MACAU

Winning by design

Bill Friedman’s book, ‘Designing Casinos to Dominate the Competition,’ used to be the final word in casino design in the early 2000s, with a dominating principle that the gambling equipment as decor beats “impressive and memorable decorations.”

However, plenty has changed since basic interiors, deliberately short sightlines, congested layouts and low ceilings were in vogue – and Asia, as the industry’s hotbed of new developments, is continuing to redefine the parameters.

“The best designs still create a diversionary, immersive experience. All need to present an escapism look and feel to the design,” said Paul Steelman, CEO of Las Vegas-based architecture firm Steelman Partners, which has designed countless casinos and integrated resorts worldwide.

“We believe the trends are away from copycat classic design to unique, artfully inspired design. Cold modern design never works within the VIP casino.”

Attracting and retaining high rollers is a challenge for the region’s casinos, which in Macau for example rely on VIPs for half of their gross gaming revenue.

Changing tastes

The look and feel of the gambling environment for the big spenders has evolved as their tastes, demographics and expectations have changed.

According to Tom Decker, director of business development and communications at Arquitectonica, which was behind Macau’s City of Dreams development, among other projects, the challenge is to adapt to VIPs who are either younger, or have a younger outlook on life.

The Naga 3 expansion project in Cambodia, for example, will have “instagrammable” features – a far cry from times when VIPs sunk into the dim lights of a smoke-filled room.

“The design needs to be more unique and unexpected, rather than traditional, and set itself

apart from establishment ornate décor,” Decker said. “Even then the expectation is that materials are of a high quality and designs are within a classical modern approach that is lasting.”

As explained by Westar Architects managing director Lee Montaina, VIPs are more varied and international than ever before. The intimate, personal and at times, cramped, gambling environments of the past are simply not what VIPs from various markets expect these days – and casino architects are responding accordingly.

“The sizes of these spaces are increasing and will continue to increase as we add more amenities. Additionally, service areas and supporting spaces are much more important,” Montaina said.

“However, each property typically wants to maintain some control of the décor so that it fits within their overall brand strategy… and the operators need diversification across properties whilst maintaining their brand elements.

“There is always room for innovation, but you need a client who is willing to take that risk. Could anyone have imagined a Morpheus Tower in Macau 10 years ago?” he said.

Some basic interior design rules still apply. With many casinos in the region welcoming a disproportionately large number of Chinese VIPs, Steelman points out that it is essential that there is “nothing that insults the culture or typical Feng Shui beliefs of the casino players.”

“Each casino design we do is based upon successful historical examples, yet in each casino we add a new feature,” Steelman said.

Meanwhile it would be nonsensical to offer a first-class VIP gaming floor experience if the same standards are not achieved throughout the visit, from arrival through to catering, accommodation, shopping and ultimately leaving.

“As architects, our emphasis is on programming, space planning, sense of arrival and customer traffic flow,” Decker said. “VIP arrival and the journey to VIP areas are preferably segregated and off limits from general customer areas.

“Often private gaming areas are on a different level. All support facilities from restrooms to concierge services to private rooms are dedicated to VIP customers. Access to high-end retailers is easy, discreet and in close proximity to VIP areas.

“The Asian market has become quite sophisticated. High quality food and beverage have increased in importance, especially in the VIP marketplace.”

Let there be light

There has also been a noticeable change in lighting. Whereas before traditional decorative chandeliers would sparkle above the tables, indirect mood lighting is now favoured.

“There is an emphasis on lighting that makes people look better or emphasises active versus passive areas,” Decker explained.

“In the early period of casino development, VIP areas were dark. Nowadays we look to provide views – if they are desirable and weather permits – of the outdoors, and views of the main floor, if appropriate and permitted. But in general, the highest priority is comfort and a sense of exclusivity.”

In essence, highlighting the punters’ best features and elevating them above the casino floor whilst giving them pleasant views will make them feel like kings and queens. Comfortable and confident, it is understandable why they would choose to be bold with their money, benefiting the casino’s coffers.

“Casino design needs to follow a certain set of rules to create an escapism environment,” Steelman said. “Casinos will always need to make the customer feel powerful, to win. Yes, there will be new layouts and new designs, but those that follow the basic rules that have made gambling a successful sport will always succeed.”

It is also worth remembering that the casino’s basic architectural structure should allow for relatively frequent and seamless interior design alterations.

After all, most public spaces where there is significant footfall and a large number of guests are expected to freshen up their décor reasonably often. Top-end hotels, for example, typically undergo a makeover every three to five years.

As Steelman added: “What’s new now will look old in a few years.”

Melco Resorts & Entertainment

Melco Resorts & Entertainment (6883.HK) has three casinos and the Mocha Clubs. The company operates the City of Dreams and Studio City in Macau and the City of Dreams Manila.

In September, Melco appointed Evan Winkler as company president. He will be responsible for day to day operational matters globally and will report to Melco Chairman and CEO Lawrence Ho. Winkler is a board member of Melco Resorts, and will continue to serve in that capacity.

Q2 revenue rose 17 percent, helped by the opening of its Morpheus Hotel in June last year and higher hold rates, though performance at its City of Dreams Manila property weakened on increased competition.

Total operating revenues for the second quarter of 2019 were US$1.44 billion. Adjusted property EBITDA was a record US$442.2 million, up 24 percent from the second quarter of 2018. Net income was $100.3 million, or US$0.22 per ADS, compared with US$57.3 million, or US$0.12 per ADS, in the second quarter of 2018.

SJM Holdings

SJM Holdings (880:HK) has 22 casinos in Macau, though the former monopoly has been losing market share to new IRs on Cotai. The opening of its $4.6 billion Lisboa Palace resort was scheduled for later this year, though analysts expect it to be delayed until next.

SJM reported a 0.7 percent decline in H1 gaming revenue, as growth in the mass market failed to offset a 25 percent drop in VIP revenue. Total gaming revenue was HK$16.72 billion ($2.1 billion), while total revenue also declined 0.7 percent to $17.07 billion, compared with $17.19 billion a year ago.

Analysts say the company is likely to continue to trade at a discount to its intrinsic value and other operators, with a lack of near-term catalysts to drive the share price.

Bernstein analysts say the delay in Grand Lisboa Palace and the cost escalation is now already largely priced in – meaning that SJM looks fairly valued from a valuation perspective.

Yet while the company is at a discount, the analysts also noted that it sees no companyspecific catalysts in the near term either.

MGM China

MGM China (2282:HK) is operating two casinos, with its MGM Cotai IR opening in February last year. The HK$27 billion IR features 1,400 hotel rooms and suites, meeting space, high end spa, retail offerings and food and beverage outlets as well as the first international Mansion at MGM for the ultimate luxury experience.

For Q2, net revenues grew by 26 percent, reaching $706 million, resulting from the continued ramp-up of MGM Cotai, and an increase in main floor table games hold percentage.

Adjusted property EBITDA reached $171 million, a 43 percent increase compared to the prior-year quarter.

MGM said much of the growth came from MGM Cotai, which saw the addition of newto-market tables in 2019, and the opening of VIP gaming areas in the second half of 2018.

In August, MGM China said it had secured a revolving credit facility of HK$9.75 billion ($1.24 billion) that will refinance existing senior secured credit facilities and will be used for working capital.

Galaxy Entertainment Group

Galaxy Entertainment Group (27.HK) has three main properties and runs three City Club casinos inside hotels. The company’s Galaxy Macau Phase 2 and Broadway at Galaxy Macau opened on May 27, 2015, almost doubling the capacity of the resort.

In the first half, Galaxy and Sands had the largest market share in Macau at 24.1 percent, though Galaxy leads in VIP, with 25.2 percent of the high roller market.

For Q2, the company posted flat adjusted EBITDA and lower revenue, but the results topped analysts’ forecasts helped by higher hold. Net revenue was down 5 percent year-on-year to HK$13.2 billion, while adjusted EBITDA was $4.3 billion, higher than the Bloomberg consensus estimate of $4.0 billion.

Galaxy said it’s proceeding with a $1.5 billion upgrade of its Galaxy Macau and StarWorld properties, which includes preparation work to eventually link to the third and fourth phases of the group’s development plans.

These include a further 4,500 hotel rooms, including family and premium high end rooms, 400,000 square feet of MICE space, a 500,000 square feet, 16,000-seat multi-purpose arena, F&B, retail and casinos.

Wynn Macau

Wynn Macau (1128:HK) operates two resorts, with its $4 billion Wynn Palace opening in 2016. The company’s original property is on the Macau Peninsula. The Wynn Palace has 1,700 hotel rooms and 90 percent of the resort will be non-gaming.

Wynn Resorts saw year-over-year revenue growth across all of its properties in the second quarter of 2019, particularly in Macau and Las Vegas. Total operating revenues increased 3.3 percent year-on-year, reaching $1.7 billion.

Both properties in Macau, namely Wynn Palace and Wynn Macau, saw their operating revenues inch upwards in the quarter, propped by increased casino revenue from the mass market. Table games turnover in VIP operations fell 4.6 percent at Wynn Palace, and 33.4 percent at Wynn Macau.

The company said it has made meaningful progress designing and planning the Crystal Pavilion in Macau, which it believes will be a ‘must-see’ tourism destination on Cotai.

Sands China

Sands China (1928:HK) has five properties in Macau. The company has 12,000 hotel rooms and suites, making up for 48 percent of hotel rooms run by casino operators in Macau.

Sands China posted a nine percent increase in profit for the first half of 2019, driven by increases in mass gaming volume and rampup at The Parisian.

Net revenues reached US$4.5 billion in the six months ended June 30, 2019, increasing 4.8 percent. Sands China said net casino revenues increased six percent during the period, reaching US$3.6 billion. The increase was primarily attributable to an increase of US$131 million at The Parisian Macao, driven by increases in volume in mass gaming as well as a higher win percentage in all gaming offerings.

The company is currently transforming Sands Cotai Central into a London-themed resort, which it expects to be completed by July, 2020.

DICJ imposes data protection rules

The Gaming Inspection and Coordination Bureau has prohibited gaming concessionaires and junkets from sharing any data about customers and their gaming activities with third parties, Macau News Agency reported.

The instruction was signed by DICJ director Paulo Martins Chan and came into force on Monday, September 23.

According to MNA, it defines information on gambling activities or operations as “all data related to the individual and object of the gambling activities, or related to the operation of casinos and gambling activities, including but not limited to the personal data, place of origin or nationality, profession or the gambling clients’ activity and other information such as their representatives or accompanying persons, the time of entry into and out of the casino or the gaming table, the amount of bets, the credit, the amount of the bet placed, the payment of prizes and the purchase and redemption of chips (tickets), slot machines tickets (tokens), etc.”

Sega Sammy installs first slots in Macau

Sega Sammy Creation has announced the installation of its first slot titles in Macau, and says it is optimistic about the future of its slot games in the Asian market.

The first two games to hit the casino floors will be a mahjong-themed “Fortune Tiles of Dragon” and a 243-way title “Moonlight Treasure”. Both are installed on the Genesis Star upright cabinet.

Masahiro Kurosaki, head of Asia sales noted that Fortune Tiles of Dragon drew large interest at G2E Asia in May this year, and “confirms our belief that innovative games will drive new player engagement and provide new content to retain regular players as well.”

Sega Sammy says it expects to release more slot titles across various markets over the coming months.