HONG KONG (Jan 13): Macau casino billionaire Lawrence Ho expects the city’s casino revenue to grow in 2015, betting his new resort and other openings will help lift the industry from last year’s doldrums.
Melco Crown Entertainment Ltd., headed by Ho and his Australian billionaire partner James Packer, yesterday said it plans to woo vacationing Chinese with a family entertainment center it will open with Time Warner Inc. at its new US$3.2 billion Macau casino. This is part of the company’s plan to shift resources away from high rollers, Ho said.
Casino operators including Melco, Galaxy Entertainment Group Ltd. and Sands China Ltd. are targeting mass market gamblers from China as the city diversifies its economy that largely relies on casino gambling for government revenue. Macau suffered the worst year in 2014 as Chinese President Xi Jinping’s anti-graft drive turned away high-end players who contributed to a majority of the city’s gambling takings.
“If you look at China, how many more billionaires are going to drop out of trees in the next 10 years?” Ho, Melco’s chief executive officer and co-chairman, said in an interview in Macau yesterday. “It is going to be the rise of the middle income earnings demographics. These are the younger people who want to travel, experience the world.”
Melco rose 1.2% to close at HK$63.2 in Hong Kong trading today. Galaxy led the rally in other casino stocks with shares up 2.7% and SJM Holdings Ltd. gained 2.6% and Sands China advanced 2.3%.
2015 Growth
Ho, the son of 93-year-old Macau gambling mogul Stanley Ho, expects the casino industry to recover in the second half of the year and end 2015 with growth in the “low- to mid-single digits,” boosted by Melco’s Studio City and other openings this year, he said to Bloomberg Television’s Angie Lau in Macau yesterday. Galaxy will open the second phase of its Cotai project in the middle of this year.
Deutsche Bank AG and Credit Suisse Group AG estimated Macau casino revenue in 2015 to fall 8% and 6% respectively. CLSA Ltd. and Bank of America Merrill Lynch analyst have predicted a 9% and 10% decline respectively. Jefferies LLC forecast a 3% growth.
Macau’s government has been curbing money flows to the territory over concern that illegal funds are being taken out of the mainland. It’s restricting the use of China UnionPay Co.’s debit cards at casinos and tightening rules on junket operators, the middlemen that provide credit and arrange trips for Chinese high rollers.
‘New Normal’
Ho said he hasn’t seen any further restrictions and that China’s anti-corruption campaign “is directed at government officials” which is affecting consumption appetite of people from the mainland. “It’s a good time to stay low profile,” he said.
“Once people figure out what the new normal is, then ultimately the population base and the consumption power is so great that it’s all going to come back,” Ho said. “The problem is nobody knows what is the new normal right now.”
Melco Crown is building a 30,000-square-foot (2,787-square- meter) Warner Bros. Family Entertainment Center that will include a virtual reality Batman ride and other facilities featuring DC Comics characters such as “Superman,” “Wonder Woman” and “The Flash,” the company said.
Gambling Tables
Melco’s Studio City, inspired by Hollywood, is scheduled to open in the third quarter, Ho said at a media briefing yesterday in Macau. The company aims to start with 400 gambling tables and 1,600 rooms from two hotel towers at the resort located in the increasingly popular Cotai area in Macau, he said.
The company hopes Macau will allow it to put more gambling tables with such non-gaming elements at the new resort in line with government guidelines, he said.
Chinese president Xi had called on Macau, the only Chinese city that legally allows casino gambling, to nurture new growth areas and turn the city into a world tourism and leisure center.
“We think Melco’s announcement will be viewed by the government as a step in the right direction,” Karen Tang, an analyst at Deutsche Bank, wrote in a report. “That said, visibility on table quota remains murky.”
The new casino will have a 130-meter tall Ferris wheel, inspired by the film’s two asteroids shooting through a Gotham City building, according to the company. It will have a nightclub, a television broadcast studio and a 5,000-seat center for concerts, sports and theatrical events, it said.
Almost 2 million mainland tourists visited the former Portuguese colony in November, an increase of 28% and 70% of the total, according to government figures.
Melco Crown said Jan. 2 that it will delist from the Hong Kong stock exchange because of low trading volume and significant additional costs, while keeping its Nasdaq listing.
The move isn’t related to the Macau gambling slowdown nor China’s anti-graft campaign, and Melco “will take a look at” the possibility of restructuring casino assets for relisting in Hong Kong if big enough properties come along, Ho said.