GGRAsia – Macau market at bottom or near bottom: Adelson

Macau market at bottom or near bottom: Adelson

Dec 18, 2015 Newsdesk Latest News, Macau, Top of the deck

The Macau market is “at the bottom or near the bottom”, said Sheldon Adelson, chairman and chief executive of casino developer Las Vegas Sands Corp.

The businessman was speaking in Macau on Friday at the opening of the St Regis Macao, Cotai Central. The 400-room hotel, part of a brand owned by Starwood Hotels and Resorts, is the fourth and final hotel tower of the Sands Cotai Central property on Cotai. The St Regis Macao tower does not add new gaming facilities to Sands Cotai Central. The total Sands Cotai Central complex has been described as a US$4.4-billion scheme.

Sands China Ltd, the Macau unit of Las Vegas Sands, had said in a filing in August that the total cost for completion of the St Regis was expected to be approximately US$380 million. Sands China owns and manages Sands Cotai Central.

Asked about the status of the Macau market, which in the gaming sector has seen 18 straight months of decline in casino gross revenue to November 30, Mr Adelson stated on Friday: “Nothing goes down in a straight line forever; just as nothing goes up in a straight line forever… So I think we are the beginning of the shift in the cycle; from a recession-type economy, to a bottoming out. And I think the economy and Macau’s fortunes will turn around. I think we are either at the bottom or near the bottom and I think it will turn around in the near future; certainly within 2016.”

Investment analysts have linked Macau’s sustained gambling decline to China’s anti-graft campaign, which began in the autumn of 2012, at the time Xi Jinping became Communist Party chief in China.

A report on Tuesday from Morgan Stanley group – citing a speech by Mr Xi in June – suggested China’s clean up campaign had moved from “anti-extravagance” to “anti-corruption” in the period from 2012 to 2015, and would enter the stage of “preventive measures” in 2016, with the possibility of some stabilisation in mass gaming. The mass market gambling segment has generally been declining in Macau at a slower rate than the VIP segment.

Mr Adelson was asked on Friday how the opening of the high-end St Regis – which includes butler service as part of its offer – would help Sands China’s Macau gaming operations.

Mr Adelson said, referring to an already existing gaming facility at Sands Cotai Central: “There’s a separate entrance at the St Regis for players that want to go… to the Dragon Palace, a high end VIP area.”

Official data indicate that not only has GGR been falling market wide year-on-year, but also hotel occupancy in Macau has been softening.

Macau hotels’ average occupancy rate during the first 10 months of 2015 was 83.7 percent, a 4.6-percentage point fall from the 88.3 percent occupancy in the prior-year period.

The chairman added that the opening of the St Regis had to be seen in the context of the firm’s product offering on Cotai as a whole. Sands China says it has close to 10,000 rooms at different price points, 650 shops, and 100 food and drink outlets.

Mr Adelson also said that some apartment-hotel space at St Regis was “not quite finished yet and [it] will take another few months to get them finished”.

Table allocation

Asked about fresh table allocation from the Macau government for Sands China, Mr Adelson referred to his US$2.7-billion new Cotai property The Parisian Macao, which the firm says is due to open “in the second half of 2016”.

He stated: “We are hoping to be treated fairly, which we are quite confident the Macau government will do… and give us the 250 tables additionally; the way the other concessionaires are getting them.”

Union Gaming Securities Asia Ltd said in a note on November 18 that four major Macau casino schemes still to launch on Cotai – including The Parisian – are likely to get 250 tables each, matching the allocations given to two other properties that opened this year.

The Las Vegas Sands chairman said that while his knowledge of digital technology only extended to pressing “send and end” on his telephone, The Parisian would include non-gaming attractions for younger visitors, including what was referred to as a “virtual theme park” called Planet J – where young visitors would be able to play versions of popular role play computer games.

Mr Adelson was asked during the press conference why he had hired Wilfred Wong as president and chief operating officer of Sands China. Mr Wong, who took up his post on November 1, was previously chairman and chief executive of Hong Kong-listed Hsin Chong Construction Group Ltd. A unit of that group – Hsin Chong Engineering (Macau) Ltd – is a key contractor on the Parisian Macao.

Mr Adelson said: “We were looking for a proven leader; someone who was a generalist in leadership… the company he worked for built all these buildings as constructon manager for Sands China and for Las Vegas Sands prior to that.”

He added: “He had experience in building these buildings and he understands the relationship with what we call the ‘programming’ – what functions are being performed in what part of the hotel…”

Mr Wong, who also attended the press event, said a focus for Sands China in 2016 would be staff training and where possible promotion of local staff.

“The local staff take up about 90 percent of our workforce and they are a truly important force in our operation. Hopefully we will be able to train them up and promote them into responsible positions,” he stated.

“I have every confidence that in time we are going to be the best workforce in Macau,” said the Sands China COO, adding that the company was “benchmarking staff to international standard,” so that they could be the “best in the world,” not just the best in local terms.