Big new casino represents a gamble for Macau's traditional gaming power
Posted by Gavin Smith on 30 Apr 2009 at 13:04
A brand new casino being built on a Chinese Island has gone under the microscope, with the scheme going ahead in spite of the local gaming market going through a tough period.
The Financial Times took a close look at City of Dreams, the newest gaming development on Contai Strip, part of Macau and seen by some as Asia's own Las Vegas.
Costing $2.1 billion ($1.4 billion), Melco Crown Entertainment (MPEL) is hoping it will prove a hit when it opens in June.
Players will be greeted by a rock-themed casino, night clubs, and Harley Davidson motorcycles as prizes.
According to the Financial Times, Macau's gaming revenue went up by 31 per cent in 2008, but this was then hit by a slump in September.
This is thought to have been caused by the Chinese authorities tightening visa restrictions which meant visitor numbers from some parts of China fell off. The global credit squeeze has also affected trade.
According to the report, the City of Dreams is seen as crucial for MPEL and its high-level executives.
It is also seen as key to the high-profile Ho Family - Lawrence Ho, sun of Stanley, is MPEL chief executive.
The Times reports in 2002 Macau gave the thumbs up to licences for international investors meaning the likes of Las Vegas sands and Wynn Resorts could develop interests in Macau and threaten the island's traditional big players.
High interest greeted the opening of Sands Macao in 2004, and then Wynn Macao in 2006, and Venetian in 2007. However, according to the Financial Times SJM, a Stanley Ho interest and gaming company, is still Macau's biggest casino firm.
Its rivals have recently had their own challenges, with Las Vegas Sands putting a stop to construction at partly complete schemes on Cotai.
Recently the firm has been refusing to comment on claims it is thinking of selling Sands Macao in a lease back move.
MGM Mirage has a joint Macau project with Pansy Ho, daughter of Stanley, but this is subject to speculation and some have said MGM could end up selling its 50 per cent stake, the Financial Times says.
The Ho family's grip on the local sector looks strong still, with the report adding it holds half of the six gaming licences in a market which has seen a boom since 2002.
Quoted by the Financial Times, Gabriel Chan, an analyst at Credit Suisse, says: "Their market share may be smaller but don’t forget the pie is much bigger now."
MPEL looks ready to clean up from any recovery in the market through City of Dreams and is expected to be the only casino opening of its kind in Macau in the immediate future.
The financial times also said MPEL's market share could double to about 17 per cent by 2010 thanks to the new casino.
Macau's casino sector has seen some ups and downs recently, with revenue in the first quarter of 2009 slumping 13 per cent compared to the same timespan last year. However it was eight per cent higher than the amount recorded in 2008's fourth quarter.
Quoted by the Financial Times, Francis Lui, deputy chairman of Macau operator Galaxy Entertainment, said: "The worst is likely to be over as long as there are no more big corporate problems. This year I am cautiously optimistic."
Analysts say Macau's gambling revenue could decline further in the first six months of this year, but could then recover later in 2009.
