Rivals in the world’s largest casino market are watching closely as Macau’s biggest casino in two years opens its doors today.
The HK$15.5 billion Galaxy Macau - owned by Hong Kong property and construction tycoon Lui Che-woo’s Galaxy Entertainment - will be only the third property to open on the Cotai Strip and is launching with 450 gaming tables, 150 of them high-stakes VIP tables.
“A good thing is occurring,” Wynn Macau chairman Stephen Wynn said yesterday.
“Macau is getting a better product and as long as what’s built here is good, Macau will in the long run be a better place to come to and we’ll get our share off the top. If a bad place opens - another one of those casinos in [converted] office buildings - that doesn’t do us any good.”
But Wynn (pictured), who toured the expansive 2,200-room Galaxy property yesterday morning, was cautious about the near-term impact of an anticipated injection of casino credit into the already red-hot high-stakes gambling segment. “If it grows [right away], it’s going to be growing with the junket operators, with credit,” he said.
Junket operators are the middlemen who dominate Macau’s VIP gambling segment. Junkets bring players to casinos, advance them credit for gambling and collect their debts - all in exchange for hefty commissions from the casino operators that typically exceed 40 per cent of casino winnings.
Macau’s credit-driven VIP casino revenues soared 95.8 per cent in the first quarter to 42.6 billion patacas, accounting for 72.7 per cent of all casino revenue. The cash-based mass market, by contrast, grew a more modest 30.9 per cent to 15.95 billion patacas.
To help boost revenue, most of Macau’s bigger casinos will advance credit to their VIP junket operators equal to around one month’s worth of commissions. That gives the junkets more capital, allowing them to extend more credit to customers, which ultimately increases winnings for the house by driving play at the VIP tables.
Wynn said he was anticipating the added injection of credit into the VIP segment, and as a result he would pay extra close attention to credit issues in the coming months - including the possibility that some junket groups or high-rollers could overextend themselves and fail to settle debts on time.
“Things slow down, or somebody doesn’t pay, what the hell happens?” Wynn said.
Galaxy executives have meanwhile stressed that the focus of their new Cotai property is on the more profitable mass market. While the company’s five-year-old StarWorld casino hotel on the Macau peninsula overwhelmingly relies on junket-driven VIP revenue, the new flagship property is nearly five times larger and features more tourist-oriented amenities like a 4,000 square metre rooftop wave pool with 350 tonnes of white sand.
By tapping the mass market, where the casino doesn’t have to hand over 40-plus per cent of winnings to junket agents, Galaxy is aiming to boost overall profitability.
Chief financial officer Bob Drake said the goal at the Cotai property was not simply to boost the company’s market share, which stood at about 10 per cent last month according to Citigroup. “We are more focused on profitability than we are concerned about market share.”
The new property will employ some 7,600 staff on opening day and includes a 1,500-room Galaxy branded hotel (700 rooms will be ready on opening), a 260-room Banyan Tree hotel and a 500-room Hotel Okura.
Some 50 restaurants and food outlets and a “1930s Shanghai-themed” nightclub round out the offering, with a nine-screen, 3-D cinema scheduled to open this year.
Galaxy has purchased a fleet of 70 new shuttle buses to ferry punters between the property and Macau’s border with Zhuhai.
Rival Cotai operators including Sands China’s Venetian Macao and Melco Crown Entertainment’s City of Dreams, which opened in 2009, are also chasing the rich mass market.
While the front page of yesterday’s Macau Daily Times was covered with an advertisement from Galaxy, the back page was taken over by one from Sands China. “Congratulations to the grand opening of Galaxy Macau,” it said. “And a warm welcome to the neighbourhood.”
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Casino rivals watch closely as Galaxy Macau opens
Neil Gough in Macau
15 May 2011
Rivals in the world’s largest casino market are watching closely as Macau’s biggest casino in two years opens its doors today.
The HK$15.5 billion Galaxy Macau - owned by Hong Kong property and construction tycoon Lui Che-woo’s Galaxy Entertainment - will be only the third property to open on the Cotai Strip and is launching with 450 gaming tables, 150 of them high-stakes VIP tables.
“A good thing is occurring,” Wynn Macau chairman Stephen Wynn said yesterday.
“Macau is getting a better product and as long as what’s built here is good, Macau will in the long run be a better place to come to and we’ll get our share off the top. If a bad place opens - another one of those casinos in [converted] office buildings - that doesn’t do us any good.”
But Wynn (pictured), who toured the expansive 2,200-room Galaxy property yesterday morning, was cautious about the near-term impact of an anticipated injection of casino credit into the already red-hot high-stakes gambling segment. “If it grows [right away], it’s going to be growing with the junket operators, with credit,” he said.
Junket operators are the middlemen who dominate Macau’s VIP gambling segment. Junkets bring players to casinos, advance them credit for gambling and collect their debts - all in exchange for hefty commissions from the casino operators that typically exceed 40 per cent of casino winnings.
Macau’s credit-driven VIP casino revenues soared 95.8 per cent in the first quarter to 42.6 billion patacas, accounting for 72.7 per cent of all casino revenue. The cash-based mass market, by contrast, grew a more modest 30.9 per cent to 15.95 billion patacas.
To help boost revenue, most of Macau’s bigger casinos will advance credit to their VIP junket operators equal to around one month’s worth of commissions. That gives the junkets more capital, allowing them to extend more credit to customers, which ultimately increases winnings for the house by driving play at the VIP tables.
Wynn said he was anticipating the added injection of credit into the VIP segment, and as a result he would pay extra close attention to credit issues in the coming months - including the possibility that some junket groups or high-rollers could overextend themselves and fail to settle debts on time.
“Things slow down, or somebody doesn’t pay, what the hell happens?” Wynn said.
Galaxy executives have meanwhile stressed that the focus of their new Cotai property is on the more profitable mass market. While the company’s five-year-old StarWorld casino hotel on the Macau peninsula overwhelmingly relies on junket-driven VIP revenue, the new flagship property is nearly five times larger and features more tourist-oriented amenities like a 4,000 square metre rooftop wave pool with 350 tonnes of white sand.
By tapping the mass market, where the casino doesn’t have to hand over 40-plus per cent of winnings to junket agents, Galaxy is aiming to boost overall profitability.
Chief financial officer Bob Drake said the goal at the Cotai property was not simply to boost the company’s market share, which stood at about 10 per cent last month according to Citigroup. “We are more focused on profitability than we are concerned about market share.”
The new property will employ some 7,600 staff on opening day and includes a 1,500-room Galaxy branded hotel (700 rooms will be ready on opening), a 260-room Banyan Tree hotel and a 500-room Hotel Okura.
Some 50 restaurants and food outlets and a “1930s Shanghai-themed” nightclub round out the offering, with a nine-screen, 3-D cinema scheduled to open this year.
Galaxy has purchased a fleet of 70 new shuttle buses to ferry punters between the property and Macau’s border with Zhuhai.
Rival Cotai operators including Sands China’s Venetian Macao and Melco Crown Entertainment’s City of Dreams, which opened in 2009, are also chasing the rich mass market.
While the front page of yesterday’s Macau Daily Times was covered with an advertisement from Galaxy, the back page was taken over by one from Sands China. “Congratulations to the grand opening of Galaxy Macau,” it said. “And a warm welcome to the neighbourhood.”
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