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The Debut of the City of Dreams at Macaus Cotai Strip

Melco Crown Entertainment Limited debuted its City of Dreams casino on June 1st, 2009 in a two billion dollars wager that Macau will recover from an economic slump that pushed rival Las Vegas Sands Corporation to stop construction on a neighboring casino project.

The complex on the Cotai Strip has 516 casino gaming tables in a 420,000 square foot casino facility, Grand Hyatt and Hard Rock Hotels as well as a multimedia facility and shops managed by DFS.

Melco Crown Chief Executive Officer Lawrence Ho, the son of gaming tycoon Stanley Ho said last month that a lukewarm reception of the City of Dreams may spell disaster for them.

The City of Dreams, which is located across the road from Asia's biggest casino resort, the Venetian Macau, owned and managed by billionaire Sheldon Adelson's Las Vegas Sands, is expected to test the former colony's plan to turn Cotai Strip into an entertainment area that surpassed the Las Vegas strip.

Adelson stopped the construction of a second property on the Cotai Strip in November 2008 as profits fell and the credit markets slide down. Winson Fong, who helps manage $2 billion dollars at SG Asset Management H.K. Ltd., stated that the gaming sector had a terrible year in 2008 because of the weakening Macau economy. He added that now, people are buying into the gaming sector because gaming shares tends to perform better during an economic recovery.

Melco Crown, a joint collaboration between Lawrence Ho and Australian billionaire James Packer, developed the casino-resort complex to get visitors stay for longer period of time by providing different amenities aside from gaming.

The City of Dreams will feature a permanent show made by Franco Dragone, the director of Celine Dion's show in Las Vegas. Ho said that the City of Dreams will need much less than the Venetian Casino's seventy thousand daily visitors.

According to the May 27th, 2009 research report of CLSA Asia-Pacific analysts Aaron Fischer and Huei Suen Ng, the debut of Macau's 2nd biggest casino facility may be the tipping point for the Cotai Strip.

The report stated that the Venetian casino does attract tourists down to Cotai Strip but it is not enough to retain tourists for the entire trip. The addition of the City of Dreams could turn the strip into a "must stop" for gamers.

Gabriel Chan, a Hong Kong-based analyst at Credit Suisse Group said that while the City of Dreams may help improve the duration of stay of tourists, he does not think that it will help raise the average gamer visitor for more than two days. He added that in Las Vegas, there are different kinds of shows that keep visitors entertained.

In Macau, there is just Zaia by Cirque du Soleil at the Venetian casino. Chan said that there are more than ten thousand circuses in China, so he does not think that visitors like from mainland China will be attracted to stay longer in Macau to watch such shows.

In the first 4 months of 2009, more than half of Macau's $7.3 million visitors were same-day tourists and the usual length of stay for the month of March was 1.3 nights, according to government data.

Macau visitors' duration of stay has ranged from 1.1 to 1.6 nights since 1997. Macau's gaming revenue and tourists arrivals drop every month except one between January 2008 and April 2008 amid the financial crisis. Limits on the number of visits by mainland Chinese to Macau, the only part of China where gaming facilities are allowed, worsened the slowdown.

 

Monday, July 20 , 2009
Brian Letendre