GLOBAL REPORT—With fallen profits and declining hotel stays in Macau, some wonder the fate of the larger hotel and gaming industry in the Chinese city.
The Chinese government’s pursuit of an anti-corruption campaign has led to a dramatic fall in high-rolling mainland Chinese visitors. Last month, which was the 12th consecutive month of decline, Macau’s Gaming Inspection and Coordination Bureau released data showing that gross gaming revenue dropped 37.1% to 20.4 billion Macanese patacas ($2.3 billion). Hotel stays are down 10%, according to Macau Government Tourist.
Aaron Fischer, a gaming analyst at the brokerage firm CLSA, believes gambling revenues won’t go into positive territory until next year.
“Next year should be a pretty good year for the mass market, but we don’t feel as confident with the VIP market as there has been serious structural damage,” he said.
At present, about 95% of resort revenue comes from gaming, compared with 65% in Las Vegas, according to Macquarie.
Revenue per available room in the city’s hotels was down 7.9% to 1,419.87 Macanese patacas ($158) year-to-date April, according to STR Global, sister company of Hotel News Now. Average daily rate was down 2.4% to 1669.85 Macanese patacas ($186) over the same time period, while occupancy was down 5.7% to 85%.
Development, optimism forge on
Even so, hotel development soldiers on.
On 25 May, the Galaxy Macau Phase 2 opened its doors. The opening could signal the start of a new era in Macau, with the Chinese enclave’s six casino resort operators investing a total of $20 billion in new properties in the next two years. Industry analysts are watching how the resort performs, as it is the first to open since gambling revenues began a steep, yearlong slide.
Galaxy Macau, owned by Galaxy Entertainment Group (which is controlled by Hong Kong billionaire Lui Che Woo), added three new hotel brands to its collection—The Ritz-Carlton, Macau; JW Marriott Hotel Macau; and the Broadway Hotel—bringing the resort’s number of hotels to six with just under 4,000 rooms.
Rauf Malik, VP of operations for the JW Marriott Hotel Macau and The Ritz-Carlton, said that although visitor numbers are down, “we see the overall numbers as poised for recovery. We are optimistic that Macau will attract a diverse range of visitors looking for experiences beyond gaming in the future.”
Next to open this year will be the St. Regis Macao. It’s part of the Sands Cotai Central Resort, which already has Conrad, Holiday Inn and Sheraton properties.
Josef Dolp, managing director for Sheraton Macao Hotel and The St. Regis Macao, said: “The St. Regis Macao will add to the diversification drive to position Macau not only as a gaming destination.”
While gambling is still available, Dolp believes the St. Regis’ strengths lie in other attractions.
“Our guests will find an array of different shows, the best shopping, tailor-made entertainment for families and especially children, and excellent hotels available in all categories for every price point,” he said.
Melco Crown Entertainment Limited’s majority-owned $3.2-billion Studio City casino resort also is due to launch this year. Macau’s draw now spans well beyond gaming, the company said in a statement
“The government has been successfully diversifying the local tourism economy in Macau over the years, and Melco Crown Entertainment has long supported this development direction by bringing a wide range of innovative entertainment to the market,” according to the statement.
Other developments set to open in 2016 will be the $4.1-billion Wynn Palace; Sands China’s $2.7-billion, 3,000-room Parisian; MGM Resorts International’s Cotai debut; and Louis XIII, an “ultra-luxury destination,” which is being bankrolled to the tune of $1.5 billion by tycoon Stephen Hung.
CLSA’s Fischer sees all these openings as much needed, agreeing that guests want an experience beyond gaming—one the Ritz-Carlton and the JW Marriott are hoping to provide, Malik said.
“As Macau diversifies and widens its offer, the tastes of its visitors are also evolving. Despite the crackdown, we are seeing demand for a new kind of luxury, one that transcends beyond the existing glitz and glamour present in Macau to offer a more exceptional and gracious experience to appeal to the new guests we would like to bring in.
“JW Marriott Hotel Macau and The Ritz-Carlton, Macau are able to answer this specific demand,” Malik said.
A broader appeal?
However, Fischer does have some reservations about whether Macau can broaden its appeal to attract non-Chinese visitors.
“If you don’t speak Cantonese or Mandarin, the service levels are terrible and need to rise dramatically to appeal to non-Chinese tourists,” he said.
But does it matter if the resorts don’t bring in as many non-Chinese visitors as hoped?
CLSA predicts that by 2020 outbound mainland tourist numbers will reach 200 million, double the number from 2013 with Macau and Hong Kong as the main beneficiaries.
As Josef Dolf said: “We have to remember that within a five-hour flight radius there is a market of 2.3 billion people; in Las Vegas, there is about 300 million people.”
The scale of investment in Macau, upward of $50 billion, means that the city is always going to be preeminent, Fischer said.
With those figures, no one will bet against Macau in the long-run, he said.