naturally fall. That – coupled with ageing first generation properties that have yet to see any refurbishment – will only continue the decline


As new properties open up in COTAI, the Peninsula’s share of the overall market will

congested in that area, I think having the growth diverted to COTAI makes a lot of sense.” In this context, it is surprising that there are no signs of public concern. In recent years there have been a few sales and purchases of hotels/casinos (especially from such satellite casinos in the SJM orbit) but it is possible to say that operators have not yet awakened to reality. “I cannot speak to the reasons why casinos operators are not concerned,” answers Andrew M. Klebanow, Senior Partner of Global Market Advisors, LLC in Las Vegas, and one of the few voices that has been speaking systematically upon the subject. “Perhaps they are confident that a rising tide (of gaming revenue and visitation) will allow them to continue to operate profitably. The problem is that Macau has experienced downturns in the past and unforeseen events may cause another contraction in the market. When that happens, the properties on the Peninsula will be the first to suffer.” And as Govertsen adds: “The reality is that while the Macau Peninsula has seen its share of GGR decline relative to COTAI, it is experiencing growth in revenues.”

Impact of smoking ban

Effective 1st January, 2019 players are no longer allowed to smoke in VIP rooms, or in premium mass areas that pass off as VIP zones. All of Macau’s casino properties will effectively become ‘smoke-free’ (customers will have to go to dedicated smoking lounges to smoke as opposed to being able to smoke at the tables). The mass floors in Macau went smoke-free in October 2014. In December, Sanford C. Bernstein released a report

analysing the impact of having dedicated smoking rooms as opposed to allowing customers to smoke in the open, stating there ‘will be changes in betting behaviour – when customers return from their smoking breaks, they may not necessarily bet the same size they did before smoking.’ Various properties will also likely be impacted differently

from the smoking ban. Properties built from 2015 onwards are already smoke-free: Galaxy Phase II, Studio City, The Parisian, Wynn Palace, MGM COTAI, and Morpheus at City of Dreams. The properties that currently have VIP smoking include

Wynn Macau, Sands Macao, The Venetian, Sands COTAI Central, the Four Seasons (Plaza Macao), City of Dreams, Altira, Galaxy Macau, MGM Macau, Grand Lisboa and other SJM properties. “One thing we want to highlight here is that while most

operators have already filed applications with the Health Bureau regarding licensing of their smoking lounges, one operator – SJM – has not filed application for smoking lounges at its owned properties (Grand Lisboa, in particular). This would mean that players will not be able to smoke in these properties,” wrote Bernstein’s research team.

Stagnation S 22 MAY 2019

For hotels without a casino, life on the Peninsula is more complicated. But for those whih have an associated casino the problem is the quality of service provided. In comparison with COTAI, Peninsula is already dealing a losing hand.

ome experts believe Macau needs 100,000 new hotel rooms to reach a critical size similar to that of Las Vegas, but even if ‘only’ 40-50,000 are built in the next 10 years, for example, the overwhelming majority will not appear on

the Peninsula. Last year, 20 hotel projects were under construction, with

a further 27 projects in the planning stage, totalling 12,750 new hotel rooms. Of the 20 hotel projects with the respective 7,556 hotel rooms under development, some 6,242 were being built in COTAI. Due to the lack of space (the main reason), but also to the

limitations of UNESCO’s heritage classification and the geometry of the urban space, little can be done on the

Peninsula – particularly as both China and Macau have already said that there will be no gaming on land reclaimed from the sea. There will be some renovations and limited demolitions in the coming years but it is not an exaggeration to say that the hotel offer on the Peninsula has stagnated. If, on the one hand, existing properties tend to be valued

by the scarcity of supply, on the other the service offered to the consumer is worsening. A 2018 report released in the latest Macau Gaming Service

Index (MGSI) reveals that the service provided by the city’s casinos is at best mediocre. The quality found in COTAI casinos is, on average, better than that found in Macau’s Peninsula casinos, a trend already evident in other years.

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