Inside Asian Gaming

November 2015 inside asian gaming 11 to help characters from Tweety Pie to the Green Lantern overcome foes and outscore fellow riders. The 40,000 square foot fun zone on four levels also features a diner with character themed meals at family friendly prices and a pair of party rooms for Looney Tunes or DC superhero styled children’s events. (No bachelor or bachelorette parties, management says.) Although they’re primarily intended as crowd pullers, Melco Crown hopes to get some return on its entertainment investments. The Golden Reel is priced at MOP$100 (US$12.50) for adults, MOP$80 for children up to 12 and MOP$85 for Macau residents and seniors 60 and older. Batman Dark flight costs MOP$150 for adults, MOP$120 for children and MOP$125 for residents and seniors. House of Magic tickets run MOP$400 for adults, MOP$320 for children and MOP$340 for Macau residents, with VIP treatment available in all categories at a 50% premium. Two hours in the Warner Bros Fun Zone costs MOP$200 for an adult and child and MOP$340 for two adults and two children. An adult must accompany children under eight. Hotel packages include the Golden Reel and Batman as freebies, but the House of Magic comes at a MOP$700 premium for two. INSTANT EARNINGS Despite the attractions’ revenue generating potential, Morgan Stanley Research warns that they are likely to be a drag on Studio City’s margins. The brokerage says that will be offset by the resort’s Cover Story higher margin mass market gaming. Analysts Praveen Choudhary, Alex Poon and Thomas Allen suggest that Studio City will be accretive for Melco Crown’s fourth quarter and drive 30% EBITDA growth for the company in 2016. They expect Studio City to generate US$348 million in EBITDA next year, based on 3% growth in gaming revenue for the market overall and 21% growth of Melco Crown from their respective third quarter levels. But the Morgan Stanley report cautions that if new supply fails to drive demand – it notes that Galaxy Macau’s Phase 2 opening in May has not materially boosted the market’s gaming revenue – the result could be price wars, promotion overspending and margin pressure. Credit Suisse analysts Kenneth Fong and Isis Wong, who turned positive in July and bullish last month, observe that Melco Crown is unlikely to use a marketing strategy that would hurt 100% owned City of Dreams to benefit 60% owned Studio City. Credit Suisse estimates that Cotai’s new casinos will break even if there’s 1.5% gaming market revenue growth and a 15% return on invested capital with 4% growth, though those calculations don’t factor Studio City as an all mass market casino. Melco Crown is positioning Studio City as a mass market property, while City of Dreams remains focused on premium mass. One indication of the difference is the classification of both Studio City hotel towers as four star facilities. However Mr Ho says the hotels, “for international standards, are beyond five star,” and the four “Although they’re primarily intended as crowd pullers, Melco Crown hopes to get some return on its entertainment investments. The Golden Reel is priced at MOP$100 (US$12.50) for adults, MOP$80 for children up to 12 and MOP$85 for Macau residents and seniors 60 and older.”