Take a tour of south Macau and it’s hard to tell that the world’s biggest gambling hub is contracting. On a vast piece of reclaimed land, dusty with cement mixers and dump trucks, all six of the city’s casino operators are building new resorts.
Galaxy Entertainment Group Ltd. will open the first of the new hotel-casinos May 27, including an area modeled after New York’s Broadway theater district. Melco Crown Entertainment Ltd. plans to finish the next project later this year, complete with Asia’s tallest Ferris wheel. Sands China Ltd. follows with a property featuring a half-size replica of the Eiffel Tower.
Welcome to Macau’s alternate reality. Casinos are betting $26.6 billion that if they add hotel rooms and casino tables, they might be able to stop the decline in revenue and start them rising again. It’s the opposite of textbook economic principles: More supply will mean more demand. Everyone in the industry is watching to see if it will work.
“Galaxy’s openings will be the first major test for the industry on whether new capacity will drive visitation and gaming revenue recovery,” said Jamie Zhou, an analyst at Macquarie Securities Ltd. “The question now is what kind of customers they will bring and how much gaming revenue are they going to drive. That’s what on everyone’s mind.”
The new resorts are aimed at positioning Macau beyond hard-core gambling for Chinese high-rollers to a Las Vegas-style recreation hub for families and couples, with restaurants, entertainment and shopping in addition to casinos. It’s part of the reinvention mandated by Macau’s government for casino operators to focus on developing tourist attractions after China’s anti-graft crackdown and slowing economy kept away high rollers. The operators are adding non-gaming features to their resorts in hopes of winning more gaming tables from the government.
Galaxy, controlled by billionaire Lui Che-Woo, is betting on a Broadway theme at its revamped casino with Brazilian belly dancers and sold-out headline act from 64-year-old Cantonese pop singer Alan Tam. Across the street, the Hong Kong-based company hopes to lure shoppers by offering more luxury stores at the second phase of its main Galaxy Macau casino in the reclaimed Cotai area.
To the south of the new Galaxy resorts, Melco Crown’s Studio City project boasts a Batman theme ride, the soaring Ferris wheel and a nightclub from Ibiza, Spain-based Pacha at its Hollywood-inspired resort, which even roped in actors Brad Pitt and Leonardo DiCaprio for a promotional film directed by Martin Scorsese.
Across the street, billionaire Sheldon Adelson, whose eight-year-old Venetian resort features musicals including Cats and Beauty and the Beast, is building the Parisian Macao with the half-sized Eiffel Tower.
Will They Come?