Inside Asian Gaming

inside asian gaming December 2015 26 Insights branding is still VIP-oriented, the retail mix will follow. If the retail area is big enough, it would be ideal to have a full range of offerings to cover all clusters. IAG: What specific difference are there doing retail in an IR setting compared to normal retail say in Hong Kong or Shanghai for example? GS: The three golden rules in retail mall value are location, location and location. In Macau? It’s gamers, gamers and gamers! Well, at least it still is right now. In a normal retail industry, rental income is the major revenue for a mall, therefore everything is retail leasing oriented, while in Macau, retail is a relatively small proportion compared with gaming, therefore things are more gaming oriented. It shows in many ways. The first is mindset, which is not how other business and operations would help retail, but how retail would help gaming. Then there is marketing, in that different target customers decide different marketing strategies and promotion and membership systems. The population and customer bases are more versatile in Hong Kong and Shanghai – there’s a bigger pie for differentiation. Properties in Hong Kong and Shanghai are normally a mix of office and retail or residential and retail, where office workers and residents are regarded as providing important spending power in the mall, while in Macau it is mostly IR and tourist-oriented. Then you have HR factors, it is more difficult to get retail professionals and qualified staff in Macau, which limits some good brands or interesting concepts from entering Macau. In places like Hong Kong and Shanghai you can easily find lots of interesting designer or niche brands – not so easy to do in Macau! IAG: How are retail space deals struck between the retailer and the concessionaire? Typically what’s the mix between fixed cash monthly rental and percentage of sales? Has this been changing over the years? GS: Normally a typical retail lease has a fixed rent and a turnover rent, with the retailer paying whichever is higher each month. However, every landlord is different and every deal is different, depending on how you negotiate and the attitudes of both sides. It has not changed too much over the years in the Hong Kong and Macau markets. IAG: We’re hearing Hong Kong is getting a bad reputation with mainland tourists with analysts predicting much lower growth rates in the future. Is this a boon to Macau retail? GS: It can be a risk or an opportunity to Macau. The risk side is that tourists may choose to come to Hong Kong and Macau on the same trip. If the number of tourists entering Hong Kong decreases, it might affect Macau too. The opportunity side is that if Macau can offer better hospitality and customer experiences than Hong Kong, together with entertainment, gaming and other elements, Macau might benefit from the current Hong Kong situation. IAG: Will greater critical mass of retail on Cotai propel Macau into more of a shopping destination in the minds of tourists? Could it help extend the average stay in Macau? GS: Cotai is becoming the shopping destination for tourists, although it still has a lot to improve to catch up with Hong Kong. I don’t think shopping alone can help extend the average stay in Macau. Tourists won’t stay in a city for three days or more purely for shopping. Instead, if Macau offers more attractions, entertainment, resort facilities, F&B and places of interest combined with shopping, it will significantly help to extend the average stay. “The three golden rules in retail mall value are location, location and location. In Macau? It’s gamers, gamers and gamers!”