On October 27, Macau will witness the grand opening of the new Studio City resort. The massive new resort is the first of a wave of new Macau resorts expected to open up by the end of 2016.
The economic environment in Macau is a lot different these days than it was when many of these resorts were first planned. In 2013, Macau drew $45 billion in gaming revenue, seven times the amount of the Las Vegas Strip. However, after an intense government corruption crackdown has cost Macau operators billions of dollars in VIP revenue, 2015 full-year revenue projections in Macau are now only around $30 billion.
For nearly two years now, Macau casino operators have been butting heads with the local and central government over policies that have negatively impacted gaming revenue, including the new corruption policies, mainland visitation restrictions and VIP smoking bans. In addition, the local government has been encouraging Macau operators to diversify the types of entertainment that guests can find at their new resorts and not rely so heavily on gambling.
Studio City
Studio City is 60 percent owned by Melco Crown Entertainment Ltd (NASDAQ: MPEL). When it opens its doors in less than a week, it will offer about 1,600 new hotel rooms in Macau. In addition to the hotel, Studio Citywill offer the world’s highest figure-8 ferris wheel, a Batman Dark Flight simulation ride, a 40,000-square-foot Warner Bros indoor play center, the House of Magic multi-theater magic attraction, a 5,000-seat event center capable of hosting live concerts and other special events, the Studio 8 operational television recording and broadcast studio and the Pacha Macau nightclub.
Oh, and before I forget, the resort also intends to offer gambling as well. Clearly, MPEL seems to have gone above and beyond reasonable expectations when it comes to offering non-gambling entertainment options. However, even though the company requested 400 gaming tables for the resort, the Macau government recently granted only 200 tables for 2015 and 50 more for 2016. In addition, Macau’s government reiterated its previous intention to arbitrarily cap the growth in table games at no more than 3% per year for all of Macau.
Operators respond
The stubbornness of the Macau government recently prompted…
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