Increase in Macau Hotel Rooms
In Macau, a perfect storm of supply and demand has been developing, as VIP's have disappeared, demand has dropped, and many new casinos and hotels remain under construction. The supply of hotel rooms in particular, is due to rise, with a total of 16 hotels under construction, adding a grand total of 10,800 rooms to a market that already has more than enough. Another 34 remain in the planning stage of development, and will flood Macau with another 8,800 rooms once they are built. The Parisian Macau is due to open this summer, with the Wynn Macau also due to open around the same time. MGM Cotai has been put on hold until the early part of 2017.
Room Prices Falling
According to the president of Sands China Ltd, there is no cause to expect a price war between casinos in most areas, but when it comes to hotel rooms, things may be a little different. He admitted there is a possibility of aggressive discounting for rooms, which is part of a larger plan to reignite revenue for hotels in the area. He made the following statement on the subject: “I think you’re going to see more promotions or discounting on rooms, because obviously the [Macau room] inventory is growing significantly.”
Galaxy Hotel and Casino (Photo Brenden Brain)
Mass market Moves Forward
With the dwindling numbers of big money VIP players, there seems to be a strategic shift at work in Macau. The focus is becoming more mass market centric, with emphasis being also placed on non gaming revenue sources. If the prices of accommodation are low and the non gaming entertainment options are plentiful, new hotels will have every chance of filling their rooms with tourists. Macau can no longer rely on being the gambling capital of Asia, and so it must evolve, in order to thrive.
Bloomberg, in his detailed analysis into Macau's 4th Quarter 2015 results has already reported that Sands China have already attributed 84% of their recent gambling revenue to mass market customers, with also an increasing amounts of revenue coming from non gaming offerings. They appear to be leading the way with 18% of total revenue, ahead of other major casinos such as Melco-Crown and Galaxy, on 13% and 10% respectively.