Below are profiles of Melco PBL's five major competitors, namely Sociedade de Jogos de Macau (SJM), Las Vegas Sands (LVS), Galaxy Entertainment, Wynn Resorts (WYNN), and MGM MIRAGE/Pansy Ho:
1. Sociedade de Jogos de Macau (SJM)
SJM is run by Stanley Ho who had a 40-year monopoly on gaming in Macau until 2002 and had a 100% share of the market until the May 2004 opening of LVS’ Sands. SJM caters to VIP clientele, but after decades of a monopoly and little reinvestment into its properties, SJM has lost significant share as strong competition has come to the market. SJM had a roughly 75% share of 2005 gaming revenues, but has since seen the share decline to an estimated 51% in Q406, and reportedly fell below 50% for the first time in December. Stanley Ho has mentioned the possibility of closing one-third of its gaming rooms due to the increased competition. To help turn the business around, SJM recently hired Frank McFadden, the former COO of the Venetian Macau, to be president of JVs and new business development. SJM presently has 17 casinos with another five expected to open through 2009, including the Grand Lisboa before the 2007 Chinese New Year. As more premium properties open, such as the Crown Macau, it is expected that SJM will continue to lose share.
When LVS opened the Sands in May 2004 on the Peninsula, it went after the mass market segment, which has since significantly outgrown the VIP market. The Sands also gradually ramped up its VIP business and as a result of the two has outgrown the market and its revenue share has increased from roughly 12% during its first full quarter to 17% in 2005 and an estimated 20% in 2006 (estimated 18-19% in Q406). LVS will open seven properties with more than 19,000 hotel rooms and approximately 2,900 tables and 16,000 slots on the Cotai Strip through 2009, starting with its anchor property the Venetian Macau in Q307. These properties are expected to increase LVS’s table capacity share from roughly 25% at year-end 2006 to roughly 40% in 2008-09. Roughly 85-90% of LVS’s table games on Cotai will cater to the mass market, but its hotel rooms will also attract VIPs. The Cotai properties will also have a significant non-gaming business with roughly three million sq ft of retail space, including one million sq ft at the Venetian Macau. LVS will also have three million sq ft of meeting and convention space, which is expected to help fill the hotel rooms - a strategy that has worked well for the Venetian in Las Vegas.
Galaxy operates the four City Club casinos catering mostly to the VIP and day tripper market with roughly 400 tables and 560 slots. These properties are not very differentiated from SJM’s properties. The Waldo opened July 2004, while three of these properties, the RIO, President, and Grand Waldo opened in H106. In October, Galaxy opened the 500-room, 290-table, and 370-slot StarWorld hotel and casino catering to the mass market, located on the Peninsula next to the Wynn. The four property openings in 2006 have helped Galaxy gain revenue share from roughly 7% in Q106 to 17-18% in Q406. Galaxy’s next property opening is expected in 2008 with the Cotai Mega Resort behind the Venetian. It is expected to cater to the mass market with roughly 1,500 rooms, 600 tables and 1,000 machines, with a potential expansion of the property to 12,000 rooms, 1,500 tables, and 3,000 slots by 2012.
Wynn Macau opened on 4 September 2006 on the Peninsula catering to the VIP segment with a luxury product not seen in Macau. After a rough September opening in which table hold and margins lagged, Wynn Macau has been very successful, earning an estimated 13% market share in Q406 despite only 7-8% of the market capacity. Additionally, Wynn has been successful in attracting the Hong Kong mass market and non-China VIP market as its 600-room hotel is a competitive advantage in attracting new VIP business. Since Wynn opened, there has been a marked acceleration in Macau gaming revenues with YoY growth of 43% in September-December compared with 13% YoY growth January-August. Visitation to Macau since the Wynn has grown over 20% YoY compared with 15% YTD growth prior to the opening. In July 2007 Wynn’s table capacity will almost double from present levels to 420 tables and slot capacity will more than triple to 1,280 slots. Wynn is also has plans to build a second hotel tower at the Wynn Macau. Looking out, Wynn plans to develop 54 acres on Cotai. No timetable for the Cotai property has been announced.
The gaming subconcession joint venture of Pansy Ho and MGM MIRAGE plans to build the US$1.1bn MGM Grand Macau on the Peninsula next to Wynn Macau. The first phase of the MGM Grand is expected to open in late 2007 with roughly 347 tables, 1,037 slots, and 600 rooms. MGM is waiting to hear about suitability findings on Pansy Ho by Nevada and New Jersey. If Pansy Ho is not found suitable, the agreement between MGM and Pansy Ho calls for MGM to sell its stake to Pansy or another party, but does not allow MGM to buy out Pansy. The MGM Grand Macau property may also benefit from MGM’s recently announced JV with Diaoyutai State Guesthouse to develop non-gaming luxury resorts in mainland China. While details of future projects have not been released, if a property is named MGM Grand it could offer brand name recognition for the Macau property, which would be important as gaming advertising not allowed in mainland China. It is expected that the MGM/Pansy Ho JV will have further Macau projects together.
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