“Virtually all” floor areas in Galaxy Macau Phases 3 and 4 will be given over to non-gaming facilities, said the chairman of Macau casino operator Galaxy Entertainment Group Ltd in the firm’s 2016 annual report filed on Friday.
“Galaxy Entertainment continues to move forward with Phases 3 and 4 with the potential to commence construction in late first-quarter or early second-quarter 2017, with virtually all floor areas allocated to non-gaming and primarily targeting MICE, entertainment and family facilities,” said Lui Che Woo. He was referring firstly to the next stages of the group’s flagship Cotai casino resort Galaxy Macau, and latterly to the non-gaming activity segment known as meetings incentives, conferences and exhibitions (MICE).
Some casino jurisdictions mandate the maximum amount of floor area in a venue that can be allocated to casino gaming. But investment analysts have noted that gaming areas in so-called integrated resorts typically offer much higher yields than non-gaming areas. As a result, a small amount of resort floor area in percentage terms, has the potential to provide the bulk of the earnings in a property.
Galaxy Entertainment stated in its 2016 results in late February that the firm expected to start construction of Galaxy Macau Phase 3 and Phase 4 late in the first quarter or early in the second quarter this year. In recent weeks there has been activity on the Phase 3 site.
The firm’s chairman made reference in the annual report to the so-called “Centre and Platform” policies of the Macau government and the Chinese central government, designed to help reduce Macau’s dependence on casino revenue.
“The central government… reiterated its support towards Macau to develop in the direction of ‘One Centre, One Platform’, i.e. the World Centre of Tourism and Leisure and the Commercial and Trading Services Platform for China and Portuguese-speaking Countries, which will benefit all of Macau,” stated the chairman.
Mr Lui also mentioned Macau’s “forthcoming Tourism Industry Plan,” as another example of government support for the sector. The later was a reference to the “Macao Tourism Industry Development Master Plan”. The plan – to cover an array of topics including tourism products, destination marketing and tourism carrying capacity – is to be completed this year, according to the head of the Macao Government Tourism Office, Maria Helena de Senna Fernandes.
Galaxy Entertainment’s chairman noted in his firm’s report: “The group is positive on the longer-term outlook for Macau and we are hopeful that the recent signs of stabilisation will [see] successful transition into a sustainable recovery.”
But he also stated: “… we do acknowledge that in the shorter term we face increased regional competition and a tightening regulatory environment.”
The aggregate investment budget for Galaxy Macau Phase 3 and Phase 4 will be “definitely no less than” HKD43 billion (US$5.54 billion), the company’s deputy chairman Francis Lui Yiu Tung told Hong Kong media in Beijing earlier this month.
He added that the venues would include facilities aimed at family visitors and young adults.
The deputy chairman was speaking to the media while in Beijing as a delegate to the Chinese People’s Political Consultative Conference, an advisory body to the central government.
For the HKD19.6-billion Galaxy Macau Phase 2, Galaxy Entertainment received an aggregrate of 250 new-to-market gaming tables under the Macau government’s table cap, between the facility’s launch in May 2015 and January 2016.
Studio City, 60-percent owned by Melco Crown Entertainment Ltd, led by Lawrence Ho Yau Lung, opened in October 2015 and got 250 new tables for its US$3.2-billion spend.
Projects opening since then have had smaller new-to-market table allocations from the city’s government, relative to the amount of investment.
Wynn Macau got 150 new tables for its US$4.4 billion Wynn Palace resort, which launched in August last year. Sand China Ltd got the same number of new tables for its US$2.7-billion Parisian Macao venue, which opened in September.
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"We forecast Grand Lisboa Palace will have EBITDA of HKD2.0 billion (US$260 million) with 330 tables by 2022, and HKD3.5 billion with 380 tables by 2023"
Credit rating agency Fitch Ratings