Inside Asian Gaming

INSIDE ASIAN GAMING | May 2008 30 Feature telecoms. The remaining 10% is owned by Macau businessman Chan Siu. The casino at Le Royal Arc will of course be run under the concession of Stanley Ho’s SJM. The hotel is also in good hands— New World Development’s hotel portfolio includes the chic Grand Hyatt Hong Kong, which is considered by many as one of the leading luxury hotels in Asia. The 5-star hotel component of Le Royal Arc, dubbed New World Le Arc Hotel, will feature 301 rooms, including a spacious presidential suite and six deluxe duplexes with adjoining outdoor gardens on the 11th floor. Mr Tso is clear about the positioning of Le Royal Arc relative to its glitzy casino hotel neighbours. “I think we have to say we’re much better than StarWorld. That’s not our target. Our target is to be among the MGM andWynn level.” Subsidised pedestal Le Royal Arc’s mass gaming floors will occupy the ground and first floors of the development, while VIP gaming rooms will operate on the second. Current plans call for the modest-sized casino to open with 153 mass gaming tables, 36 VIP tables and 400 slot machines. It appears, therefore, that despite the impressive stature of Le Royal Arc, the casino within will not contribute to feared overcapacity as much as the string of mega resorts set to open from next year along the Cotai Strip—joining the hulking Venetian Macao and its half-million square foot gaming floor. Le Royal Arc also appears to have a clearer idea of where it stands than the arriving behemoths.When LVS first entered the local market in 2004 with Sands Macao, ending Stanley Ho’s effective 42-year casino operating monopoly,the company’s primary stated objective was to nurture the long-neglected mass market. Despite massive investment in main gaming floor facilities, however, expectations that the mass market would rapidly outstrip the VIP market have yet to be realised. In fact, the latest trend has been in the opposite direction. Following strong growth of the VIP market in the first quarter of this year on the back of rising junket commissions, VIP baccarat’s share of the city’s total casino revenue reached 73%, up from 67% a year ago. The rise in commissions has been led by Crown Macau, which is another modest-sized casino hotel with upscale aspirations. Crown has seen its share of local casino revenue rise from 9% in December to 18% in February. According to Crown operator Melco PBL, March saw the property “continuing to see upward growth,” which could indicate a share reaching or even exceeding 20%. Of course, the higher commissions will have a detrimental impact on Crown’s margins, but the sheer gain in volume could still see its bottom line emerge in better shape when first quarter results are announced in May. One of the most insightful blogs on Macau casinodevelopments that InsideAsian Gaming has come across is MacauTripping. com, maintained by “ChuckMonster”, whose appellation belies the depth of his analyses. He writes of Crown Macau’s recent market share-gobbling feat: “That one casino can lock in 20%market share (possiblymore) is— in a word—WHOA. Imagine that, the teeny tiny Crown... with a footprint about the size of the fountain/plaza outside of the Sands Macao, in a location way the hell away from anything remotely interesting, luring in the absolute cream of the junket crop—in turn beating the living snot out of the big huge Venetian, the fancy and beautiful Wynn, the brand spankin’newMGM,the breathtakingly weird StarWorld and the entrenched SJM monstrosity including its brand new cactus shaped neon death star of a hotel tower.This is like MacauTripping taking over Google.” The capacity of Le Royal Arc and Crown Macau are both of a manageable and— importantly—reconfigurable scale. The mega resorts will simply not be as flexible in a market which has yet to wholeheartedly accept the notion that bigger is better, as resort-goers in the US have done. Beyond taking the free shuttle bus to trample around the must-see canals of Venetian Macao, the majority of Chinese visitors don’t appear interested in the resort’s retail or entertainment facilities. And while Deutsche Bank analysts speculate that LVS could perhaps turn a US$1 billion profit on its US$16 billion worth of resort development in the US andAsia by achieving all its mega-monetising possibilities (largely by selling adjoining retail space and upscale residences), a potential regulatory minefield in Singapore and even Macau could dash such optimistic forecasts, whereas Le Royal Arc has already taken its apartment sale proceeds to the bank. While we are loath to turn to parables to make our point, if Venetian Macao squats as a goliath among new Macau casinos, then Le Royal Arc would appear a tall but slender David by comparison.