Inside Asian Gaming

on average they saw multiple shows during their visits.While this may not be the primary reason for visiting Las Vegas, entertainment certainly gives it a big added attraction. This will also be a big driving force for Macau. While the Venetian Macao will fea- ture Cirque de Soleil and City of Dreams will host Dragone shows, local content en- tertainment should be a bigger excitement to visitors frommainland China, Hong Kong and the rest of Asia. Today top Hong Kong artists could easily pull a full house con- cert in major cities in the mainland, with top-end tickets easily selling for Rmb1,000 (US$132).With Media Asia (a Lai Sun Group company) and Emperor Entertainment on the scene, Macau would not be short of ex- citing entertainment events. eSun’s Macau Studio City will be a sig- nature property, blending world-class infra- structure and local content entertainment on the Cotai Strip. Deploying top artists in HK and Asia, this composite property will boast 6 million (up to 6.6 million) sq. ft GFA comprising casino, hotels, apartments, retail and entertainment. Strategic partner New Cotai, LLC (a company led by the Las Vegas and Macau gaming veteran David Fried- man) and Capital Land of Singapore own 40% and 20% respective stakes in the proj- ect.Taubman Asia will be the retail manage- ment partner to the 1.4m sq. ft GFA shop- ping space and Ritz Carlton and Marriott the hotel-management partners. Another major entertainment company in HK,Emperor Entertainment Group also has its hotel casino flagship in Macau—Grand Emperor Hotel. While this is a property on a much smaller scale, Emperor Entertainment could well deploy its talent across different properties in Macau and enrich the enter- tainment scene. Macau same day travellers as % of total visitors Source: Census and Statistics Services of Macau, Las Vegas Visitors and Covention Authority Average nights of stay per visit China outbound travellers vs Macau visitor growth from mainland Source: China Statistical Yearbook, Census and Statistics Services of Macau Oversupply of hotel rooms? According to the latest government statistics, Macau had 13,052 hotel rooms at the end of May this year, with an additional 24,000 rooms under construction and an- other 15,000 in the application pipeline. This represents a 299% increase.The 24,000 hotel rooms could come to the market over the next 3-4 years, while those in the application pipeline may come later. Using the 24,000 as incremental supply over a horizon of four years, it would require 29% compound annual growth rate (Cagr) in visitor arrivals to maintain the current 74% occupancy rate. However, the mix of same day and multi-day travel and the average stay per visit could change this. For instance, a doubling of the average stay per visit from the current 1.2 nights to 2.4 nights (still be- low Vegas’ 3.5 nights) would cut the required visitor growth by half. Our sensitivity analysis shows that if inte- grated resorts and convention models could bring themulti-day travel percentage to 60%, and average stay per visit to two nights, then it would require 15% Cagr in visitor growth till 2010 to get the rooms filled at 90% oc- cupancy. An interesting point to note is that while hotel occupancy was at an average of 74% in Macau in 1Q07, the Wynn Macau has been able to achieve 85%. However, with the sudden supply of 3,000 rooms from the Venetian Macau this year, soon to be followed by another 1,500 from Crown Macau, MGM and Grand Lisboa, we anticipate some ramp-up time and will not be surprised to see some lower occu- pancy and/or promotional packages in the early days, starting from the latter half of 2007. The impact, however, should be lim- 8