Australian billionaire James Packer and Melco Crown, Co-Chairman and CEO, Lawrence Ho, joined their financial resources together to co-fund a 3.2 billion casino, Studio City, which opened on October 27th in Macau. Although, Studio City has a Batman theme that’s echoed throughout the décor, rides and casino games. Batman is just one of the superheroes that Melco Crown Entertainment Ltd is banking on for a reversal of fortune. It is no secret that gambling has been on a downturn in Asia for five years now. Ho and Packer are hoping that Batman will use his powers to supercharge the revenues for this mega casino complex. On hand for the launch of the Asian gambling resort were a number of high profile Hollywood actors, writers and producers, including Robert De Niro, Leonardo DiCaprio, Martin Scorsese, and Brett Ratner, guests were treated to special screening of their new movie, “The Audition.” The project, a short Chinese movie, served as a clever way to announce the opening of the Studio City Casino and Entertainment Complex. Each participant received $13 million for the project.
Asian gambling is down due to a revenue slump, which in large part is because of a crackdown on corruption and the declining value of the Chinese Yuan. The mega launch comes on the heels of a September announcement that Chinese gambling revenues were down by $2.1 billion, for the 16th month in a row. In an interview with CNBC, Ho was undeterred by the recent revenue announcement, recalling the fact that Melco opened the City of Dreams complex in 2009, during a similar period of financial distress. Ho went on record to state that, “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.”
There’s a real emphasis on balance in Melco’s Studio City, with non-gaming attractions featured as prominently as gaming options. But one thing is consistent throughout, the Batman theme, upon entering the complex visitors are immediately greeted with a virtual reality ride and Ferris wheel. The Batman, eight figured Ferris wheel is the highest of its kind in Asia, it cannot escape being noticed as the design concept is built directly into the main entrance. It’s no accident that Batman, Superman and other superheroes are key to the project’s appearance. In order to broaden the appeal of Studio City, the Chinese government intends to maintain a fine line between the entertainment value and gambling. Meaning, less emphasis on the gambling casino, as a way to draw in both modern consumers and mainland patrons. Ho believes that ultimately the Studio City Complex will generate revenue from both entertainment and gambling, in a statement he added that the attractions will have a “decent [return on investment]” of their own. During the same interview, Lawrence Ho acknowledged that Melco understandably expects to make the greatest profit from gambling.
Melco Crown is owned in part by James Parker and Studio City is a joint venture. Parker admits that he’s looking forward to growing the casino’s mass market appeal. Mass market spends more time playing casino games than VIPs. However, most of Studio City casino rivals, court VIP customers. Parker hopes this will bolster the Asian gambling industry. Lawrence Ho for his part believes casino game play by Chinese mainlanders is key, he went on to mention that, “Ultimately the rise of the middle class in China is what drives consumers in Macau and many parts of Asia.” Therefore, the positioning of The Studio City Complex can be seen as a strategic planning move, because Ho also pointed out that they expected a lot of foot traffic by building the Entertainment and Casino venue adjacent to one of the two border crossing areas, directly between Macau and China.
Studio City is actually the second gambling complex to open in the area this year. In May, rival Galaxy Entertainment opened an extension resort and Broadway themed casino in Macau. Melco’s Studio City Resort features 250 gaming tables, 150 fewer than they requested. Based on the governmental crackdown, prediction analysts believed that Melco would only be granted 100 tables. So although, Ho and Melco were disappointed by the reduced number of gambling options at the tables, overall they were pleased to go beyond the predicted estimate. One thing that guests won’t find at Studio City are baccarat VIP lounges. Ho and Melco believe it’s a waste to build special VIP areas, they prefer having open areas for all. Lawrence Ho didn’t see the government allocation as unfavorable, he said that the 250 gaming tables was actually, “quite good.” It should be noted that Galaxy opened with 150 tables, and only saw an increase last week of an additional 100 gaming tables.
Melco Crown’s Studio City Resort may just become a saving grace for the region hardest hit by declining gambling revenues. The move away from VIP clientele might end up being the strategic move of the decade, as the financial crisis had the greatest impact on the VIP sector globally. Mass market casual gamblers were affected by the declining Chinese Yuan, but the sector posted fewer losses. In the 3rd quarter of this fiscal year, Galaxy Entertainment suffered a 29 percent loss. While opening a new resort helped their revenue, nothing offset the financial decline that hit VIPs the hardest, and recovery has been slow, at best. There’s no doubt that Lawrence Ho and James Parker took note of this before deciding against a VIP focus and they don’t plan on courting high end clientele in the future.
