Inside Asian Gaming

inside asian gaming December 2014 24 A s Macau’s gaming revenue retreats, retail revenue at the city’s casino resorts keeps advancing. The sector is so firmly established now as a high- margin growth stream, all the new Cotai resorts plan to jump on the bandwagon, eager to catch-up with Sands China, the Las Vegas Sands subsidiary that has spearheaded a veritable revolution in Macau retailing. In 2006, Macau had total retail space of approximately 300,000 square feet, featuring one department store. The opening of The Venetian Macao in 2007 quadrupled the market’s retail space, and today retail covers some 5 million square feet, almost half of it in Cotai. “There is a powerful synergy between gaming and retail that creates the optimal environment for retailers to maximize a store’s sales potential,” says Morgan Parker, chairman of the International Council of Shopping Centers’ Asia Pacific Research Council. “Cotai’s casinos create enormous foot traffic for the retailers.” Macau’s retail sales grew 21% in 2013 to US$6.2 billion, according to the government’s Statistics and Census Service, and are up 9% by value through the first half of this year. An estimated 60% of that spending is by tourists. Sands Retail, the arm of LVS that runs its malls in Macau and Singapore, claims one in three dollars of last year’s retail expenditure—more than $2 billion—was spent in Sands China malls, whose sales through the first half of this year are up 21% year on year to $1.25 billion. “This sustained growth totally vindicates our strategy of continuing to expand and develop our offering in Macau,” says LVS Senior Vice President of Retail David Sylvester. “The physical interconnectedness of Shoppes at Four Seasons, Shoppes at Venetian and Shoppes at Cotai Central creates a one-stop shopping destination for local consumers and tourists, particularly those who may be pressed for time and are seeking mass-market, prime upscale and luxury items.” Third-quarter results show Sands China’s malls continued to boost revenue and fatten operating margins while tenants increased sales, despite Macau’s falling gaming revenue. As landlord, Sands China derives mall revenue from rents, overage (a portion of sales above agreed targets) and property management fees. Combined these were up 17.5% from a year earlier to $104.7 million. Operating profit grew 18.6% to $94.8 million as operating margins widened to 90.5%. Morgan Stanley notes that retail growth outstripped Feature In Focus Retail revenue is bucking the current softness on the gaming side, and Sands China is leading the charge By Muhammad Cohen Macau Shopping, Not Dropping Shoppes at Four Seasons Macao