Non-casino elements debut in Macau's Cotai

Jason Tan in Macau

1 September 2008
Business Times Singapore

Las Vegas Sands cutting reliance on gaming with entertainment, retail spots

WITH the debut of its first resident show and a luxury mall, Las Vegas Sands is in full gear to spice up the Cotai Strip scene here by adding entertainment and retail elements, in a bid to cut dependence on its gaming-driven revenues.
Last week, the Venetian Macao - the world's biggest mega casino-resort and the first property on the Cotai Strip - formally raised the curtain on the much-touted Zaia, a 90-minute resident production from Cirque du Soleil.
The same day, its adjacent neighbour, Four Seasons Hotel Macao, also opened its doors by boasting the first luxury mall in the former Portuguese enclave, adding hype to Cotai's development.
'We are changing Macau from a gaming-centred to a multi-faceted destination,' William Weidner, president and chief operating officer of Las Vegas Sands, told reporters.
In 2004, the US firm launched an ambitious project by reclaiming land in between Taipa and Coloane islands - hence the name 'Cotai', aiming to recreate the success of Las Vegas Strip here.
The project, which will welcome at least 10 more hotels by 2010, runs at a total cost of US$13.5 billion.
It is expected that in 2010, non-gaming activities will account for 45 per cent of all Cotai Strip's profits, up from this year's estimation of 40 per cent, according to Mr Weidner.
When Cotai takes shape, gaming floor area will take up only 3 per cent of the total floor space, leaving the bulk to non-gaming businesses, he said.
Zaia, for one, will kick off a series of seven Las Vegas-style resident performances along the Cotai Strip. The Canadian circus troupe Cirque du Soleil has poured over US$150 million into the show, which debuted at a custom-built 1,800-seat theatre inside the Venetian Macao last Thursday.
'It is an untried model in Macau and Venetian is the first doing it,' David Green, a Macau-based gaming practice director with PricewaterhouseCoopers, told BT.
Sands is trying to replicate the successful model in Las Vegas, where 60 per cent of revenues are generated from non-gaming activities - such as retail and restaurants, but is not sure if it will take off in Macau, Mr Green said.
Over at Four Seasons, its luxury mall - The Shoppes at Four Seasons, is eyeing China's big spenders who are willing to splurge on luxury goods. The 211,000 square foot mall gathers 180 world renowned brands, such as Gucci, Hermes, Fendi and Louis Vuitton, under one roof, of which 60 are new to Macau. 'Now, there will be more non-casino reasons for people to come here and spend,' said Mr Weidner.


Accompanying story: Macau casino boom faces threats

AT NIGHT, the Cotai Strip is glowing with lights, bustling with cranes and construction workers.
Launched on August 28 last year, the Venetian Macau is the first property rising in the reclaimed land between two smaller islands of Macau. Exactly the same day a year later, Four Seasons Hotel opens its doors to visitors.
By next year, Traders, Sheraton and Shangri-La will welcome guests. By 2010, other big hoteliers to move into the strip will include Hilton, Intercontinental and Conrad.
When the Cotai Strip takes full shape, what it will have on offer will stretch the imagination: 20,000 hotel rooms, over 3 million square feet of retail space, and 2.5 million square feet of meeting and convention facilities.
Sheldon Adelson, chairman of Las Vegas Sands, told reporters last week: 'Upon completion, the Cotai Strip will be the world's top convention and exhibition hub. Even the combined space offered in Shanghai and Beijing is of no competition.'
While Macau has already surpassed the Las Vegas Strip as the world's top gambling centre in terms of gaming revenues, its future prospect does face looming threats. For one, China is trying to cool the Macau boom with restriction on mainlanders' visits.
Beijing is reported to be planning to further restrict individual mainlanders from visiting the gaming city to once every six months instead of every two months, starting from October. Since July 1, mainlanders from selected cities travelling under Beijing's individual visitation scheme - who represent over 50 per cent of all tourists to Macau - have been permitted to visit the enclave once every two months.
That itself was a shift from a once-a-month rule enforced on June 1, and before that, a twice-a-month policy was in effect.
'It is a variable impossible for casino operators and Macau government to control,' said David Green, gaming practice director with PricewaterhouseCoopers.
Meanwhile, the capital markets have lost their previously voracious appetite for casino stocks. This is the result of the credit squeeze and escalating fuel costs, which indirectly impact destination casinos; there are also concerns about earning outlooks, especially those stocks with exposure to the Macau market. Sands reported a second-quarter loss of US$8.8 million, attributed to the increased interest costs of loans underpinning developments in Macau, Las Vegas and Singapore; as well as higher running costs of the Venetian Macao and the Palazzo in Las Vegas.
'Casino firms are typically highly geared, and susceptible to a combination of declining earnings and rising costs of capital,' Mr Green said.