Inside Asian Gaming

11 10 W hen a property developer builds a new shopping mall, the management com- pany likes to sign up at least one prestigious store in order to attract shoppers and to en- courage other retailers to move in. Las Vegas Sands Corp (LVS) Chairman Sheldon Adelson is using the same principle to create a successful gaming resort. The ‘mall’ is his Venetian Macau resort in Cotai, and the keystone ‘stores’ are the luxury hotels he believes will help turn Macau from a day trip destination into his vision of “Asia’s Las Vegas.”He’s so confident of achieving this vision that he’s even trademarked the slogan, as well “the Cotai Strip,” which is the official name of the development. At first glance, it seems Mr Adelson needs the hotel brands more than the hotel brands Name Draws Las Vegas Sands Corp has teamed up with a string of hotel brands to build a critical mass of high-quality resort facilities along Macau’s burgeoning Cotai Strip need him. He expects non-gaming income on the Cotai Strip tomake up as much as 50% of the revenues,compared to an estimated 5- 10% at present in Macau. Mr Adelson told a recent press confer- ence on the site: “In Las Vegas, gaming ac- counts for about 35% of our bottom line and we [The Venetian] are one of the top two or three casinos out of more than 100. Here in Macau, in the Asian market, it will probably be 50-60%. It’s not going to be as casino-centric a business model as has ex- isted here for the last several decades. It’s a truly integrated resort and various parts of our revenue are from other things like shop- ping, rooms, spas, conventions, exhibitions and shows.” To make that much non-gaming revenue, he’ll need to attract a lot of visitors to the one million sq. ft of retail space and the 1.2 mil- lion sq. ft of exhibition facilities being built, and to do that he needs quality places for those visitors to stay. Leveraging local brands Some 20,000 rooms are planned for the Cotai Strip – 3,000 of which will be at LVS’Venetian Macau. LVS is also developing hotels under several other brands. Two of Mr Adelson’s hotel partners, Starwood and Shangri-La Resorts and Hotels, are better known to Chi- nese consumers than is LVS. Between them, Starwood and Shangri-La operate 52 hotels in Greater China, and will be opening at least 56 more within the next five years. In Cotai, Starwood will manage a 4,000- room Sheraton Hotel (which will become the biggest Sheraton in the world), and a 460- room St Regis hotel with its signature but- ler service. There will also be more than 400 luxury holiday apartments under the St Regis brand. The Sheraton is due to open in 2008 and the St Regis accommodation in 2009. Shangri-La will manage a 600-room Shan- gri-La hotel and a 1,200-room Traders hotel. The properties are expected to start operat- ing in 2008.The Hilton,Four Seasons,Intercon- tinental, Conrad and Holiday Inn hotel brands will also have properties at the resort. Matthew Fry, Starwood’s Vice President, Acquisitions and Development, whose own grandfather was a hotel developer in Las Ve- gas, says:“One of the benefits of Starwood is that we have a huge presence in China. We understand the Chinese market, and obvi- ously that’s going to be a huge component of the guests here.” Where LVS does have instant recogni- tion, is among conference and exhibition planners. William Weidner, President and Chief Operating Officer of LVS, said in early March that 30 international trade shows had already been booked for the Cotai Strip’s yet-to-be- completed exhibition centre, along with several corporate conferences featuring more than a thousand delegates each. A hundred tour operators had also signed contracts with LVS in advance of the first phase of the site’s opening in July or Au- gust, added Mr Weidner. The combined marketing muscle of the partners and the fact LVS is taking the main commercial risk as the site developer, makes the deal look very attractive for the hoteliers. Mr Fry says:“The benefit is that Starwood is frankly just managing the hotel for Las Ve- gas Sands and they have common ownership of everything on the Cotai Strip. “I think Mr Adelson recognised the value that brands such as Sheraton and St Regis will bring to the Cotai Strip. They will au- tomatically bring a stamp of quality on the location, on a global basis, and immediately make it an attractive destination. People such as meeting planners will say ‘Well if it’s good enough for Sheraton it should be good enough for me’. “The other benefit of having branded op- erators such as ourselves is the power of our distribution network – our sales and market- ing team. We have global teams that will be delivering business into these hotels. That’s part of what LVS is getting when they pay to have us here.” Equal partners Symon Bridle, Chief Operating Officer for Shangri-La Hotels and Resorts, stresses though that the Cotai project is an equal partnership between LVS and hoteliers. According to Mr Bridle, “To get the Co- tai Strip positioned correctly is going to re- quire a collective effort. It’s going to be the Cotai Strip first, and in our case, Shangri-La second.Through our customer base and our brand loyalty, that’s how we will bring the market in.” Mr Adelson and his company think most of their new customers will come frommain- land China, making the Shangri-La group an obvious choice as a hotel partner. Mr Bridle stresses: “Making the assump- tion that a lot of the business will come out of China, I think we are recognised as the leading luxury brand in China with 21 hotels there today and another 20 under devel- opment, with five opening this year. I think we’ve already got very strong brand loyalty in the China market and that’s going to be one of our potential success elements. We have a very good relationship with a lot of the tour operators up in China as well. We operate a regional sales office out of Guang- zhou already, with the Guangzhou Shangri- La just opened.” One potential conflict of interest be- tween the hotel brand owners and LVS in Cotai is guest revenues.The hotels would like guests to spend as much money in their ho- tels as possible, while LVS also wants them to spend freely outside the hotels at the casino, the shows,the restaurants and the shops that will make up the integrated resort. Mr Bridle says: “We’re certainly not there to keep the person in the hotel per se. Every- one has to recognise that people are coming to Cotai because of that integrated element. We may have a guest that’s coming to see Cirque du Soleil or wants to go and see an NBA [basketball] game or whatever. “I think the hotel is really going to fulfil its traditional function of being your bed- room, but we know that guest is not going to spend a lot of his time there. “We recognise some of the lunch or din- ner business will be looking to utilise some of the other restaurants in the complex. We also hope there will be other people in differ- ent hotels who will be looking for different experiences themselves and might come to dine in our restaurants. “We might have a bit less usage of tra- ditional things like telephone calls that the pure business person might be utilising. But today in our Horizon Club rooms, Internet use is a free service anyway, so we’re not tak- ing revenue from it.There might be a slightly different mix in laundry, and what we call the minor operating departments.” “From our perspective, we want to try and maximise revenues from the hotels, but the owner Sands is going to be look- ing at the bigger picture, says Mr Fry from Starwood.”“I think it’s complicated here be- cause you’re going to have a casino, retail and restaurants – it’s going to be a fine bal- ancing act.” Mr Fry adds: “The pool space has been created by a world class designer and will be The planned Sheraton and Traders hotels on Cotai The planned Shangri-La

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