The USD 2.4 billion Venetian Macau Resort Hotel is an ambitious venture, remarkable both for its massive size and for its location on the once-empty Cotai Strip. The Venetian, which opened on August 28, is the biggest hotel in Asia and the second biggest building in the world. It has the world’s largest gaming floor, a 15,000-seat arena, 30 upscale restaurants plus a giant food court, 350 retail shops, 3,000 all-suite rooms and 1.2 million square feet of convention space, to say nothing of its signature canals, complete with gondolas and boatmen.
And the Venetian is only the beginning of the USD 10 to USD 12 billion Cotai Strip project, which will eventually feature 14 hotels, 20,000 guest rooms, hundreds of restaurants and three million square feet of retail space, along with the card tables, slot machines, roulette wheels and other games of chance for which Macau is famous. „We are going to create a mini Las Vegas out of the Cotai Strip,“ said Sheldon G. Adelson, one of the world’s richest businessmen with a net worth of at least USD 15 billion and the owner and CEO of Las Vegas Sands, which owns both the Venetian and the Cotai Strip as well as the profitable Sands Macao casino in downtown Macau.
With the Cotai Strip project, Adelson hopes to change the nature of tourism in Macau. Currently, most visitors arrive on ferries from Hong Kong, go to the casinos and leave the same day; the average visit to Macau is just one day, compared with almost four days in Las Vegas. Now, with the Venetian and, eventually the Cotai Strip, Adelson hopes to attract visitors from all over Asia, especially China, and even some from the U.S. and Europe. His goal is have these people stay longer, and spend more money, than the day trippers from Hong Kong.
But will it work? Can Adelson fill the Cotai Strip’s 20,000 guest rooms, plus the retail space, restaurants, casinos, convention and exhibition areas, and so on? The answer from Adelson is yes. His business plan is to attract convention visitors to the hotel, with the Las Vegas-style shows (the Venetian will have a permanent Cirque de Soleil show), the arena, the restaurants and the duty-free shopping as additional lures. Once there, visitors will gamble, and that’s where the revenue will come from. „The gaming income will represent about 60 percent to 70 percent of our income,“ said Adelson in an interview. „That’s because the Chinese people have a greater propensity to see gaming as a form of entertainment than Americans do.“
If anyone can turn Macau into a conventions destination, it will be Adelson. He was once the world’s largest convention and exhibition organizer, and he created the Comdex computer shows, which he sold to Softbank Corp. of Japan in 1995 for $ 860 million. „Our specialty [attracting conventions] is something that other people haven’t learned how to do yet, and even if they learn how to do, they don’t have the experience and the expertise,“ he said.
The analysts interviewed for this article — two gaming experts and a travel and tourism expert — were optimistic about the growth of tourism into Macau. Their optimism is fuelled by the increasing wealth and growing middle class in China, which is by far the main market for tourism into Macau.
„At the end of the day, Macau is a China consumer story,“ said Gary Pinge, head of Hong Kong Conglomerates and Gaming for Macquarie, the international bank corporation. „It sits at the doorstep of a 1.3 billion population, and that population is seeing rapid expansion in terms of middle class wealth. These guys are not only going to buy cars and houses, but they are also going to look at outbound travel. Right now, they can’t afford long haul flights, but they can afford short haul flights, and Macau and Hong Kong are within three hours of most parts of China. So I think the outlook for Macau, particularly [regarding] tourism out of China, is very positive.“
Whether those Chinese tourists will want to visit an integrated resort like the Venetian, rather than simply going to the gaming halls that proliferate all over Macau, is less certain. „They know in Macau that the Chinese just want gambling, so the market for other attractions in Macau is not there, at present,“ said Murray Bailey, founder of Travel Business Analyst, a travel data, consultancy and research company which has offices in Hong Kong and France. „But the thing with the China [outbound travel] market is that it moves so quickly and it changes so quickly. It’s big, so you don’t have any problem with numbers, but how it is going to evolve is a bit difficult to tell.“
The Venetian and the Cotai Strip — which is now under construction and will be finished by 2010 — are counting on sharp growth in outbound conventions traffic from China, another market that is hard to predict. „At present, the conventions market is nowhere, as far as China is concerned,“ said Bailey. „But tomorrow, will it be there with the biggest shows you’ve ever seen in Asia? The China market surprises constantly. So I would think that, yes, the meetings and conventions business will come, but that’s just supposition. I don’t know whether it will or not, but based on what has happened in other [segments] of the market, the business will come.“
So far, said Pinge, the Venetian is having reasonable success in attracting conventions. „It is focused around MICE [meetings, incentives, conventions and exhibitions], and if you look at how many conventions and exhibitions they signed up even before the facility opened, they have done a pretty good job. I think they have a pretty good chance of achieving 60 percent to 70 percent hotel occupancy at an early stage.“
Another gaming analyst and investor, who preferred not to be named, also expressed optimism about the future of both the Venetian and the Cotai Strip. „I am sure it is going to work, over time,“ he said. „Number one, they are the first ones in, the first movers, so that helps. Number two, these guys know how to execute, both in terms of getting their resorts up and getting a marketing program up. And the third thing is, they’ve got money. They have plenty of resources, they have access to capital, and they have Wall Street’s ear. So I feel confident that the project is going to work.“
Hotel companies are among the believers as well. Some of the world’s top hotel chains have signed up to manage hotels on the Cotai Strip. These include Starwood Group (which will manage a Sheraton and a St. Regis), Shangri-La (a Shangri-La and a Trade“s Hotel), Hilton Hotels, Fairmont, Raffles and Four Seasons.
„This is an outstanding opportunity to be well positioned on the Cotai Strip, which will become one of Asia’s premier conference, meeting and leisure destinations,“ said Andrew Clough, senior vice president of development, Middle East and Asia Pacific, for Hilton Hotels. Hilton will manage a 2,500-room Hilton Hotel, a 600-room Conrad Hotel and a 300-room Conrad Residence on the Cotai Strip. And of course, Adelson himself is an optimist. „Our biggest fear is that our 20,000 rooms will be woefully inadequate to meet the demand,“ he said in a news conference at the opening of the Venetian.
Adelson and his Las Vegas Sands have trademarked the names „Cotai Strip“ and „Asia’s Las Vegas,“ but they do not have the Cotai reclaimed land area all to themselves. Aside from Adelson’s Cotai Strip, the Cotai area, which is about 10 minutes from downtown Macau, will soon feature two more mega-developments: Melco PBL Entertainment will launch the USD 2.5 billion City of Dreams late next year, and the USD 2 billion Macau Studio City, a resort that will combine retail and gaming with TV and film production, will open in 2009.
Although most analysts are generally optimistic about the outlook for the Venetian complex and the Cotai Strip, there are caveats. Macau, once a sleepy Portuguese colony, has remarkably poor tourist infrastructure. Millions of visitors take the high-speed ferries from Hong Kong each year, yet the Macau ferry dock is crowded and inefficient. Immigration lines at both the ferry dock and the airport are long and slow, taxis are in very short supply throughout the city and a ferry terminal that is planned for the Cotai Strip has suffered delays and is not yet operational.
Some improvements are in the works, but are several years away, at best. These include a light rail system, an airport expansion, and a cross-harbor tunnel between the Macau peninsula and the Cotai Strip.
Las Vegas Sands executives have been sharply critical of the slow pace of development in Macau, especially in light of the huge tax bills paid by the company. But at the news conference, Adelson took a softer tone. „These are government-responsible infrastructure developments, and to the extent that they speed them up, we will be very grateful,“ he said.