Inside Asian Gaming

inside asian gaming December 2014 26 going forward,” Vice President for Public Relations Buddy Lam says. “It will make us a more complete destination.” Melco Crown signaled its commitment with the August opening of SOHO at City of Dreams—a “lifestyle shopping, dining and entertainment precinct,” as it’s billed—and will be “substantially expanding” retailing at the resort ahead of the scheduled opening in 2017 of a fifth hotel tower. Early plans put the number at around 200 shops. On its third-quarter conference call, Melco Crown confirmed Feature In Focus all large corporations who, generally speaking, are professional and consistent in their approach to managing the properties. On the street, retailers will likely deal with private or smaller landlords who may not understand what the retailers need. Successful retailing requires both a professional retailer and landlord to work together.” Rents, however, reflect little difference in the relative strengths of Cotai and the Macau peninsula. In January, Hong Kong-based Future Bright Holdings leased roughly 21,000 square feet in The Yellow House, a choice location near the Ruins of Saint Paul, for HK$2.4 million per month for five years (US$307,700), plus overage— additional payment if sales exceed agreed targets. Macau’s first outlet of the American fast-fashion retailer Forever 21 opened there in July. Base rent for the five-level flagship store totals approximately $175 per square foot annually. That’s about the same as Sands China’s Shoppes at Venetian on Cotai, where rents last year rose 21.8%— and 7.1% at the company’s Shoppes at Cotai Central—resulting in average annual base rents of $179 per square foot at The Venetian and $120 at Cotai Central. At the company’s Shoppes at Four Seasons on Cotai the average more than doubled, from $150 to $348, the result of an accounting change in which “a significant portion of the rent paid by the duty-free luxury shops was converted from overage rent Not by Rent Alone: the Mall vs. the Street By Muhammad Cohen Macau’s retail trade has expanded immensely since Sands China opened Shoppes at Venetian in August 2007, but as with gaming, the center of gravity is steadily shifting to Cotai. “The advantages for a retailer being on Cotai are numerous, so it’s a really easy decision compared to Macau’s traditional downtown,” says Morgan Parker, chairman of the Asia Pacific Research Council of the International Council of Shopping Centers. “Being in an organized mall compared to a street provides a retailer with certainty as to the quality and consistency of other tenants nearby. In the street, the retail mix can be random, and therefore retailers often can’t leverage the pull of their neighbors.” There are other advantages, he adds. “The casino landlords are Sands China’s third-quarter retail revenues 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 the company’s casino business with pre-tax earnings up 19% year on year and 40% quarter on quarter. Melco Crown Entertainment’s City of Dreams has 176,000 square feet of retail space and 70 outlets.