Connectivity key to speed of ramp up in Macau

Connectivity and positioning of resorts on the Cotai strip is likely to be key to the speed of the ramp up of the properties and its importance may have been underestimated, CLSA said in a recent research note.

The firm noted that foot traffic was strong at Las Vegas Sands’ Parisian, which opened last month, compared with Wynn Resorts’ Wynn Palace, which opened three weeks earlier.

The Parisian reportedly has about 45,000 visitors a day, compared with 15,000 at Wynn.

“While it can be argued that a premium product is naturally going to see lower visitation, we feel that there will be a material impact on ramp up speed,” the note said. “We have underappreciated the location of these properties and, perhaps more importantly, the connectivity to other resorts. This should have been obvious after we saw the challenges of Studio City,” it said.

The Parisian benefits from its connection to neighbouring resort, The Venetian and Sands’ other Cotai properties that see daily visitation of more than 100,000. Wynn on the other hand is on the edge of Cotai, with City of Dreams being the nearest neighbour and poor connectivity between the two.

“While we expect this to change over time, as this corner becomes the “Golden Triangle” of premium mass. It also does not help that this is its first foray into Cotai and lacks contiguous land that benefits operators such as Sands and Galaxy.”

Given the latest market trends, CLSA said it expects gross gaming revenue to decline 6 percent in 2016, followed by a gain of 5 percent next year and 6 percent in 2018, led by the mass market. In VIP, it sees a drop of 17 percent this year, a further decline of 4 percent next year and 2 percent growth in the next three years. Mass is likely to grow 4 percent in 2016, 12 percent next year and 9 percent in 2018.