GGRAsia – 4-star hotel at Studio City makes sense: Union Gaming

4-star hotel at Studio City makes sense: Union Gaming

Sep 24, 2015 Newsdesk Latest News, Macau, Top of the deck

It “makes sense” for Melco Crown Entertainment Ltd to request its hotel accommodation (pictured) at Studio City, Macau, be redesignated four-star from five-star, Union Gaming Securities Asia Ltd told GGRAsia.

“It makes sense to us that something had to give,” said analyst Grant Govertsen.

He added, referring to other Cotai casino projects from respectively Galaxy Entertainment Group Ltd, Melco Crown itself and Wynn Macau Ltd: “Virtually all new hotel supply is being billed as five-star, but can it really be possible that the rooms we will see at Studio City be of the same quality standard and size as the rooms at Ritz-Carlton, the fifth tower at City of Dreams, or Wynn Palace? With this in mind, I think a four-star designation makes more sense than a five-star one.”

The US$3.2-billion Studio City – due to open on October 27 – will be packed with non-gaming attractions designed to draw mass-market customers. The attractions include a Ferris wheel, a Batman-themed virtual ride and a collection of magic shows.

According to the latest edition of Macau’s Official Gazette, Melco Crown submitted a request on May 11 to the city’s Land, Public Works and Transport Bureau to redesignate the hotel accommodation at Studio City – contained in two towers at the property and amounting to 1,600 rooms – to four-star .

“…at this moment this typology [four-star] is the most suitable for the policy of the diversification of accommodation and tourist product and because from a technical point of view the project presented to Macau Government Tourist Office is better framed as this type of [facility],” said Melco Crown. Macau’s government tourist bureau is responsible for licensing hotels in the city.

A browser-based Internet search of the Studio City website – and the heading of the website itself – still referred as of 6.15pm on Thursday to a “five-star luxury hotel” at the property.

GGRAsia asked Melco Crown for clarification on the website reference but no reply had been received by the time this story went online.

Mass focus

The structure of Macau gross gaming revenue (GGR) – for many years skewed in the direction of VIP gambling – has recently shown some signs of becoming more mass-market focused, even if only as a result of the relatively sharper decline of VIP. Official data for the second quarter showed VIP baccarat GGR fell 42.2 percent year-on-year, while mass-market GGR, including slots and electronic table games, fell by 30.2 percent year-on-year.

VIP revenue accounted for 55.5 percent of casino GGR in the three months to June 30, down from 58.2 percent in the previous quarter and from 60.1 percent in the prior-year period.

Macau’s mass gaming revenue is likely to grow by approximately 4 percent quarter-on-quarter in the third quarter, “marking the first sequential increase since the first quarter 2014,” said UBS Securities Asia Ltd in a report issued on Monday.

The average cost of a Macau hotel room was MOP1,511 (US$189) per night in the eight months to August, show data from the Macau Hotel Association. That was a fall of 5.4 percent from the prior-year period. The easing in prices has coincided with the year-on-year decline in VIP gambling in Macau.

Local newspaper Jornal Tribuna de Macau reported on Thursday that the government is mulling introducing subsidies to organisers of package tour groups in order to encourage their customers to stay overnight in the city. Macau’s visitor arrivals in the eight months to August 31 are down 3.2 percent from the prior-year period to 20.44 million, according to official data.

Studio City is 60-percent majority owned by Melco Crown. Lawrence Ho Yau Lung, co-chairman and chief executive of the firm, said at a press conference in January, that Studio City would be mass-market focused with a “strong premium [mass] component” because of its location near the Lotus Bridge crossing point linking Cotai to neighbouring Hengqin Island, a special economic zone of mainland China that has recently opened a range of non-gaming family-based attractions including a theme park.