emperor Palace Casino, which opened in
January (withgaming rununderStanleyHo’s
SJMconcession).
Galaxy is rushing toopen theGrandWal-
do inCotai before the“GoldenWeek”rushof
mainland Chinese holidaymakers in the first
week of May.The propertywill house 16VIP
gaming rooms, 166 tables and350 slots, and
will continue the company’s focus on the
high-roller segment. Galaxy will then make
itsfirstmajormove todraw themass-market
with the 33-storey HK$2.5 billion (US$320
million)GalaxyStarWorld,scheduled toopen
one month before Wynn. Galaxy StarWorld
willhave200 tablesand300slotmachines,as
well as 500five-star hotel rooms atwhat the
company calls “affordable rates” and a bevy
ofdiningandentertainmentofferings.
Affordability is key to Galaxy’s strategy.
GalaxyCEOAnthonyCarter stresses thecom-
pany’sadherencetothe“Asianpricepoint.”He
observes that while Sands Macau’s fine din-
ing restaurants are devoid of customers, the
noodle shopenjoys abrisk tradewithpenny-
pinchingday-tripperskeen tosaveasmuchof
their cashaspossible for thegaming tables.
Theday-trippersareMacau’sprovenmar-
ket,andGalaxy,whichclaims tohaveabetter
understanding of the local market than the
new arrivals from Las Vegas, believes main-
landChinesewillnotsupport themorepricey
productsofferedbyWynnResortsandLVS for
at leastanother tenyears.Ofcourse,WynnRe-
sorts and LVS believe their superior product
offeringwill immediatelybringanewmarket
of longer-staying,higher-spending visitors to
Macau to support theexpensivenon-gaming
elementsof theirnewproperties.
Costwill not be a concern at the casinos,
since nonewill impose cover charges and a
HK$100 (US$12.8) chipcosts the sameacross
all properties. All the new casinos will also
presumably containat least some tables car-
ryingminimumbets of HK$100 – the lowest
minimum currently available in Macau. As
Sands Macau has proven, day-trippers with
no ties tohotelswill prefer togamble in the
best-quality surroundings.
Assuming the likes of Wynn Resorts and
LVS are able to provide at least amarginally
GalaxyCotai MegaResort
better casino environment than the “local”
operators,Galaxy StarWorld’s casinobusiness
may bemore restricted to the customers ac-
tually residing in its hotel rooms. In a recent
article in
Fortune
magazine, Mr. Carter was
quotedassaying:“This isnotLasVegas;Asians
wanttogamble,notgoshoppingorseeCeline
Dion shows.Thatwill come indue course.But
rightnow I justdon’t see that thedemand for
these new facilities the Americans are build-
ingwillmeet the cost.”The trouble forGalaxy
is, regardless of the Americans’ bottom lines,
Asians may prefer to gamble in the venues
surroundedbyshoppingandshows.
Macau’s Second Big Bang?
Oneof the latest theoriesgainingacceptance
inastrophysicscircles is that theuniversewas
created by not one, but two big bangs. The
development of mega-resorts, of which LVS’
VenetianMacauwill be thefirst,could create
a second big bang inMacau. That big bang
maynotbegaming-focused though. It could
instead see the emergence of a new non-
gaminguniverse inMacau,and theexplosion
ofentertainment,diningandconventionand
exhibition revenues – at present, casino op-
erators inMacauearnnegligiblenon-gaming
revenues, while those along the Las Vegas
Stripearnover half their revenues fromnon-
gaming sources.
Currently, only 20% of visitors toMacau
stay inhotels, and the city needs todevelop
greater attractions to encourage people to
stay longer – gambling on its own is clearly
not enough. The sprawling Venetian Macau
will seek to provide a critical mass of non-
gaming attractions under one roof to keep
guests staying twoormorenights,as theVe-
netian inLasVegashasdone.Themoremod-
est Galaxy StarWorldwill bemore reliant on
external attractions tokeep itsguestsstaying
oneormorenights in thecity.
Galaxy’s attempt at single-property criti-
cal mass will take the shape of the HK$4.76
billion (US$610 million) Galaxy Cotai Mega
Resort, slated to open in 2008 and be com-
pleted in four phases by 2009 – by which
time Asians will presumably be ready to go
shopping and see shows (thoughnot neces-
sarilyCelineDion).
The casino at the Mega Resort will fea-
ture about 450 tables and 1,000 slots, and
the non-gaming draws include restaurants,
awater park, ahealth club and spa, karaoke
lounges, shops, an amusement arcade and
a theatre, in addition tomulti-purpose con-
vention and exhibition facilities (PBL-Melco
notably dropped the convention center
from itsUS$1billionCityof Dreams project,
perhaps fearing theVenetianMacau jugger-
naut). The Mega Resort will come after Ve-
netianMacau and provide less extravagant
but probably more affordable non-gaming
amenities.
Galaxy may deride the strategy of the
US-based operators, but themarket it is tar-
geting is asunprovenas theirs.For theirpart,
theUSoperatorsderideMr.Carter’sassertion
that their offeringswill be too expensive for
mainland Chinese. Says Steve Wynn in the
Fortune
article: “To look at the high level of
shopping and consumer taste in Shanghai
andHongKongandstill suggest that theChi-
nese won’t care about luxury is a ridiculous
denial of reality.”
Therewill likely be demand for bothVe-
gas-style luxury andGalaxy’s“affordable lux-
ury.”Galaxy has noplans tooffer the former,
but it may find itself competingwith LVS in
themarket for the latter.Told thatMr. Carter
believes the “Asian price point” for a hotel
room is under US$100, LVS Chairman Shel-
don Adelson responded: “I’m going to have
five price points in Cotai. I want the mass-
market and thehigh-rollermarket.My target
is tomaximizeeveryopportunity.”
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