Scientific Game

Making Waves

Hong Kong's gambling cruises may be popular, but they won't be cannibalizing Macau 

Saturday, 14 December 2013 17:08
Share
Visit us

Every so often, presumably tired of reporting on the inexorable growth of Macau’s casino industry, the financial media take to searching for reasons to temper the optimism. 

One popular theme is the possibility of casinos being legalized in Hainan. Another is potential competitive threats from gaming expansion in other jurisdictions around the region.

Last month, Bloomberg attempted to sow some new seeds of pessimism with a headline that proclaimed: ‘Floating Casinos from Hong Kong Stealing Macau Gamblers.”

“Lower costs, less government scrutiny and easier visa requirements are encouraging some China bettors to turn to gambling boats as an alternative to Macau’s glitzy casinos,” stated the article, providing a couple of anecdotal examples of would-be mainland Chinese punters who had opted to patronize one of the eight casino cruises that sail nightly out of Hong Kong rather than make the increasingly costly trip to Macau.

 

M.V. Macau Success saw profit double in the first half of 2013 to HK$2.15 million.

 

The number of visitors on such boats has risen 9% year on year in the first half of 2013 to 615,328, reports Bloomberg, benefiting Hong Kong-listed operators such as Success Universe Group and Genting Hong Kong.

Nelson Wang, a businessman from the southeastern Chinese city of Wenzhou, was quoted as saying he took an overnight trip on a gambling boat while in Hong Kong because he didn’t have time to travel to Macau and didn’t want to apply for a visa to go there. “It’s a work trip after all—if I get a separate visa to Macau it looks a bit odd,” explained Mr Wang, adding that with the Chinese government on the alert for people gambling too extravagantly, he’d rather be discreet. Mainland tourists don’t require separate visas to board casino cruises once they are in Hong Kong. “Everyone knows that Macau is closely monitored by the central government,” added CLSA analyst Richard Huang. 

According to Hoffman Ma, deputy chairman of Success Universe, “The cruise ship can be a good substitute for mainland tourists.”

Success Universe has a 55% interest in the nine-deck M.V. Macau Success, which saw profit double in the first half of this year to HK$2.15 million (US$277,000). This follows on from a profit of HK$2.9 million in 2012 and a loss of $7.8 million in 2011. Still, even though Success Universe’s cruise business appears to be growing strongly, its returns are paltry compared to those of the group’s 46.8% stake in Macau casino resort Ponte 16, which recorded EBITDA of HK$331.5 million last year.

The newfound popularity of Hong Kong’s casino cruises is a byproduct of Macau’s inability to keep up with accelerating demand, claims Bloomberg. The report points out that Macau resorts are currently running at close to full capacity. “Rooms in Macau averaged US$175 a night in July, according to the government, while Bloomberg Industries estimates Las Vegas rates averaged $108 last year. A room on a Hong Kong casino boat can cost as little as HK$400 ($52).”

Of course, in saying Macau resorts are running at full capacity, the article appears to contradict its initial assertion that Hong Kong’s casino ships are cannibalizing them. Indeed, if anything, it appears the Hong Kong cruises are now enjoying a resurgence on the back of spillover from Macau. Hong Kong’s casino cruises had previously been dealt a heavy competitive blow in the wake of Macau’s casino boom from 2004, leading to years of stagnant growth despite their proximity to mainland Chinese customers and far lighter tax burden—while Macau’s casinos pay a hefty 39% tax on gross revenue, Hong Kong casino ships pay nothing on the gross. This suggests that Macau casinos offer a fundamentally far more attractive proposition to mainland gamblers than Hong Kong cruises. And the latter’s resurgence could prove temporary once the coming wave of new Macau properties start opening in Cotai from the second half of 2015.

The Bloomberg story does point out: “Macau casino operators say they’re not worried about the competition. The casino boats offer little in terms of dining and shopping and do a fraction of the business of Macau’s gambling industry.”

Their impact “is minimal,” says Ambrose So, CEO of Macau’s leading casino operator by market share, SJM Holdings. “The pie is growing bigger and some money overflows there.”

Current Issue

Moving ahead

Moving ahead A year after the deadly attack at Resorts World Manila, management continues to reinvent the property to recover and meet the challenge from Entertainment City rivals. By Muhammad Cohen | Editor-at-Large   The tragic events of 2 June 2017 at Resorts World Manila sent shock waves across the Phili... Friday, 29 June 2018 01:32

"This is not a drill..." Gaming businesses must plan judiciously for emergencies such as the Resorts World Manila attack, natural disasters and accidents so they can respond effectively when best plans fail. By Muhammad Cohen   Arson at Resorts World Manila a year ago, Typhoon Hato battering Macau last August and the La... Friday, 29 June 2018 01:24

Five signs that your organizational culture is toxic to customer experience

Five signs that your organizational culture is toxic to customer experience IAG explains the importance of company culture in achieving exceptional customer experience and the five signs that your culture might be toxic to your customer goals. By Sudhir H. Kalé, Ph.D.   Numerous studies on customer experience (CX) highlight the crucial role company culture plays in del... Friday, 29 June 2018 01:18

Height of Luxury

Height of Luxury With the opening of its new luxury hotel at City of Dreams in June, Melco Resorts is looking to take control of Macau’s lucrative premium mass segment. By Ben Blaschke   “We’re not just opening a new hotel today, we’re opening a whole new chapter. We’ve built a landmark for Macau and a... Friday, 29 June 2018 01:08