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Integrated Resort 2.0

Newsdesk by Newsdesk
Thu 30 Jul 2009 at 16:00
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The next generation of casinos may be leaner, meaner—and taller

Las Vegas-style integrated resorts were going to transform Macau’s gaming industry. But the non-gaming facilities of the most spectacular proponent of this business model—The Venetian Macao—have arguably underperformed so far relative to the capital invested in them.

A conference session at G2E Asia 2009 titled: ‘The Integrated Resort: Scaled Down?’ heard how the industry in Asia and further afield is responding to the lessons learned.

Paul Heretakis, Vice President of Westar Architects, has some insight about what works in the United States. His company has reportedly been involved in a number of high profile casino design and remodelling projects there, including The Venetian, The Bellagio and Beau Rivage in Las Vegas, and Harrah’s and Trump Plaza in Atlantic City.

“In America, a bar on the casino floor creates a ton of energy. Here [in Macau] a bar sucks the energy right out of a place—there’s nobody drinking and nobody wants any part of it,” suggested Mr Heretakis.

Trend follower or setter?

While this makes for a good sound bite, it isn’t necessarily accurate. The Lion’s Bar at the MGM Grand Macau for example is packed most nights, but the people in there aren’t necessarily gamblers. The issue may be, rather, was the money and effort used in building the bar in the first place really worth it in a heavy gamblers’ market like Macau? Would MGM MIRAGE and Pansy Ho have been better off using the space for more gaming tables?

It depends. It depends in particular whether you think a service industry (for that after all is what the casino business is) should merely reflect consumers’ existing tastes, or whether it should strive not only to anticipate but also actually to create new tastes. How for example did we know that people would like modern theme parks until Walt and Roy Disney actually built one?

While some developing trends prove to have universal appeal, understanding cultural differences in the globalised market as it exists today is critical for designers and architects to create new IRs and evolve existing ones, said Mr Heretakis.

Growing pains

For example, it is well documented that non-gaming amenities in Las Vegas make up a much larger portion of market revenue than they do in Macau. That doesn’t necessarily invalidate the transplanting of the IR concept to Asia, asserted Mr Heretakis.

“In Las Vegas and Atlantic City, resorts started out small and grew as new dining and entertainment trends were added. Here in Macau some of the amenities are brand new so an evolution process needs to take place. Instead of the resort growing with the market, this market has to grow into the resort,” he suggested.

A popular perception internationally about the Asian casino industry is that it tends to borrow design, marketing and merchandising ideas from Las Vegas and other Western jurisdictions. But Western casino operators appear to be drawing on important lessons learned by Asian casino developers.

A combination of rising land values during economic boom times, and stressed balance sheets during a bust, has led many Las Vegas operators to focus on incremental changes to existing properties rather than building anew on green or brown field sites. For at least the previous three decades and probably longer, the Vegas model was one of so-called ‘implosion’, i.e., the constant tearing down of properties that had reached a certain age, and their replacement with new ones.

“The idea of building big resorts [in Las Vegas] is dead—for now,” Dennis Forst, a stock analyst with KeyBanc Capital Markets told the Las Vegas Sun in July.

“Investors want to know how they’re going to pay down debt and shore up their balance sheet. They don’t want to hear about spending a billion dollars on a new venture,” he said, referring to the financial troubles of Las Vegas Strip resorts now under construction.

Softly softly

That incremental approach has been seen in Macau, with Stanley Ho’s casino holding company SJM adding hotel accommodation to his Grand Lisboa property and Steve Wynn currently building Encore Macau, the VIP-focused extension to Wynn Macau.

As US real estate becomes more expensive and projects extract more value from less space, architects have begun adopting Asian design techniques, said Brad Friedmutter, founder and CEO of Friedmutter Group, during the G2E Asia 2009 session.

The Group is an architecture and design practice with offices in Las Vegas, New York, California and Hong Kong.

In recent years the average ‘footprint’ (i.e., plot size occupied) of new Las Vegas developments has been shrinking relative to the amount of gaming, retail and hotel space on offer. This mirrors exactly the format of developments on Macau peninsula, where land is scarce and expensive. Only on the island of Cotai, reclaimed from the muddy waters of the Pearl River Delta, have the operators been able to stretch their integrated resort ‘legs’.

Mr Friedmutter believes condensed sites and multi-level casinos will eventually become the norm across US markets.

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The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

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