Casino mogul rolls dice on Macau with Parisian-themed resort

Parisian is central to Chinese city’s efforts to diversify from pure gambling destination

 

At 8.18pm, a highly auspicious time in Chinese numerology because it sounds like the word for riches, fireworks light up the half-size replica of the Eiffel Tower at the Parisian casino, the glitziest new addition to Macau’s skyline, the world’s biggest gaming market.

On a giant screen, the face of Sheldon Adelson, the 83-year-old casino magnate who is chairman and chief executive of Sands China, looks down on Macau, an enclave transformed from a sleepy Portuguese colony into the world’s biggest gambling destination. A replica of the Doge’s Palace is just down the street, at the adjoining Venetian which Adelson also owns.

Revenue slump

Macau is the only place in China where casinos are legal, but revenue from the green baize have slumped as a corruption crackdown and slower economic expansion in China impact on revenue.

The Parisian is central to Macau’s efforts to diversify away from a pure gambling destination, filled with VIP high rollers from mainland China, into a mass-market destination where China’s new middle class can come to play, and which is less politically sensitive.

Some 1,600 slot machines and 410 gambling tables, 3,000 rooms, hundreds of shops, a theatre, a children’s play area modelled on the Luxembourg Gardens, and a water park, the exuberance of the Parisian launch reflects the tentative return of confidence in Macau.

Macau’s casino gross gaming revenue rose 1.1 per cent year-on-year in August, to around 18.84 billion patacas (€2.1 billion), the first time in 27 months that it did not contract.

It meant that for the eight months to August 31st, Macau’s aggregate casino gross gaming revenue was nearly 144.40 billion patacas (€16.1 billion), down 9.1 per cent from a year ago, Macau’s gaming inspection and co-ordination bureau said.

“Based upon the pre-bookings and based upon the convention bookings, we have have essentially hit the bottom,” the mogul told a news conference in the Parisian’s theatre. “Now, is it sustainable for a long time to come? I can’t answer that question.”

Hotel rooms

Adelson’s first outing in Macau came with the Sands in 2004, which broke even in a year, followed by the Venetian and Sands Cotai Central. Sands has seven hotel brands and his company has 13,000 hotel rooms in Macau now. To put this into context, there are about 19,000 hotel rooms in Dublin.

During the press conference, Adelson deflected questions about his pledge to give Donald Trump up to $100 million towards his presidential campaign, focusing instead on the issue of where Macau is going.

Adelson expects the Parisian to break even within four years, but generally he expects gradual growth, and he’s not alone in this cautious optimism. In August, the Las Vegas entrepreneur Steve Wynn opened a 1,700-room, $4.2 billion (€3.74 billion) Wynn Palace casino in Macau.

MGM China is opening a $3.1 billion (€2.76 billion) property called MGM Cotai in the second quarter of next year, while the Grand Lisboa Palace, a $3.9-billion (€3.47 billion) casino by SJM Holdings, the company started by the originator of gaming in Macau, Stanley Ho, is due to open in 2018.

Integrated resort

Central to the future of Macau is the concept of the integrated resort, which mixes gaming and non-gaming elements and is something that the Macau government is keen to develop. One press briefing was held in a room where Kung Fu Panda was in attendance, and it is interesting to see children on these properties as the family element comes into play.

“We are the first concession owner to emphasise non-gaming in all of its components, I’d like to say that our competitors have not yet caught up with us,” Mr Adelson told the news conference.

This month, Deutsche Bank gaming analyst Karen Tang upgraded the casino stocks Sands China, MGM China and Melco Crown to buy.

“We conclude that Macau is now at the start of a mass-led GGR [gross gaming revenue] recovery. Importantly, both base mass and premium mass are growing again,” she said.

Deutsche forecasts that mass gaming revenue growth will accelerate from 4 per cent year on year to 10 per cent year on year in the second half of this year, and 12 per cent next year.

Morgan Stanley is predicting that in 2017 the Parisian will earn $300 million before interest, tax, depreciation and amortisation.

Table licences

Adelson did not receive licences for as many tables as some of his competitors this month – he received 150 new tables, including 100 for opening day, but last year Galaxy and Melco Crown were given 250 each for their new facilities. This adds to the pressure on Sands to build other revenue streams.

Spreading one’s bets is an old gambler’s trick, and already Adelson is looking for expansion elsewhere in the region, and further afield.

“There doesn’t seem to be too much more growth here [in Macau] . . . we’re aggressively and continually lobbying for other locations throughout the Asia Pacific countries. We’ve been looking at Japan, Korea, Vietnam, Thailand.

“My dream was to have, actually, I wanted 20 properties, but we only got six lots. We’re very happy with this, we’re not unhappy, and with the opening of the Parisian we have completed the available land and parcels on what I call the Cotai Strip,” Adelson said.

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