IAG NOVEMBER 2015 - page 11

November2015
inside
asiangaming
11
to help characters from Tweety Pie to the Green Lantern overcome
foes and outscore fellow riders. The 40,000 square foot fun zone
on four levels also features a diner with character themedmeals at
family friendly prices and a pair of party rooms for Looney Tunes or
DC superhero styled children’s events. (No bachelor or bachelorette
parties,management says.)
Although they’reprimarily intendedascrowdpullers,MelcoCrown
hopes to get some return on its entertainment investments. The
Golden Reel is priced at MOP$100 (US$12.50) for adults, MOP$80
for childrenup to 12andMOP$85 forMacau residentsand seniors60
and older. Batman Dark flight costs MOP$150 for adults, MOP$120
for children andMOP$125 for residents and seniors. House ofMagic
tickets runMOP$400 foradults,MOP$320 forchildrenandMOP$340
for Macau residents, with VIP treatment available in all categories
at a 50% premium. Two hours in the Warner Bros Fun Zone costs
MOP$200 for an adult and child andMOP$340 for two adults and
two children. An adult must accompany children under eight. Hotel
packages include the Golden Reel and Batman as freebies, but the
HouseofMagic comesat aMOP$700premium for two.
INSTANTEARNINGS
Despite the attractions’ revenue generating potential, Morgan
Stanley Research warns that they are likely to be a drag on Studio
City’smargins. The brokerage says that will be offset by the resort’s
Cover Story
higher margin mass market gaming. Analysts Praveen Choudhary,
AlexPoonandThomasAllensuggest thatStudioCitywill beaccretive
forMelco Crown’s fourth quarter and drive 30% EBITDA growth for
the company in 2016. They expect Studio City to generate US$348
million inEBITDAnext year, basedon 3% growth in gaming revenue
for the market overall and 21% growth of Melco Crown from their
respective thirdquarter levels.
But the Morgan Stanley report cautions that if new supply fails
to drive demand – it notes that GalaxyMacau’s Phase 2 opening in
May has not materially boosted themarket’s gaming revenue – the
result could be price wars, promotion overspending and margin
pressure. Credit Suisse analysts Kenneth Fong and Isis Wong, who
turned positive in July and bullish last month, observe that Melco
Crown is unlikely to use amarketing strategy that would hurt 100%
owned City of Dreams to benefit 60% owned Studio City. Credit
Suisse estimates that Cotai’s new casinos will break even if there’s
1.5% gaming market revenue growth and a 15% return on invested
capitalwith4%growth, though thosecalculationsdon’t factorStudio
City as an allmassmarket casino.
Melco Crown is positioning Studio City as a mass market
property, while City of Dreams remains focused on premiummass.
One indication of the difference is the classification of both Studio
City hotel towers as four star facilities. However Mr Ho says the
hotels, “for international standards,arebeyondfivestar,”and the four
“Although they’re
primarily intended
as crowdpullers,
MelcoCrownhopes
toget somereturn
on itsentertainment
investments.TheGolden
Reel ispricedatMOP$100
(US$12.50) foradults,
MOP$80 for children
up to12andMOP$85
forMacauresidentsand
seniors60andolder.”
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