Inside Asian Gaming

inside asian gaming November 2015 8 The 1,600 room resort’s exterior is “Gotham City with an asteroid shot through it,” Mr Ho says, while the interior evokes Hollywood of the 1920s and ’30s – staff urge customers, “Have a glamorous day” – with shopping areas presented as period movie set versions of New York and Beverly Hills, plus steam punk elements taken from the early industrial age. “We didn’t follow what the competitors did. We’re a young company,” the 38 year old Mr Ho adds. “We’re willing to try new things.” STAR POWER VERSUS HORESPOWER The most astonishing thing they’re trying, by Macau standards, is Studio City’s absence of VIP gaming, relying solely on higher margin but far lower volume mass market revenue. Constrained by the Macau government’s gaming table cap, Studio City received 200 tables now and 50 more as of January 1. Mr Ho calls gaming revenue “the economic engine” that drives resort revenue and makes it possible to invest in expensive attractions. But with only 250 of the 400 tables originally envisioned and no VIP tables, some believe that engine may be short of horsepower. Mr Ho counters that Melco Crown, which also owns City of Dreams and Altira in Macau and City of Dreams Manila in the Philippines, currently derives less than 10% of EBITDA from VIP players and is less reliant on that segment for earnings than any Macau casino operator except Sands China. “We steered away from VIP gaming tables a long time ago. Since our IPO [on the US NASDAQ exchange in 2006] we believed mass tables would be leading the Macau market,” Mr Ho explains. “At 250 tables, it was a no-brainer for us” to forgo VIP gaming. No doubt, the 41% decline in VIP revenue through the first three quarters of this year, compared to the 29% drop in mass market revenue, helped guide the choice. “If it was 400 tables, maybe we would have put in some VIP,” Mr Ho adds. That number would also satisfy Melco Crown’s loan covenants calling for Studio City to have 400 tables by next October. Melco Crown says it is in talks with lenders to satisfy their concerns. The resort’s second level also reportedly has a VIP area ready to roll out, when and if management chooses to go after higher rollers. For now, gaming tables branch out from a central corridor leading from the hotel’s main entrance on Estrada do Istmo, Cotai’s central corridor. The roughly diamond shaped casino floor, with red, orange and gold as the dominant colors, also has 1,233 gaming machines and a 200 terminal live dealer multigame arena. Main floor table minimums begin at HK$300 with HK$1,000 tables dominant and all but 16 tables for baccarat. The premium mass Signature Club has a branch off the main floor with about one-third of the casino’s allotted tables and smoking prohibited outside smoking lounges throughout. Lighting fixtures range from crystal chandeliers to Chinese inspired cloth lanterns. The casino’s centerpiece is a fountain of cascading teapots, surrounded by a tea bar. There’s no live music or entertainment on the floor, but plenty outside. Studio City, 60% owned by Melco Crown and 40% by two US hedge funds, is banking on its location and future infrastructure development to make it a hit. The 13.1 hectare (32.3 acre) site sits at the foot of the Lotus Bridge border crossing from Hengqin Island and will eventually have a Macau light rail stop at its doorstep, both expected to generate lots of traffic in coming years. Despite Melco Crown securing its subconcession last among the six operators in 2006, Mr Packer says, “We have been able to get the two best sites in Cotai,” with City of Dreams at the north end of Cotai’s main drag and Studio City at the south end. “Business continues to move to Cotai.” FANCY FLIGHTS Dubbed “Asia’s Entertainment Capital,” Studio City aims to shift Macau’s center of gaming and tourism gravity further toward Cotai with its array of non-gaming attractions. Most immediately noticeable is the celluloid inspired Golden Reel running in a figure eight from the 23rd floor between the resort’s two hotel towers, rising 130 meters (428 feet) above Cotai. The 17 cabs, boarded as the wheel keeps rolling, can each accommodate up to 10 riders. The 15 minute ride provides bird’s- eye views of Cotai, Macau International Airport and Hengqin. Batman Dark Flight begins with a tour of Wayne Industries “The resort has invested hundreds of millions of dollars in entertainment features, headlined by a reported US$70 million for The Audition, a short film starring Academy Award winners Robert De Niro, Leonardo DiCaprio, director Martin Scorsese – all of whom attended the resort opening for the film’s debut – and Brad Pitt.” Cover Story