Inside Asian Gaming

complex is scheduled for completion in the first quarter of 2009. The property will have 3.7 million sq ft of gross floor area, of which about 1 million sq ft will be devoted to re- tail space, film and TV studios, a concert hall and expo facilities. There will be 2,000 hotel rooms, and a relatively small 200,000 sq ft set aside for gaming, with 400 gaming tables and 1,000 slot machines. Construction of the second phase of the project will likely start in 2009, and pending government approval, the gross floor area could be increased to 6 million sq ft by 2011. A comparatively small proportion of Ma- cau Studio City’s total area will be devoted to gaming. LVS’ US$2.3 billion Venetian Macau, by comparison,will have 700 tables and 4,300 slot machines when it opens in July 2007. Mr Wong points out that “the development and design of Macau Studio City is more into the way of a complete entertainment experience for people, rather than singling out gaming as the theme.” Macau Studio City is being developed by three partners. Hong Kong-listed eSun Hold- ings (through its subsidiary,East Asia Satellite Television Holdings) has a 40% share of the project,New Cotai LLC,through a consortium headed by former LVS executive David Fried- man, also has 40%, and CapitaLand, one of Singapore’s largest property developers, ac- quired the remaining 20% in January. The casino will operate under the license of Melco PBL Entertainment – one of Macau’s six gaming concession holders. Marriott In- ternational has submitted a letter of intent to manage both a Marriott hotel and a Ritz- Carlton hotel at Macau Studio City. Phase One of the project will also include a new 6- star boutique hotel concept called The Tang Hotel, created by David Tang, founder of the China Clubs and Shanghai Tang. Entertainment DNA The entertainment element of Macau Studio City will be provided by eSun, a major player in the Chinese live entertainment and film- star market. The company says it will “inject its media and entertainment ‘DNA’ across the full range of activities and experiences that guests will enjoy at the property.” CLSA’s Gavin Ho elaborated on eSun’s role in the project:“For example, it will lever- age its satellite network and have live-audi- ence television events taped on its prop- erty in which guests can participate – game shows, music events, contests and the like, with Asia’s favourite talents. It also plans to work with major retail partners to have tele- vised fashion events, and film, television and star-tie-ins and sponsorships that will excite audiences and guests alike, and bring Asia’s most important stars to the shopping mall’s walkways.” The entertainment facilities at Macau Studio City will include a 2,300 seat theatre, a 4,700 person capacity multi-function venue capable of hosting sporting and MICE (meet- ings,incentives,conventions and exhibitions) events, stand-alone state-of-the-art televi- sion and film production facilities and a 1.4 million sq ft Studio RetailTM complex. Studio Retail TM “Studio Retail TM will integrate live-audience taped lifestyle and fashion programming throughout the retail environment,” accord- ing to PSDG. Shopping at Macau Studio City “is an experience whereby you are continu- ously interacting with the entertainment element, which is either in the film or music area,” explains Mr Wong.“You will be visually and sensually entertained at the same time as you are going through your shopping ex- perience.” Several attraction corners will be inter- spersed in the retail area,where visitorsmight witness a film shoot, celebrity-interview, or small-scale music or theatrical performance. The multi-function venue could see taping of TV shows and other performances in front of a live studio audience, and “we also have small recording studios peppered around the place,” adds Mr Wong. In January, Taubman Asia was appointed as Macau Studio City’s preferred retail part- ner.Taubman Asia is a subsidiary of Taubman Centers, one of America’s biggest shopping mall developers.Taubman’s retail projects in- clude The Pier at Caesar’s in Atlantic City, the future MGM MIRAGE CityCenter retail district development in Las Vegas, and other retail properties spanning from Beverly Hills to Or- lando, Florida. Taubman Asia President Morgan Parker was initially concerned about retail over-ca- pacity in Macau, given the forecast creation of 6 million sq ft of new retail space in the city over the next three years. In October 2006, Mr Parker said the development was toomuch too soon,but he has since changed his assessment. On the announcement of his company’s partnership with the Macau Studio City project, he commented: “We are extremely confident Macau won’t be over- supplied with retail” as long as the pace of development for casinos, convention centres and resorts continues.” Mr Parker says further research on the market convinced Taubman to enter Macau. Taubman manages 23 regional shopping centres in eleven US states, and the company feels it could use its strength and experience to establish a dominant position in Macau’s nascent resort-centred retail market.Mr Park- er also called into question the 6 million sq ft forecast,pointing out“a lot of the supply is ei- ther delayed or not being built.There are big question marks about what’s being built.” Furthermore, Mr Parker adds that even if the 6 million sq ft gets built around new ho- tel rooms, Macau will only have 17 sq m of retail space per hotel room compared to 33.5 sq m per room in Las Vegas. Vegas currently has 41 million sq ft of retail space compared to Macau’s 1 million sq ft. So Long Hong Kong Macau bulls believe the massive new supply of quality retail space in the city will allow it to draw mainland Chinese visitors who cur- rently travel to Hong Kong to shop, especially since Macau will soon also offer a wider vari- ety of entertainment and cheaper and higher quality hotel accommodation. Mr Wong echoes that sentiment and scoffs at the suggestion that it will take sever- al more years for gambling-hungry mainland Chinese to start demanding non-gaming attractions to a sufficient degree to support Cotai’s mega-resorts. “I think they would come if this project opened tomorrow.I think only because of a lack of it are they turning to Hong Kong. When such facilities become available in Macau – and they may be even better than the Hong Kong ones in terms of novelty and design – people will find that Macau is where they want to come and spend their money and stay a couple of days more before they go to Hong Kong just to go to Ocean Park, and god forbid, even Disney.” LVS is the most fervent follower of the supply-creates-demand thesis in Macau. The company is developing some 20,000 hotel rooms along the Cotai Strip in properties that include a total 3 million sq ft of retail space. Sheldon Adelson has a knack for knocking his competitors, and says he is not worried about the Taubman project. “If you were a shopper and you were staying in one of our 20,000 rooms, would you leave the proper- ty, walk down the street and go to another property simply because it’s stand-alone and Taubman developed it?” he asked. “I can as- sure you that American developers mean little or nothing to Asian retailers.” Entertaining Potential Entertainment in Macau has even greater growth potential than retail, if only because the base is so low. As CLSA’s Gavin Ho points out, in 2005, 71% of visitors to Las Vegas at- tended shows during their stay, taking in an average of six shows. Vegas visitors spent an average US$137 and US$49 per trip on shopping and entertainment, respectively. Meanwhile, Macau’s mainland Chinese visi- tors spent an average US$237 – 73% higher than Vegas visitors – on shopping in 2005, but because of the almost complete absence of shows in Macau, spent almost nothing on entertainment. Considering the cash they splash on shopping, mainlanders could at least theo- retically afford to splurge on entertainment as well.“Affordability aside, we believe shows and concerts should have strong appeal, pro- vided they are the programmes these visitors are looking for,” writes Mr Ho. “Andy Lau, for example, who has won countless music and other awards in mainland China, Hong Kong and overseas, could easily pull a full house in a mainland show for which tickets sell at up to Rmb1,000 (US$130).” More About the Owners Macau Studio City is being devel- oped by Cyber One Agents Limited, a 60/40 joint venture between East Asia Satellite Television Holdings (a subsidiary of Hong Kong-based eSun Holdings) and New Cotai LLC. eSun Holdings is one of Asia’s leading media and entertainment companies and an associate compa- ny of Lai Sun Development, a lead- ing hotel and property developer. Both companies are part of Hong Kong’s Lai Sun Group. eSun holds 66.6% of East Asia Satellite Televi- sion Holdings (giving it a 40% share of the Studio City project), while the remaining 33.3% is held by Singa- pore’s CapitaLand. New Cotai, LLC is a consortium of US-based investors including Da- vid Friedman, Co-Chairman of Ma- cau Studio City, and funds managed by Silver Point Capital, a private US- based investment firm, and Oaktree Capital Management, a global inde- pendent investment management firm. Mr Friedman is a veteran resort and gaming developer who led Las Vegas Sands Corp’s entry into Ma- cau. He also holds a Nevada gaming license. 13 12 In designing Macau Studio City, PSDG President and CEO Paul Steelman says he “wanted to make a modern project – a building that is seamlessly relevant for any time period. We want it to be functional and deemed as a great design and special tourist attraction forty years from now.” PSDG follows the same principles in designing its other projects, including the striking Ho Tram resort in Vietnam, pictured here.