Seven months on from its opening, Galaxy Macau’s new property honeymoon period is over, but its popularity seems undiminished. Inside Asian Gaming spoke to Galaxy Entertainment Group President and COO Michael Mecca about how the erstwhile VIP-focused casino operator is slowly building its mass-market business with its Cotai resort
Following the mid-May opening of its new flagship property—the expansive HK$16.5 billion (US$2.1 billion) Galaxy Macau resort on Cotai—Galaxy Entertainment Group (GEG) soared from near the bottom of the revenue share league table of Macau’s six casino operators to second place. Only the city’s previous monopoly casino operator, SJM, did better. GEG maintained that second place ranking into October (the most recent available official figures). That’s no small feat for a company that has only seven years’ operating experience in the casino industry, and is pitted against international market stalwarts such as Las Vegas Sands Corp, Wynn Resorts and MGM.
GEG’s market share surge was primarily the result of its soaring VIP baccarat revenue, driven by the significant expansion of its VIP capacity as Galaxy Macau came online. The property’s swanky VIP gaming rooms (but not its main casino floor) were designed by world-renowned casino architect Paul Steelman, and easily drew in junket operators and their high-rolling customers. GEG has continued to expand the VIP facilities at Galaxy Macau as the growth of Macau’s overall VIP baccarat sector continues to outpace that of its mass market. Galaxy Macau’s stock of VIP rooms increased from seven at opening to ten by the third quarter of 2011.
In absolute terms, the mass market still only makes a paltry contribution to GEG’s total revenue—with the company’s main gaming floor table revenue (excluding slots) constituting just 14.4% of its total table revenue in October. In relative terms, however, GEG’s mass-market revenue has been exploding (growing at a much faster rate in percentage terms than its VIP revenue) since Galaxy Macau provided the company its first real hook to lure mass crowds.
GEG’s previous flagship since 2006, StarWorld Hotel & Casino on the Macau peninsula, had a very limited main gaming floor owing to the property’s tiny plot size, and by necessity, catered primarily to VIP baccarat players. The unveiling last year of a refurbished, Paul Steelman-designed main casino floor at StarWorld did little to boost that property’s mass-market appeal, suggesting size does matter when it comes to creating a crowd-pulling mass-market gaming venue.
The expansive Galaxy Macau—occupying a land area of 550,000 square metres—has sufficient scale to house several mass-market attractions. In June 2011—the first full month of Galaxy Macau’s operation—GEG’s main gaming floor table revenue (excluding slots) more than tripled year-on-year. In October, it was almost four and a half times higher than in the year-ago month, suggesting Galaxy Macau’s mass-market business is gaining traction, with the opening-day crush of curiosity seekers giving way to regular, serious mass players.
In contrast to their mass-market counterparts, VIP players seem content within cosy confines—as long as they receive excellent customer service. StarWorld punches well above its weight in Macau’s high roller segment, earning disproportionately large VIP baccarat revenue relative to its modest size and development cost—HK$3.4 billion (US$436 million). The property’s robust VIP baccarat performance is generally credited to GEG’s steadfast focus on anticipating and meeting its customers’ needs.
Maintaining that focus
As GEG President and COO Michael Mecca points out, “StarWorld has always been one of the most prominent VIP casinos anywhere in the world, and our responsibility at Galaxy Macau was to ensure we gave that same focus to customer service in our mass business and premium direct business. And we had to make sure that all of our team members were geared toward that.
“We wanted our mass players and premium direct players at Galaxy Macau to enjoy that same level of welcome and memorable experience as our VIPs have always enjoyed with us [at StarWorld]. Every guest on our mass floor is important to us.”
Galaxy Macau still has a way to go in developing its mass-market business. In October, 17.5% of total table revenue at Galaxy Macau came from the main floor. Although that compares favourably with the mere 7.0% of total table revenue derived from the main floor at StarWorld in the same month, it is still short of the 22.3% of table revenue generated by the mass market industry-wide.
GEG has a clear incentive to boost its mass-market business because it offers much better profit margins than the VIP sector, which in Macau is dominated by junkets to whom casino operators must offer sizeable commission or revenue share. Among the efforts to boost mass-market revenue at Galaxy Macau is the placement of a clearly demarcated high-limit area in the centre of the main gaming floor, in addition to the operation of GEG’s Galaxy Privilege Club loyalty programme, encouraging members to play more in order to move up the tiers of the scheme and qualify for greater benefits.
Another segment GEG is seeking to expand is its premium direct business (consisting of high rollers who come to the casino directly, rather than through junkets), which also provides superior profit margins to junket-driven business. Premium direct players are catered for at Galaxy Macau’s Jinmen Club, containing 23 tables and six private salons, including one of the most luxurious such salons Inside Asian Gaming has visited, complete with its own private dining area, massage table and spa room.
Spreading the word
IAG toured Galaxy Macau on a recent Tuesday afternoon with Mr Mecca, and remarked on the crowds of visitors property-wide during a mid-week, non-holiday period. Mr Mecca responded: “The popularity of the property just keeps growing. The best promotion you can have is word of mouth. Whether it’s with the day-trippers or the premium guests, they’re our best promoters. Galaxy Macau creates memories for people, so when they go back home, they want to tell their friends they had a great experience here.”
That experience begins from visitors’ initial glimpse of the property’s façade. “When you first look at it, you see a building that is majestic, that is palatial, and makes a promise to you that something incredibly special is happening inside.”
Mr Mecca stresses that in order to provide guests the company’s coveted “World Class, Asian Heart” experience promised in its marketing campaigns, Galaxy Macau depends crucially on its 8,000 “vibrant, enthusiastic” team members, who “breathe life into the facility.”
Both Galaxy Macau and StarWorld are known around the city for boasting the most striking, leggy female welcome ambassadors at their lobbies, ushering guests inside with beaming smiles. “They’re selected as much for their personality as for their profile,” says Mr Mecca. “All of the ladies posted around the property, they have big smiles, they welcome our guests, they take photos with them, they take photos of them, and they’re here just to make people feel welcome. So as soon as guests walk into Galaxy Macau, they immediately feel welcome, and they feel they’re in a place where they can feel comfortable during their holiday—whether their holiday is for five hours or for five days.” And the friendliness of Galaxy Macau’s staff goes well beyond the welcome staff, permeating the casino areas, hotels and F&B outlets.
As for maintaining service standards throughout the property, Mr Mecca explains, “we spend a great deal of time and energy training our people, not just when they first join us—we have the dealers’ school and training classes when they join—but then on a regular, ongoing basis. We have dedicated people in every department who spend their entire time on the floor, and there are impactful behaviours that we monitor, that are all geared towards providing the required level of service. You’ll see that every one of the security guards, as you enter, they’ll make a motion of welcome. And the dealers, after each hand, they’ll look up at the customers and make sure everything is okay. Every department in the property participates in the programme and our goal is to provide a level of service second to none in the industry.”
Integral to keeping Galaxy Macau’s employees motivated is the hands-on approach of GEG’s senior management. “It’s about all of us being present,” comments Mr Mecca. “All of us participating with these young people, being out here supporting them every day and being onside with them. So they know that we’re out there too. We’re not hidden up there [in corporate offices], we’re out here with all of these young people greeting the guests, supporting them, and making sure they have all the tools that they need to get the job done.”
Value propositions
With Galaxy Macau, GEG wanted to create “a set of game-changing amenities for Macau,” states Mr Mecca. “We wanted to provide a set of overall facilities that didn’t exist here. That’s not only good for our company, that’s good for Macau. Every property that opens now should add value to the proposition of the integrated destination resort.”
Galaxy Macau’s centrepiece attraction is the lush, tropical, 52,000 square metre rooftop Grand Resort Deck, where a 350-ton white sand beach surrounds the 4,000 square metre Skytop Wave Pool. Both the resort’s two grand main lobbies offer free visual spectacles—one featuring a giant diamond rising majestically from a fountain, and another a series of giant crystals that display colourful visual effects triggered by motion sensors as visitors walk by. Meanwhile, the branded lobbies of the Banyan Tree Macau (featuring the sumptuous Banyan Tree Spa) and Hotel Okura Macau in the property’s second tower have their own distinct charm. Galaxy Macau offers a combined 2,200 five-star rooms, suites and villas, including 1,500 rooms at the Galaxy-branded hotel.
The property also houses the city’s most diverse pan-Asian selection of F&B outlets under one roof and on 15th December will inaugurate a state-of-the-art nine-screen UA Galaxy Cinemas multiplex—eagerly anticipated by residents of Macau, where there are currently no modern multi-screen cinemas.
Mr Mecca states: “We have invested a great deal to expand our non-gaming offerings to help further the government’s goal to diversify Macau’s leisure and entertainment offerings and position Macau as a world class tourism and leisure centre. And we will continue to do so.”
Home-field advantage
In addition to its top-notch customer service and amenities, Galaxy Macau also benefits from the regional experience of GEG’s local leadership—namely, Chairman Dr Lui Che Woo and Vice Chairman Francis Lui—as well as the international expertise of its imported senior executives, such as Mr Mecca.
“The Lui family has been doing business in Hong Kong, mainland China and Macau for over fifty years,” says Mr Mecca, “so they understand who the customers are and how to care for them. As a company, we focus on providing a product offering and service standard that is uniquely Asian. This differentiates us from various Western product offerings in Macau that were merely transplanted from Las Vegas.”
Mr Mecca adds: “They [the Lui family] have been in the hospitality and hotel business, the restaurant business, and they understand how to develop properties, they understand how to build great hotels. They care very much about the community, they care very much about the guests, they certainly care very much about the shareholders, and they care very much about each and every team member.
“They are gentlemen. They are caring people, they appreciate loyalty and are very loyal. It has been an absolute pleasure working with this company and working with all of the people in this company. I’ve enjoyed it an awful lot.
“And you can see when Francis and the Chairman walk through the property, there are great smiles and waves and the feeling that we’re in it together. We’re truly a team, we’re truly a family.”
GEG’s management is also mindful of maintaining good relationships with its business partners. Junket operators spoken to by IAG are almost universal in their praise of GEG, which they claim treats them much more equitably, consistently and considerately than some of the other casino operators in Macau.
The company also appears to be more politically sensitive and on better terms with government (both in Macau and the central government in Beijing) than some of its competitors. Mr Mecca believes Galaxy Macau is perfectly positioned to benefit from the central government’s twelfth five-year plan, announced in May this year, which calls for Macau’s development into a global tourism and leisure centre, in addition to the diversification of its gaming-dominated economy. He observes: “China will provide Macau’s main source of visitors—especially the rising middle class, who prefer a truly Asian product and experience, which is what Galaxy Macau offers. Furthermore, our partnership with Banyan Tree and Hotel Okura will help expand our customer base across North and Southeast Asia.”
While the rising tide of Macau’s booming casino industry has been carrying all operators, if GEG continues playing to its strengths, it could well continue moving ahead of the pack, while also growing its higher-margin mass-market and premium direct businesses. Inside Asian Gaming questioned Mr Mecca about GEG’s recent performance and outlook, as well as his thoughts on the Macau market in general.
IAG: Did you expect Galaxy Entertainment Group would jump up the Macau market share rankings as much as it has following the opening of Galaxy Macau?
Michael Mecca: Our goal was to expand the market. We did not intend in any way to pinch market share from our competitors. Galaxy Macau was about growing the market for Macau; growing the market for Cotai. And I think as we talk to the other properties on Cotai, they experienced growth after Galaxy Macau opened. That was the intent—we wanted to provide another great reason to come to Macau, to come to Cotai.
And we understood, again through the Chairman and Vice Chairman, the vision for Macau by the central government and the Macau government, that Macau was destined to become a true holiday destination for mainland China and for all of Asia.
As we have always said, market share is not our top priority. We are primarily focused on enhancing our operational efficiency to drive profits and profit margins, and using our capital and resources effectively to maximise benefits for our stakeholders.
In the meantime, we will continue to grow StarWorld. The performance of StarWorld validates our business strategy. The VIP-centric property has one of the largest rolling chip volumes in the VIP segment in Macau, and recently achieved its thirteenth consecutive quarter of record EBITDA [earnings before interest, taxes, depreciation, and amortisation].
What do you see as the biggest threat to the continued boom of Macau’s gaming revenue? Is infrastructure a major concern?
Human resources and infrastructure are the biggest challenges Macau is currently facing. As the gaming industry grows, obviously the demand for labour also increases. It is still a challenge to find sufficient manpower to meet the demand, and there is a lack of experienced and skilled candidates to fill a wide range of positions.
However, recognising this challenge, we are doing our best to provide various in-house training courses to our team members to enhance their knowledge and skills, such as in languages, computer skills and other areas. The government also provides many free training programmes and enhancement courses to people employed in this industry. I believe through a variety of professional training programmes, it can gradually raise the level of Macau’s labour market.
We have a relationship with all the training institutions in town and many of our staff members were found through these local initiatives and educational sources. We see ourselves as a competitive player and the people we are going to attract are those who believe Galaxy offers them a bright career opportunity. We are an organisation that provides opportunities to our staff to develop, learn and be involved in decision-making.
Another challenge that we are all currently facing is that we are going through a transitional period where Macau’s infrastructure is under development. The government is doing its best—for instance, it is expanding the border gate area to allow greater capacity and is proposing to extend the border gate’s opening hours. The Transport Bureau has also indicated that a new lane for tour buses will be added to ease road congestion near the border in the first half of next year. The LRT [light rail transit] is scheduled to be in service by 2015, and we are confident it will draw more traffic to Macau.
These things can’t be done overnight. It will be a step-by-step process that takes time.
When will Galaxy expand further in Macau?
At this stage, we are focused on the continued business execution of StarWorld and the ramping up of Galaxy Macau. We are delighted by the successful opening and performance of Galaxy Macau to date. Galaxy Macau shuttle buses bringing guests to the property are nearly always full, the mass gaming floor is busy and vibrant, the specially-designed VIP rooms are proving to be popular, and demand for hotel rooms is very strong and we had full occupancy during the Golden Week. We believe this is just the beginning and are confident of achieving greater success as the operations ramp up.
StarWorld has continued to perform strongly since the opening of Galaxy Macau; visitation to both properties continues to increase. With StarWorld’s VIP-centric business and the diversified business in Galaxy Macau, we are confident that the two properties will continue to complement each other.
Planning approval has been granted for an additional GFA [gross floor area] of 15 million square feet of our Cotai land bank, including hotels and entertainment facilities, retail and exhibition. We will make the move in line with market demand. We will work on the exciting development plan, which we will disclose at an appropriate time.
Do you see Galaxy Macau working in cooperation with the other Cotai properties, Venetian and City of Dreams, as much as you’d planned? What more can be done toward making the three properties a joint critical mass of attractions to draw more traffic to Macau, and Cotai in particular?
We understand the importance of a critical mass and its appeal to our customers, and the cooperation with the other two gaming operators is actually already in place.
One example is that we are operating shuttle buses connecting the three properties which we think will provide convenience, better service and more choice for visitors. We also believe this service can draw a wider variety of visitors to the Cotai district.
Has the Okura hotel at Galaxy Macau succeeded in boosting Japanese visitor numbers?
With the opening of Galaxy Macau, we were hoping to attract more visitors, especially from other parts of the Asian region. Okura is a legendary brand and it has a lot of appeal to Japanese customers, so certainly, there have been Japanese tourists visiting Macau because of this brand. Also, Okura Macau seems to be bringing in customers from elsewhere. We’ve seen growing visitation from other regions, including Indonesia, Singapore and Korea, since the opening of Galaxy Macau.
What has been the single greatest challenge of operating in Macau?
Running a big property such as Galaxy Macau, with over 8,000 employees, requires fine-tuning in the initial stage. We have opened the property successfully; the next step for us will be to review the business constantly, improve service delivery, and enhance productivity to drive operational efficiency. I am confident that we can achieve these objectives with our strong management team and quality staff.