What has the performance of non-gaming been like, both at City of Dreams and Altira Macau?
Nicholas Naples – The performance of non-gaming this year has been particularly excellent. Not only has there been stunning market growth, but City of Dreams and Altira have both become a popular choice for casino gaming and leisure seekers coming to Macau from all over Asia, predominantly China. Our hotels are very busy, running very good occupancy rates.

It seems Melco Crown has a clear non-gaming positioning for each of its properties: family entertainment at City of Dreams and fine dining at Altira.
Each property does have a different strategy. Altira is a Forbes five-star recognised hotel that does have high-end food and beverage. It has a very strong local following from the food and beverage and from the gaming perspectives. It is more of an urban concept, so you don’t see families attracted to that product. It is more couples and singles that go there, and the locals that are looking for a unique dining experience.

City of Dreams is different in the sense it is an integrated resort, offering amenities for all kinds of visitors, whether you are a family or whether you are single. Our target customer, between the ages of 25 and 55, will find something in City of Dreams.

Clearly, “The House of Dancing Water” was a change-trigger. Did it help in raising City of Dreams’ profile?
It made the market more aware that City of Dreams exists and that it is a high-quality player in Macau. The show itself is world-class, but City of Dreams is also world-class. The two together became a very powerful combination that helped get the word out faster – and to a wider market – that we exist in Macau.

When the show opened, some analysts were worried the running costs of “The House of Dancing Water” were very high.
Is the show sustainable on a stand-alone basis?
The show certainly is sustainable on a stand-alone basis. It is performing beyond anybody’s expectations. From our perspective, “The House of Dancing Water” is a unique element to City of Dreams that none of our competitors will be able to duplicate any time soon.

Is the show profitable?
The show is moving towards profitability. It is at a break-even level currently.

What has been the occupancy rate for “The House of Dancing Water”?
It is hovering around 95 to 96 percent.

Now, there is Club Cubic. How does that add to the overall offering of City of Dreams?
Cubic is also very unique. It is going to be one of the most unique nightclubs in Asia. Certainly I have never seen anything like it in Hong Kong or around the region. So I think what it does is reinforce the statement that City of Dreams is the centre of entertainment in Macau and that what we offer is truly unique to the region.

Again, some analysts wonder if the place is not too big for the local market.
It is a big space but it is actually broken down into approximately three or four spaces. There is the main nightclub, there is the VIP nightclub and there are party rooms and such. There is a line-up of different amenities in the way the space is portioned. So, when you walk in, you don’t sense it is an enormous club. But it does have different offerings for different levels of customers.

So, we believe it is appropriately sized for the type of clientele that it will attract.

The opening of Cubic symbolises the last major piece missing in the original City of Dreams layout. Are you working on any other new additions to the property on the non-gaming side?
We have a number of things we would like to do in the future. We have some undeveloped space that we are looking at and trying to determine strategically what is the best use for it, whether it is in the casino, adjacent to the casino or in terms of hotels and restaurants.

There are a number of options available to us right now. Now it is a good time, with Galaxy Macau opening, with [Sands China’s] parcels five and six [in Cotai] opening, for us to stand back and assess how the market is growing and then add some new offerings in 2011 and 2012 that further differentiate our proposition from our competitors’.

That is inside the City of Dreams. But on the plot where it sits, you still have an undeveloped parcel of land.
We consider the hotel development to be a mid-term project. It is something we are studying very carefully right now, to make sure we build the right product at the right time.

Galaxy-sized growth

In May, Galaxy Macau will open its doors. They do replicate things that have been successful in City of Dreams, like the wave pool, and they will also have a big nightclub. Are you afraid of that competition?
Actually, we welcome competition. Galaxy Macau is also a new proposition. They will bring a lot of new people to Macau. People usually go to more than one place – that is just the way Macau works. If Galaxy Macau helps to grow the market, City of Dreams will get its fair share automatically and we will both do better.

Will we see more cooperation in the future between the gaming operators in Cotai to promote that destination? Currently, you already run a joint shuttle bus connecting the properties.
We are very eager to increase cooperation and have done so with executives from Sands China, as well as from Galaxy Entertainment. The more cooperation amongst the concessionaires in Cotai, the better off we will be.

That being said, what are your growth prospects for non-gaming across Melco Crown properties in 2011?
We are very fortunate that our non-gaming areas already do very well. It would be conservative to say we expect to see another 10 to 15 percent growth in our non-gaming areas. However, we cannot really grow “The House of Dancing Water” much more. But we are seeing a very healthy growth over 2010 already.

Changing focus

Nevertheless, that is still below the 30 percent growth analysts are expecting for gross gaming revenue in Macau in 2011. Is the territory still a very gaming-focused market?
It is gaming-focused but, from my perspective, our gaming customers rely very heavily on the non-gaming experience as part of their choice of where to game – to the extent that if we provide excellent service in the non-gaming environment, then my gaming counterparts will do very well also.

Have we passed the stage where punters would come to Macau, play like there was no tomorrow for hours and then just sleep on the hotel lounge sofas and eat a bowl of noodles?
We are definitely evolving away from that. We don’t see a lot of that in City of Dreams. We certainly have a very large number of day-trip customers that come here and do that for a period of hours, but for the most part they enjoy the facilities. Certainly our noodle restaurants are very popular, but it is more than just a bowl of noodles.

Non-gaming is still residual in the revenue mix for all gaming operators. How important is it really for the overall success of a property?
That is exactly the opportunity. Gaming isn’t the differentiator. The services, the amenities, the quality of everything you do is the differentiator, and is what attracts customers to your property. That is the main reason why we are engaged in trying to help diversify Macau as an integrated resort destination, particularly in Cotai.

How do you evaluate the overall non-gaming offering in Macau nowadays?
The offering is excellent. We have very good hardware in Macau. We have some of the most beautiful properties ever built. They certainly compare to Las Vegas standards and in some cases [are] better.

Growing-up gaming

Are you expecting the newer properties to roll out bigger and bolder non-gaming attractions?
I think you will see that in the Cotai area. I don’t think the peninsula is predisposed to resort amenities. That is more a gaming-centric market and Cotai is really more of an integrated resort market. In Cotai, you will see a lot of resort amenities and in time to come you will see more shows, more restaurants, more entertainment, for sure.

Is the current non-gaming offering in Macau enough to build the city as an international leisure and entertainment destination?
Because Macau is a growing market by definition, there isn’t enough yet. But it is slowly becoming a much more diverse market and will offer more as time goes on. By the time Galaxy opens, and Sands China’s parcels five and six, let alone Wynn, the entire picture of Cotai will change. And that is just down the road a bit. Then, what happens in 10 years from now?

But will non-gaming here ever be as big as it is in Las Vegas?
I don’t know if it will be as big because the marketplace here is more gaming-centric than in Las Vegas. It certainly will be popular.

Is building up the meetings, incentives, conventions and exhibitions (or MICE) sector essential for that?

In the last 10 years, Las Vegas has become the largest convention market practically in the world. Certainly it is the largest in the United States, surpassing places like New York, Orlando and Chicago, which were always the top three.

The complexion of Las Vegas and the mix of businesses are very different from Macau. If Macau were able to become a major MICE destination, it would only be better for the territory. But there is a lot of competition here, with Hong Kong. Even Shanghai and Beijing compete with Macau. Singapore does. There are a lot of big convention markets in Asia. It is not clear to me whether Macau will ever have that success in the MICE business.

How is your MICE business in Grand Hyatt performing?
It has become very good. Grand Hyatt is enjoying a very high level of occupancy now. But it is really a combination of leisure, MICE and casino. It is not strictly a MICE hotel. It has a mix of all of those three.

You mentioned Macau already has world-class hardware. What about software?
My feeling is that software is harder to achieve. Over time, you can achieve it and certainly it is our goal to be the best service provider.

Are you short on people?

I don’t necessarily feel we are short on people as much as we maybe are short on having experienced people.

There has been a push to promote City of Dreams abroad. What are the international markets you are targeting?

We are targeting India, Korea, Taiwan, Japan, Indonesia and Malaysia, aside from China.

Is it important to have a more developed airport, or at least one with more international routes, to attract more visitors?

That would be very helpful. Infrastructure probably is one of the most important development items for any sort of high-volume destination. An international airport would be a very welcome addition to the landscape.

Did you feel any impact from the Japan earthquake, namely reservation cancellations?

We haven’t begun our Japanese-oriented marketing strategies yet. It was actually scheduled for later in the year. We haven’t seen any reduction in visitation coming from Japan.

Melco Crown was one of the operators that decided to stop allocating its top executives by property, and start doing it by business segment, namely gaming and non-gaming. How has that been beneficial for the overall operation?
The benefit of the current structure, which is really reflective of us becoming a more mature organisation, is that it has helped us to increase communication across the business. As opposed to being very vertically focused, we are now very horizontally focused.

From a non-gaming perspective, I work across the business, as opposed to just working inside a hotel. It means we get things done faster and more efficiently, and with a greater level of consistency.

From a partnership perspective, it also helps the synergy between the gaming and the non-gaming elements of our business. Instead of having one person sitting over two or three properties, Ted [Chan Ying Tat, co-chief operating officer for gaming] and I, in a partnership, basically collaborate on everything, together. It certainly bridges gaps in communication, it helps the team, the esprit de corps, and keeps us focused on the same objectives.

Reason to smile

Nicholas Naples started as Melco Crown Entertainment’s co-chief operating officer for operations last August. He is responsible for the operations of all the leisure and hospitality businesses, across the organisation, including marketing and brand strategies.

He has had reason to smile, so far. In the fourth quarter of last year non-gaming revenue at City of Dreams was 109 percent higher than a year before at US$47.6 million (MOP381 million), while at Altira Macau it was US$7.6 million, falling by 1 percent. However, that represented just 7 percent of Melco Crown Entertainment’s total operating revenue.

With 25 years of experience in the hospitality industry, Mr Naples has held executive leadership positions in several luxury hotel and casino companies, including Harrah’s Entertainment, Four Seasons and Ritz-Carlton. Before joining Melco Crown Mr Naples was the consulting executive vice-president of Sands China, and before that he was chief operating officer at Macau Studio City.

He holds degrees in economics and business and a master’s degree in management from Cornell University Graduate School of Hotel Administration.

Fighting talk

Last October City of Dreams had an unpleasant surprise when a mixed martial arts event was abruptly cancelled amid allegations that the promoter had embezzled about HK$13 million. But Melco Crown Entertainment’s co-chief operating officer for operations, Nicholas Naples, says the company has not quit the business of promoting fights in Macau.

“The promoter cancelled the event and we didn’t really receive the details on it,” says Mr Naples. “We look forward to doing this kind of event in the future because they are popular and they do attract the local and regional audience.”

Is it something Melco Crown will try again this year? “We hope to,”  Mr Naples says.