Macao Dragon, the new ferry operator serving the southern part of Macau via Hong Kong, could help revitalise Stanley Ho’s gaming operation on Taipa and provide a strategic transport partner should SJM decide to build a resort on next door Cotai.
Asian Gaming Intelligence understands one of the people behind privately-owned Macao Dragon is Ng Fok, a Macau businessman with long standing links to Dr Ho.
Mr Fok is currently chairman of Hotel Presidente Macau, a four-star SJM-licensed casino hotel opposite Wynn Macau on Avenida da Amizade. He is also an executive director of Macau International Airport. Dr Ho’s investment holding company STDM is a 33.03% shareholder in the airport. Mr Fok was also an official advisor to the Chinese government in the months leading up to the return of Macau to Chinese administration in 1999.
Mr Fok’s links with Dr Ho’s businesses are hardly surprising given that Dr Ho’s investment holding company, STDM, has played a major role in building up the infrastructure of the city during its 40-year gaming monopoly up to 2002.
A more relevant issue is what strategic marketing alliance, if any, will Macao Dragon form with Dr Ho’s casino interests because of those long standing links? With arrivals at Macau’s Taipa ferry growing by nearly 25 percent year on year in the first four months of 2010, the market for ferry services into Macau is not a zero sum game and clearly has room for expansion.
While it doesn’t automatically follow that Macao Dragon will become a strategic partner of SJM, it does seem clear that since its launch two weeks ago it is aggressively competing with the incumbent operator on the Hong Kong to Taipa route—the Las Vegas Sands Corp-owned CotaiJet. The initial pricing of Macao Dragon standard class fares is to offer hefty discounts on CotaiJet (HKD88 one way for Macao Dragon—with an additional buy-one get one free offer during the opening promotional period— versus HKD134 for CotaiJet one way).
CotaiJet’s main function is to deliver as many passengers as possible direct to The Venetian Macao and the Four Seasons Macao, LVS’s properties on Cotai. It does that by offering travellers discount vouchers for services and attractions available at The Venetian. It has also offered free return travel to Hong Kong for same day visitors subject to certain conditions.
Until or unless Macao Dragon steps up its frequency from the current three times per day in the Macau direction, and four times a day in the Hong Kong direction, it’s unlikely to be a major competitor for CotaiJet.
One way, however, for Macao Dragon to parlay its theoretical competitive advantage on one way ticket pricing (should it be able to sustain its pricing in the medium to long term) would be to strike marketing deals with Dr Ho aimed at delivering passengers direct to SJM-licensed properties on Taipa.
From SJM’s perspective, the incentive to market the SJM-licensed Taipa casinos aggressively isn’t very strong, given that SJM doesn’t own the full economic benefit of the casinos. It is operating a revenue share model with the owners (the traditional 40:40:20 model, where the government gets 40 percent in tax, the property investor gets 40 percent and SJM as the licensee and casino staff supplier gets 20 percent).
Were, however, SJM to persuade the Taipa satellites to act in concert (and that’s quite a big ‘if’), it could team up with Macao Dragon and run a campaign to market those properties more effectively—possibly as more intimate, boutique-style venues for mass market players who prefer to avoid crowds and want hotel rooms at more affordable prices than those available at Cotai. Taipa’s SJM casinos could also be marketed to mid-level high rollers as distinctively Chinese-owned and managed properties.
Another possible marketing fit for Macao Dragon would be for Melco Crown Entertainment’s (Nasdaq: MPEL) City of Dreams resort on Cotai. Dr Ho’s son Lawrence is co-chairman of MPEL, and there’s past evidence of SJM-linked interests coming to the rescue of MPEL, by delivering much needed VIPs to Crown Macau (now Altira Macau) across the road from Greek Mythology. It would also assist SJM to have a friendly ferry operator plying the route from Hong Kong to Taipa should SJM decide at some stage to build a property on Cotai.
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