Melco Crown Entertainment says it has seen the future of Macau and it doesn’t include high rollers.
“If you look at China, how many more billionaires are going to drop out of trees in the next 10 years?” said Lawrence Ho, Melco’s chief executive officer and co-chairman, at the unveiling this week of the company’s US$2.3 billion Studio City megaresort scheduled to open on the Cotai Strip in the third quarter.
“It is going to be the rise of the middle-income earnings demographics,” he said. “These are the younger people who want to travel, experience the world.”
Mr Ho and Melco corporate partner Crown Resorts are designing a resort to target those demographics. Gambling will comprise only 5% of Studio City’s completed space, the company says, while the centerpiece of its first phase will be a Ferris wheel 130 meters high, the tallest in Asia, dubbed the Golden Eye.
Inside, the resort will house a 30,000 square foot Warner Bros Family Entertainment Center co-developed with film and media giant Time Warner and a virtual reality Batman thrill ride as part of a tie-up with DC Entertainment that will include additional attractions featuring characters from the famed comic book creator.
Building on Melco’s success at City of Dreams with “House of Dancing Waters,” the new resort will contain a 5,000-seat theater to host a new production show called “House of Magic”.
Plans also call for a television broadcast studio, a branded nightlife offering in the form of a branch of the popular Ibiza nightclub chain Pacha, and 300,000 square feet of shopping.
“Studio City will radically enhance and diversify Macau’s evolving leisure experiences as Melco Crown Entertainment works to anticipate, innovate and ultimately satisfy the ever-growing needs of the region’s and world’s leisure destination visitors,” Mr Ho said in a statement.
Melco and Macau’s five other casino concessions generated a combined US$44.1 billion in gaming revenue in 2014, down 2.6% from 2013, the first year-on-year decline since the market opened to competition a decade ago. A dramatic fall-off in VIP play was the main reason. Historically the source of two-thirds of Macau’s world-leading gaming take, the high end was pummeled by slowing growth in the Chinese economy and an intensive crackdown by the central government on corruption, graft and capital flight. Analysts expect an even greater percentage decline this year. At the same time, the local government is under increasing pressure from Beijing to diversify the city’s economy away from its dependence on gambling, which currently contributes around 80% of total public revenue.
The Cotai resort district, a swath of reclaimed land joining the islands of Taipa and Coloane, is the locus of these efforts. Home to five integrated resorts already, the district will see billions more invested in the construction of seven new IRs over the next four years. Studio City will be one of two to open this year. (An expanded Galaxy Macau will be the other.) The goal is to remake the city as a bonafide mass-market tourist destination, and all the IRs are being designed to include thousands of new hotel rooms—Studio City alone will add 1,600—and an unprecedented array of non-gaming attractions.
As Mr Ho put it, “It’s time to rebalance” the market from its reliance on VIP revenue.
“As a company, we love the mass segment; the customer base of ours is a much higher margin business,” he said. “With the rise of the middle class in China and their consumption, that’s really the future of Macau and all gaming markets.”
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