Global Opportunities: Hong Kong

Ho gambles on mass market, and Batman, in Macau launch

Melco Crown launches mass-market casino

Lawrence Ho is launching a $3.2 billion Macau entertainment complex at the time when gaming revenues at the casino mecca are weakening, but the gaming tycoon is relaxed, because he's got Batman on his side.

Ho's Melco Crown Entertainment opened Studio City, a Hollywood-themed casino, resort and event center, on Tuesday with a party promised to feature U.S. songstress Mariah Carey and all the attendant red carpet glitz.

The high-profile launch comes, however, as Macau gambling revenues slump to five-year lows due to a combination of a weaker yuan and a corruption crackdown that's keeping mainland customers away. Revenues were down 33 percent on-year to $2.1 billion in September, the 16th monthly fall in a row.

But Ho, who is co-chairman and chief executive of Melco Crown, told CNBC he was an old hand at big launches in weak markets, referring to the company's City of Dreams complex in Macau, which debuted during the global financial crisis of 2009.

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"I think ultimately we built these properties for the next 10 to 20 years so whatever market environment it's opening in, it doesn't really matter, we just want to ensure it's the best possible opening," Ho said.

He said Studio City's non-gaming attractions - a virtual reality Batman-themed ride and figure-of-eight ferris wheel built into the main building are among them - were key to providing what modern consumers wanted. They're also key to the Macau's government push to broaden the city's appeal from gambling to entertainment.

Melco Crown is touting a Batman ride, Asia's highest ferris wheel and other Hollywood-centric features for Studio City which is scheduled to open on Oct. 27.
Getty Images

And the attractions will have a "decent [return on investment]" of their own, Ho added.

But he acknowledged that gaming remained the main money-spinner. Melco Crown, which is part-owned by Australian magnate James Packer, hopes to attract mass market gamblers to Studio City, rather than VIPs most rivals court.

"Ultimately the rise of the middle class in China is what drives consumers in Macau and many parts of Asia," Ho told CNBC, noting that the complex was next to one of two border crossing points between China and Macau that would bring more foot traffic than usual.

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The new complex is the second to open in Macau this year, after Galaxy Entertainment opened its Broadway casino and resort extension in May.

Melco received permission to operate 250 gaming tables at Studio City, more than the 150 tables predicted by analysts but fewer than the 400 Melco had requested from the government. And unlike other Macau casinos, Studio City won't feature VIP baccarat lounges.

Studio City's non-gaming elements were the main reason for the lower allocation, Lionel Leong, Macau's secretary for economy and finance, told Reuters. The government granted Galaxy 150 tables earlier this year and an additional 100 last week.

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Ho, who is the son of Macau casino mogul Stanley Ho Hung-sun, said if Studio City had received a bigger table allocation, the complex may have attracted more VIPs, but described the 250-table allocation as "quite good". He also said that Melco Crown had a history of focusing on mass market rather than VIP customers.

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This may be a saving grace for the company, as VIP business has been harder hit than the mass market sector by China's changes.

Rival Galaxy posted a 29 percent revenue drop for the third quarter, and Union Gaming analyst Grant Govertsen told Reuters that while Galaxy was benefiting from strong growth in its mass segment, it remained vulnerable to another slump in VIP revenue due to its reliance on big-spenders.

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More generally, analysts remain gloomy on the outlook for Macau.

"Until the macro situation is resolved, it is unlikely that new property openings no matter from which operator will add significantly to industry revenues," said Michael Ting, analyst at CIMB Securities in Hong Kong, told Reuters.