MACAU - It is, claims Lawrence Ho, son of the legendary and stupendously rich
Stanley Ho, a "milestone" for Macau. For Melco Crown Entertainment, the
gambling venture the younger Ho set up with James Packer, offshoot of the
fabulously wealthy Kerry Packer, it is "a turning point".
For the two sons of billionaires, it is a second chance to show whether they
can make money from Chinese gamblers rather than just talk up their own chances
while building palaces of glass.
Melco Crown's US$2.1-billion City of Dreams hotel-casino complex opened on
Monday on Macau's Cotai Strip, with little sign of a pick-up in revenues at
rival, already-established casinos, hit hard by the global financial crisis.
Nor is there much hope of
an early easing by the Chinese government of visa restrictions that have
savagely restricted cross-border visits by would-be mainland customers.
Cotai, an Asian version of the Las Vegas Strip, is the brainchild of Sheldon
Adelson, chairman of Las Vegas Sands Corporation (LVS), and home to Adelson's
Venetian Hotel, on which he bet his company's fortunes and which nearly went
belly-up last November.
Lawrence Ho, chief executive and co-chairman of Melco, the developer of City of
Dreams, remains undaunted, with his opening-night "turning point" claims. His
partner and co-chairman of the Nasdaq-traded company was more restrained. James
Packer, son of the late Kerry Packer and renowned as a big stakes gambler as
well as Australia's richest man, joined Ho on stage at the opening night
fireworks display, which was watched by thousands of Macau residents and
visitors who then filed into the new casino. But Packer didn't address the
media, perhaps bearing in mind Melco Crown's rocky history in Macau.
The company's previous bet in the territory, Crown Macau, on Taipa Island
across from the center of Macau, failed to find an audience despite its
award-winning design. It eventually abandoned the mass market it was designed
to cater to, turned to high-spending VIPs, a business it basically farmed out
to a junket operator, and rebranded the hotel-casino as the Altira Macau.
It will be different this time round, Ho contended. "Things were much tougher
when we opened Crown Macau Tower two years ago. We consider City of Dreams'
opening to be a much better time and business climate."
That would seem to ignore that Macau in 2007 was booming as never before, with
mainland Chinese and other gamblers in the region packing Macau's casinos,
which seemed to grow in number in each passing month. Two years on and the
world is still hoping against hope that the financial crisis is ending, while
the mainland economy is still promising as much as delivering a recovery in its
growth rate.
"Melco Crown entertainment still believes in our future and also in the bright
future of Macau," said Ho. "We were determined to complete City of Dreams this
year and the recent turbulence in the global markets has not deflected us from
our task."
Ho, whose once held the gambling monopoly in Macau and still controls the
biggest market share through his Sociedade de Jogos de Macau (SJM), noted that
Melco Crown isn't weighed down by massive debt - a comparison, without
mentioning its name, to Adelson's Las Vegas Sands.
"Unlike some competitors, we have a strong balance sheet," he said, adding that
the company isn't heavily leveraged. "We're an Asian company," said Ho,
emphasizing that Melco Crown is frugal and conservatively financed, with City
of Dreams completed on time and on budget. "We've built this property exactly
to the scope we promised shareholders."
Whether City of Dreams is to the scope and scale desired by Macau visitors is
another matter. The completed first phase includes 600 hotel rooms, 85,000
square feet of predominantly luxury retailing, 20 restaurants and bars, and, a
420,000-square-foot casino. An 800-room Grand Hyatt hotel and a resident
Dragone production - similar to Cirque du Soleil at the Venetian - will be part
of City of Dreams second phase, scheduled to open later this year.
Enter the dragon
The Dragon's Treasure show is sure to be a hit, in an iconic venue called The
Bubble, a dome that's sure to become City of Dream's signature architectural
feature although perhaps given an unfortunate name considering Macau's
boom-and-bust property market.
The property initially promised to house the world's largest underwater casino.
Instead, it has the two-level Hard Rock Casino, with more than 500 gaming
tables and 1,300 machines - and is replete with memorabilia from The Beatles,
Bob Dylan, Red Hot Chili Peppers, Chinese sensations BaO and Jacky Cheung, and
dozens more.
The aim is to encourage visitors to stay and to do more than gamble. "We all
want to grow Macau into a multi-day destination," Ho said. "We believe that if
we give people attractions, people will stay. Gone are the days when people
only wanted gambling. We're very culturally sensitive to what our customers
want."
City of Dreams president Greg Hawkins was also keen to underline that this was
no mere gambling joint, but a much wider experience.
"As an urban entertainment center, we believe City of Dreams delivers the
ultimate in sophisticated entertainment, first class hotels, world class retail
and the very best in Asian and international dining, providing an incredibly
diverse and cosmopolitan collection of contemporary leisure and lifestyle
experiences within this single city-like complex," Hawkins said. "We are
confident that we will strengthen Macau as a multi-day stay market."
That's the dream - but it seems to reflect little of the reality of Macau as a
tourist destination or of the property, which has the feel of a new
international airport. There's little that says "Macau" or "China" at City of
Dreams, while its musical theme seems more tacked on as an after-thought rather
than being integrated into a bigger concept for the complex. Nor are the hotel
rates, at HK$2,800 (US$360), geared toward the mass market.
Not so sweet dreams
Even with the best idea, in the best of times, the Macau market remained
dominated by day trippers from mainland China, who come mainly to gawk. The
number of high-rolling VIPs have declined in the face of Chinese visa
restrictions.
Visa changes, limiting individual visitors from one Macau trip every six
months, sent a powerful message from Beijing that it wasn't happy seeing
billions of yuan flow out of the county into Macau casino coffers. Factor in
the current economic climate - though Macau's troubles began with the visa
restrictions early last year, predating the global woes - and City of Dreams
could become a nightmare.
Macau's gaming revenues for the first quarter reversed three consecutive
quarters of decline, the first since the former Portuguese colony's boom began
in earnest in 2005. Revenues, however, remained down 12.8% from the first
quarter of last year, a more telling comparison. "The market is down about 10%
today," Ho said, "but it's still up 80% from 2005."
You can quibble over those numbers but there's no disputing the big picture.
There are now 32 casinos in Macau, compared with 17 in 2005, and nearly 4,500
tables and more 13,000 machines now, versus fewer than 1,400 tables and 3,500
machines at the end of 2005. So the number of mouths to feed has grown faster
than the pie.
The same holds true for tourism overall - spectacular growth in the sector has
been more than matched by vast development of hotels and shopping outlets.
Visitor arrivals in Macau were down about 5% for April. Visitor spending is
also trending down, the market remains more than 50% day-trippers, and average
hotel stay remains around 1.3 days, where it was a decade ago.
Cotai stripped
Cotai, with the Venetian as its anchor, was supposed to change all that,
bringing in international convention and resort business. In reality, the
market has been slow to develop. Connected by bridge to downtown Macau, Cotai
is about a 15-minute ride by taxi from the historic center and its casino area,
based around SJM's Lisboa and Grand Lisboa. Wynn Macau, MGM Grand Macau, and
Hong Kong-based Galaxy's Star World are also located there.
The Venetian, which opened in August 2007, was the first property to operate on
the Cotai landfill linking Macau's outer islands of Coloane and Taipa. To
compliment the Venetian, LVS opened the Four Seasons Hotel and Shoppes last
year.
While Melco Crown has pressed ahead with its City of Dreams, Galaxy has
repeatedly delayed its vast development next to the Venetian, hulking over but
completely disconnected from quaint, historic Taipa village.
In the wake of its near-bankruptcy late last year, LVS has postponed much of
its planned US$10 billion investment in Cotai. Half-completed LVS projects lurk
just across the street from City of Dreams and LVS recently failed to find
buyers for either of its presumed cash-cow Cotai shopping centers. Macau
residents, meanwhile, use the Venetian's faux Venice mall as a great place to
let the kids run around on a rainy day, under the painted blue sky.
At Monday's opening, Ho boldly declared, "We look forward to welcoming new
developments to Cotai, but we are confident that many will quickly realize that
the center of gravity for our industry already firmly shifted south, to us here
in Cotai." He added, "We feel Macau is a supply-driven market, so we want our
competitors to finish their projects."
But supply keeps outstripping demand. Anyone who thinks City of Dreams is going
to change the market dynamic needs to wake up.
Former broadcast news producer Muhammad Cohen told America's story to the
world as a US diplomat and is author of Hong Kong On Air (www.hongkongonair.com),
a novel set during the 1997 handover about television news, love, betrayal,
high finance and cheap lingerie.
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