Galaxy Macau is proving to be a handful for its competitors after a stellar first quarter Situated on one of the edges of Cotai, the golden towers of the Galaxy Macau hotel-casino are the first sight many punters have of the strip. Those same golden towers have welcomed an average of 35,000 to 40,000 visitors a day since opening in May, reaching up to more than 70,000 people in a single day. Up to 60 percent of those visitors are there to gamble, says Jane Tsai, vice-president of marketing communications for Galaxy Macau. Many are also staying at one of the resort’s three hotels – Banyan Tree Macau, Hotel Okura Macau and Galaxy Macau – where occupancy reached 92 percent in June. The new complex is proving to be a game changer for its parent company, Galaxy Entertainment Group. The gaming concessionaire has more than doubled its market share in the past three months. At the end of last month, it enjoyed a 20 percent market share by casino gross gaming revenue. On the league table of casino operators, it now sits second having surpassed Cotai rivals Sands China Ltd. and Melco Crown Entertainment. In the first 47 days of operation to the end of June, Galaxy Macau generated HK$2.4 billion (US$310 million) in gaming revenues and delivered adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of HK$376 million. “This is a huge accomplishment,” said Robert Drake, Galaxy Entertainment Group chief financial officer, during last month’s results announcement. “Galaxy Macau opened extremely well”. There were fears Galaxy Macau would cannibalise takings at its sister property on the peninsula, StarWorld. That has not been the case. The latter posted its 12th consecutive quarter of EBITDA growth in the period between April and June, culminating in an adjusted EBITDA of HK$685 million – a record. “We see Galaxy Macau actually strengthening StarWorld’s performance,” said Mr Drake. Surprise packet “Galaxy Macau continues to surprise,” Morgan Stanley said in an investors note after the property’s first set of results were announced. The investment bank said growth is expected to continue until the end of the year. Analysts Praveen K. Choudhary and Calvin Ho wrote that “further upside surprise could come from continued increase in market share”. The predicted 800 new hotel rooms opening before the end of the year and three recently opened VIP rooms – pushing the property’s total to 10 – could prove to be new tipping points. Although it is presented as a property for the mass-market player, the high-roller segment has been the main driver of success. Its average VIP rolling chip for the first 47 days of operation from May 15 to the end of June reached more than HK$1 billion a day. “Due to our relationship with StarWorld as our sister property, a lot of the VIP operators from there also chose to come over here and open up sister rooms,” says Ms Tsai. That was the case of Nasdaq-listed Asia Entertainment & Resources Ltd. “We actually have a very long waiting list [of junkets] asking to come in, which is good news for us.” In the mass-market segment, things have not gone too badly either. According to a research note from Union Gaming Research Macau, Galaxy Macau was ranked fourth in the two first weeks of July among the properties attracting the most mass-market play, with a 12 percent share. “This compares to its share of tables of slightly less than 9 percent, suggesting that the recently opened property is garnering more than its fair share of customers,” the report said. Galaxy assistant vice-president for casino marketing Shirley Tam says she is pleased with revenues from the main gaming floor. She pinpoints the success to two factors: lighting, and food and beverage. “We are definitely a brighter casino than the rest of the casinos in Macau,” she says, explaining mainland players like to have a clear view of what is happening on the table. She adds the resort has made a particular effort to boost the standard of food and beverage offerings on the gaming floor. The house loyalty programme allows customers to earn points from non-gaming spending. The programme’s database is closing in on 150,000 names. Change, change again It has not been all plain sailing for Galaxy Entertainment Group since May. Construction costs of Galaxy Macau have overrun by 7 percent, to HK$16.5 billion. The company blamed additional labour costs and an accelerated construction timeline. Close to 80 percent of the construction budget has already been spent. The resort’s pre-opening charges were also much higher than expected, reaching HK$767 million. Some analysts were expecting a figure less than half of that. Pre-opening expenses were a major reason why the company posted a first-half profit of HK$378.3 million, a 20.4 percent year-on-year decrease. Running a big property such as Galaxy Macau, with a swarm of 7,500 employees, required fine-tuning says Ms Tsai. Productivity and service delivery are also expected to improve as staff bed down. “We started first focusing on effectiveness in terms of delivering our brand promise and our product positioning,” she says. “The next step for us in the coming months will be to make it more efficient and increase our margins.” Expect changes on the ground, including revised pricing strategies, new gaming products and a revised layout that will see about 15 percent of the gaming floor moved. The property opened with about 450 gaming tables and 1,100 slot machines. The gaming floor can accommodate an increase of about one-third to both, the company says. A shift in focus is also planned for marketing. An initial HK$28-million campaign that saw all of Hong Kong’s Tsim Sha Tsui MTR station decked out in Galaxy livery for the opening will shift focus to individual aspects of the property. Galaxy Entertainment Group chairman Lui Che Woo says business will continue to expand. Galaxy Macau has a “unique” positioning, he says, with its claim of being the “first Asian centric destination resort” in the territory. The company has another 1.45 million square metres of land in Cotai to develop. That would be about enough to build three more buildings the size of Galaxy Macau. The company says it is still studying the market and has made no plan public. If the short-term prospects are bright, next year will bring increased competition. Sands China Ltd. will open the first phase of its Sands Cotai Central project, formerly known as parcels five and six, adding more gaming facilities and 1,800 hotel rooms to the strip. Pass the popcorn Unlike its rival properties in Cotai, there is no real entertainment drawcard at Galaxy Macau. That will change by the end of the year when the resort opens Macau’s first 3D Cineplex and its China Rouge club. The property’s biggest entertainment feature is its sky-top wave pool for hotel guests only. Galaxy Macau vice-president for marketing communications Jane Tsai says the attraction has been “really popular” but there are no plans to open it to non-hotel guests. The UA Galaxy Cinemas will see Galaxy Macau enter a partnership with UA Cinemas to develop a grand theatre with balcony boxes, four VIP houses and four traditional houses with more than 1,000 seats in total. All nine screens will be able to show 3D movies. The 16,000-square-metre facility will employ about 200 people. UA has 25 years’ experience managing cinemas in Hong Kong and currently operates nine complexes with more than 40 screens. The company has also expanded into leading mainland cities such as Shanghai, Chongqing, Wuhan, Shenzhen and Guangzhou. Galaxy Entertainment Group has signalled it wants to use the venue for international premieres. “We are planning several premieres in conjunction with our opening as well as major local and regional film events,” a spokesman said. The gaming operator did not provide estimates on attendance, revenue and profit for the cinema complex. The Macau Government Tourist Office has welcomed the project, which it expects will draw more non-gaming tourists. “We congratulate Galaxy for the initiative and expect the cinema complex to entice more visitors to come to Macau, especially families, as they will have one more reason to visit the city and stay longer.”
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