MACAU

Londoner needs stiff upper lip in tough market conditions

Macau will face the biggest test of the mantra “if you build it, they will come,” as Sands China’s $2 billion “The Londoner” gets set to open its doors after the worst year in modern records for the world’s largest gambling hub.

The London-themed resort is a revamp of Sands Cotai Central, which sits across the road from sister resorts, The Venetian and The Parisian. The company began accepting hotel bookings from mid-December and accepted the first guests from Jan. 22nd. It plans an official ceremony in early February.

It’s not just a test of current market conditions, but will also serve to show whether such themedresorts still appeal to the Chinese traveller looking for the ultimate instagram moment.

The Atrium is designed for that wow factor, creating a space modelled on London’s Crystal Palace and featuring a replica of the Statue of Eros in Leicester Square. There is also a 96-meter replica of Big Ben.

The resort features two all-suite hotels, making a total of five luxury brands at the resort. It also adds dining options from British chefs, such as Gordon Ramsey, as well as new MICE space, with a 6,000-seat arena.

“Sands China Ltd. has a successful track record of creating themed properties in Macao, and The Londoner Macao joins The Venetian Macao and The Parisian Macao as Asia’s top destinations for both the leisure and MICE markets,” Sands China President Wilfred Wong said in a recent release.

“London is an iconic city and we anticipate this addition will further raise the profile of Macao while increasing the number of visitors as our other flagship properties have done.”

New property openings have nearly all helped to successfully increase visitation to Macau, however, the near-term outlook remains highly uncertain.

Visitation over the Christmas season picked up and Macau saw its highest level of travellers since the pandemic began on New Year’s Eve with 30,747 visitors reported. Still, the recovery has not been as fast as expected since China resumed individual travel visas in September and new outbreaks across China have resulted in further tightening in travel restrictions.

It also adds dining options from British chefs, such as Gordon Ramsey, as well as new MICE space, with a 6,000-seat arena.

The Macau Government Tourism Office (MGTO) has been lobbying hard on the mainland with a series of marketing campaigns to lure travellers.

The Londoner is hoping to get a helping hand from the star power of David Beckham. The former England footballer has been Sands’ global ambassador since 2013 and has had a hands-on role in designing the new resort.

Beckham worked with London interior design firm David Collins Studio to create the Suites by David Beckham, his first such foray into hotel design.

The 14 suites take up the top two floors of the “The Londoner Hotel” and will open later in 2021.

“These suites will present a unique experience, enhanced with personal touches from my life,” he says.

The Londoner Hotel itself is an all-suite tower designed by Hong Kong-based Steve Leung Design Group with about 600 luxury suites. The Louis and Victoria Suites are 75 square meters, while the ultra-premium Windsor Suites have 113 square meters.

The Unveiling The Londoner Macau promotional packages went on sale in mid- December, offering a one-night stay in a Louis Suite and access to resident’s club The Residence starting from. MOP2,398.

Gambling loses industry titan - Adelson dies at 87

Sheldon Adelson, whose vision for gaming in Asia helped reshape the skylines of both Macau and Singapore, died in January at age 87, though analysts expect the company to continue with its commitment to the region.

Adelson, the founder CEO and Chairman of Las Vegas Sands died following complications for the treatment of non-Hodgkin’s Lymphoma. He was forced to take a leave of absence from the company in 2019 to receive treatment for the disease but had been back at work until early this year.

When Sheldon launched a new venture, the world looked on with anticipation.

In a statement, his wife Dr Miriam Adelson spoke of how the executive was an all-American story of entrepreneurship.

“When Sheldon launched a new venture, the world looked on with anticipation,” she wrote. “He was an American patriot: a U.S. Army veteran who gave generously to wounded warriors and, wherever he could, looked to the advancement of these great United States. He was the proudest of Jews, who saw in the State of Israel not only the realization of an historical promise to a unique and deserving people, but also a gift from the Almighty to all of humanity.”

Adelson was a true rags to riches story. He was born to immigrant parents and went from being a teenager selling newspapers on a street in Boston to one of the world’s richest men. According to Forbes, he’s worth $35.9 billion, making him the world’s 28th richest person.

He was a relative latecomer to the casino industry, buying the Sands Hotel and Casino in 1989 with a partner. He went on to develop that resort into the iconic Venetian property after honeymooning with his second wife in the Italian city in 1996.

Adelson is credited with being the person to recognize the potential of a swampy area of land off the Macau Peninsula, which has now been transformed into the glitzy Cotai Strip and which helped propel Macau to become the world’s largest gambling hub, generating about seven times the revenue of the Las Vegas Strip.

He opened Sands Macau in 2004 and went on to open the Venetian Macau in 2007. He opened The Parisian Macau in 2016 and in the coming weeks the revamped Sands Cotai Central will reopen as The Londoner.

His entry into Macau however was not without acrimony. The company initially teamed with Galaxy Entertainment for one of the concessions, but was unable to agree on a contract, leading to the creation of the sub-concessions.

In 2010, he opened the doors of the $5.6 billion Marina Bay Sands in Singapore, which is one of the world’s most profitable resorts and most photographed properties.

However, last year, the company pulled out of the running for a license in Japan, blaming the onerous conditions.

“Today, more than 50,000 Sands team members have Dr. Adelson and the entire Adelson family in their thoughts and prayers and are grateful to have had their lives touched by a true force of nature,” the company said in a statement.

A funeral will be held in Israel, the birthplace of Dr. Miriam Adelson, with plans for a memorial service held in Las Vegas.

Adelson was a major donor to President Donald Trump and the Republican Party.

Chief Operating Officer Rob Goldstein was appointed CEO in Adelson’s absence. Analysts have said they didn’t expect the departure of the company’s founder to mark a major change in strategy and it will remain committed to its plans in Asia.

Las Vegas Sands said last year that it was planning to sell off its properties in Las Vegas, with a $6 billion price tag. That would leave it without any resorts in North America, though it has since begun lobbying for the right to build a casino in Texas.

The major question mark will be whether the death of its founder will open the way for Las Vegas Sands to explore a digital strategy like many of its biggest rivals.

Adelson had been vehemently opposed to online gaming, leaving Las Vegas Sands behind companies such as Caesars Entertainment and MGM Resorts, which have made significant forays into the online space.

Macau police indicts four over chip fraud

Macau’s Judiciary Police has announced that it has indicted four local residents for fraud over the sale of HK$1.47 million (US$189,790) in fake VIP gaming chips to two businessmen, while a fifth suspect remains at large.

According to Macau Business the victim agreed to an offer to buy the chips at a discounted rate as he needed to pay off a gambling debt. He was told the counters were fake when he took them to another VIP room to pay his dues.

Operators pay annual bonus despite pandemic

All six of Macau’s casino operators have said they will pay a one-month bonus to their non-management staff despite crumbling revenues due to the Covid-19 crisis. Commenting on the bonus, MGM co-chair and director Pansy Ho thanked staff for remaining united during a challenging year.

“Looking into 2021, MGM will continue to invest in our team members. With our innovative mindset and courage to change, we will achieve greatness together with Macau this year.” Melco Resorts & Entertainment Chairman and CEO Lawrence Ho said the bonus recognizes the hard work, loyalty and dedication of staff.

“We appreciate our colleagues’ every contribution during this difficult time as we continue to stand as one to weather the challenges in the new year with optimism and courage.”

Slow start seen for Macau operators, but growth in H2

Lower operating costs and a better business mix are likely to have helped the bottom line of Macau’s operators in the fourth quarter, despite continued low revenues, Morgan Stanley says.

The firm predicts positive corporate EBITDA of $420 million for the quarter from all companies combined, much better than in Q1 of last year when they made $100 million. Morgan Stanley said all the operators except SJM Holdings are likely to be positive on the EBITDA level.

Morgan Stanley notes the operators made significant cuts to operating expenditure after the pandemic hit, with daily operating expenses coming down by 38 percent in Q3 year-on-year. It expects a similar decline in the fourth quarter.

The companies have also seen a higher contribution from the mass market, which has led to a better operating mix. VIP is expected to make up just 21 percent of gross gambling revenue in the most recent quarter, compared with 42 percent in the first quarter of last year.

“We estimate that VIP revenue declined by 83 percent in 4Q, while mass revenue declined by only 62 percent,” it said.

Among the individual operators, Morgan Stanley expects Galaxy Entertainment and Sands China to benefit from non-gaming EBITDA, in particular from their retail offerings. The firm notes that retail sales for many luxury stores were already positive year-on-year in October at the two resorts.

Morgan Stanley says it remains upbeat and its estimates are 5 percent above the consensus for 2022.

The analysts also observe that slot contribution to GGR in Macau has been rising and now stands at 7 percent. However, slots’ contribution to EBITDA is higher at 10 percent.

For the whole of this year, Morgan Stanley has already revealed that it is below the consensus estimate for the market, but expects outperformance in 2022. It sees 2021 corporate EBITDA of $6.4 billion, or 65 percent of 2019’s levels. The market view is for EBITDA to reach 70 percent.

It also says it continues to see potential for downside in both numbers.

In terms of the implications for gaming stocks, Morgan Stanley says stocks are likely to remain “sluggish” until there is a bottoming out of 2021 earnings revisions.

Capacity expansion, Chinese exploration and concession extension are likely to lead to outperformance of Macau’s gaming stocks in the second half of this year.

The firm sees 2021 gross gambling revenue of $24 billion, that’s 65 percent of 2019 levels and below the 70 percent consensus from analysts.

However, Morgan Stanley says it remains upbeat and its estimates are 5 percent above the consensus for 2022.

The first reason for optimism is the return of Chinese travel, with the government discouraging travel to overseas destinations, potentially benefiting Macau.

“One third of Asian gaming revenue comes from outside of Macau, part of which is contributed by Chinese consumers and could come back to Macau, with recently unveiled criminal law also making it more difficult for overseas countries to solicit Chinese consumers.”

Economic indicators in China are also pointing to pent up luxury demand and for nominal Gross Domestic Product next year to be 22 percent higher than in 2019. Given the historic correlation between GDP and Macau’s GGR, the numbers suggest gambling revenue could reach $47 billion in 2022.

Morgan Stanley is also predicting that concern over concession renewal will be lifted this year. The concessions come up for renewal in 2022, but the firm argues the government will take the decision to extend the licenses for a further three years from the middle of the year, removing the overhang on stocks.

It says that there is now not enough time for a law to be passed, for the public to be consulted and to prepare the re-tendering process before the concessions expire in June 2022.

“We expect US-backed concessionaires to be re-rated higher if all licenses are extended,” it said. “ Local stocks outperformed USbased names by 16ppts in 2020.”

The third reason to drive demand and provide upside to share prices is also likely to be capacity expansion, Morgan Stanley said. The Londoner comes online in February, while SJM Holdings Grand Lisboa Palace will add 1,900 rooms later in the year. Galaxy Entertainment’s Phase 3A expansion will also add 800 luxury rooms.

“Macau stocks tend to outperform when the industry adds significant hotel capacity (number of rooms), since these drive overnight visitors and premium mass revenue,” it said. “Stocks also tend to outperform 6-12 months before the opening of mega casino openings. We expect 2021 to be an important year in which both of these activities drive outperformance for Macau stocks.”