Grand Lisboa Palace, big headaches

SJM is so sure that the concession will be renewed that it does not mind opening the resort in Cotai, even at the end. The question is whether it will solve the problems that the company has been revealing in terms of market share and revenue.

MB Feb 2020 Special Report | Casino Lisboa – 50 Years


The 18 years of the concession previously granted to SJM, ending next month, will not be enough to guarantee a presence in Cotai.

Fortunately, for the company founded by Stanley Ho, the government last year allocated another two years in time to prevent embarrassment for the company now led by Daisy Ho from ending the concession without being able to open the Grand Lisboa Palace (GLP).

It is obvious that the project did not take 18 years to build – and here is the first headache: it was not until 2014 that the works began, which means that, for various reasons, SJM waited much more than a decade to decide to join Cotai.

It will be the last to do so, with consequences on the company’s accounts, which has seen its market share shrink.

And regardless of it not yet being clear when GLP will open, it is certainly the longest integrated resort in Macau’s history and also the most expensive.

Perhaps because all the deadlines announced by the company since 2017 have been exceeded, SJM officials have been more cautious about the opening date lately. The last information came from the group’s CEO, Ambrose So Shu Fai, who in October indicated the opening would maybe take place in the second half of 2020, at least “partially”. However, last September, analysts at Morgan Stanley indicated that they estimate the opening will be delayed to January, 2021.


“Grand Lisboa Palace is almost a ‘make or break’ project for SJM. Over the longer run, Grand Lisboa Palace’s success or failure will determine SJM’s fate” – Bernstein

It is unclear at this point what determines that it will take almost seven years to open the facility, but it is known that 2017 was an unlucky year in the project: two fires, a work-related accident, and the effects of the Typhoon Hato caused several stops and delays.

But after that, SJM officials have already set several dates, namely 2019 and 2020.

The delays not only have a direct impact on SJM’s revenue, ‘limited’ to the 22 casinos on the peninsula, which has a global market share of just over 30 per cent.

Also, the construction costs have been increased.

Last year, SJM announced that the project will cost HK$39 billion, well above Venetian’s HK$20 billion, almost 15 years earlier. Or the HK$32.8 billion at Wynn’s Cotai, the most expensive yet. “We would not be shocked if delays get extended further and the final budget goes higher [than HK$39 billion],” stated the brokerage’s house Bernstein.

Do the problems end here?

“SJM’s market share has been on decline for years. The company is betting on GLP to be its saviour. Over the past five years, SJM’s market share has fallen from over 23 percent to an historic low of 14 percent. SJM has very limited presence in the critically important Premium Mass segment and GLP will not be the panacea to cure that ill,” states another report from Bernstein.

Nevertheless, wrote the team led by Vitaly Umansky, “the property is almost a ‘make or break’ project for SJM. Over the longer run, GLP’s success or failure will determine SJM’s fate (in terms of whether or not the company will be an ongoing operational underperformer.”

Bernstein also underlines problems with the location: “GLP has an unfortunate property location on Cotai. Lacking good connectivity to other properties, lying relatively distant from the Lotus Bridge immigration crossing and far from any of the Light Rail stations, the property may likely struggle with drawing in foot traffic and will rely more extensively on bus traffic for mass visitors.” The only benefit, said this 2019 report, “is that it is relatively near Wynn Palace. The two operators are planning on having a pedestrian bridge connecting the two properties.”

“We will have new hotels, renowned restaurants, and other services that can attract more tourists. I believe it will give a good image to Macau. We can’t repeat what already exists in Cotai. We will be the last and we will try to bring new offerings,” the co-chairman and executive director of SJM Holdings, Angela Leong On Kei, promised one year ago.


Lisboeta

Grand Lisboa Palace and Lisboeta will be connected with a bridge.

Lisboeta is a theme park and resort near GLP, announced in October 2018 by Arnaldo Ho Yau Heng, a son of Stanley Ho and Angela Leong.

Described as having a price tag of HKD5 billion. Last time they mentioned dates, their promoters spoke at an opening in 2020. Before Grande Lisboa Palace?

The Lisboeta will house three hotels and “a vast array of leisure and entertainment attractions, such as Asia Pacific’s first urban zip-line, the first indoor skydiving facility in the South China region, and Macau’s first IMAX and MX4D theatres.”

Ambrose So has admitted the possibility to set up a casino at Lisboeta.

(Lisbon is the capital of Portugal and Lisboeta is the name given to its inhabitants. In both names, there is a tribute from SJM to the Portuguese)