By KATE O’KEEFFE
Wall Street Journal
HONG KONG—After three-and-a-half years, the Macau unit of Las Vegas Sands Corp. and Cirque du Soleil are putting an end to their 10-year contract.
Tuesday’s announcement underscores the difficulty casino companies have faced trying to transform the Chinese gambling haven into a well-rounded tourist destination like Las Vegas.
The Quebec-based entertainment company will perform its last Zaia show, which was its first permanent production to open in Asia, on Feb. 19, the companies said in a joint statement Tuesday.
The deal’s breakdown isn’t entirely unexpected, given earlier complaints from Las Vegas Sands’s billionaire Chairman Sheldon Adelson about disappointing ticket sales, though the two companies repeatedly denied rumors the show would be canceled.
Average occupancy at the Zaia show in January was 40%, according to a representative for the Canadian company, whose productions have been popular in the West, particularly in the U.S. casino capital Las Vegas. The combined cost of creating the heavily promoted show and its custom-built theater exceeded US$150 million, according to an August 2008 statement on the pact.
The governments of China and Macau, which last year raked in over five times the gambling revenue analysts estimate the Las Vegas Strip generated, have repeatedly said they want the territory to diversify its economy away from gambling to become a more comprehensive tourist destination.
But it hasn’t been an easy task for businesses to justify, with many visitors to Macau—the only place in China where casino gambling is legal—still only interested in the baccarat tables. The territory didn’t even have a proper cinema complex until Galaxy Entertainment Group Ltd. opened one in December as a last-minute addition to its enormous Galaxy Macau casino.
The issue remains a political hot button, with Sands China Ltd. Chief Executive Ed Tracy quoted by local media in November as saying that even though the Zaia show remained the company’s only business sector that didn’t make a profit, it wouldn’t cancel the contract. “We are prepared to take a loss to provide that kind of entertainment,” he said, according to the Macau Daily Times.
One entertainment offering in Macau that has proved popular, however, is the House of Dancing Water show at Melco Crown Entertainment Ltd.’s City of Dreams property.
The show, which the company says cost two billion Hong Kong dollars (US$257.9 million) to create, is still packed after opening in September 2010. The company is even launching some extra shows, “due to the enthusiastic support from [its] fans.” Some analysts were initially skeptical of the House of Dancing Water because its expense and the poor ticket sales at Cirque du Soleil, but they say it has succeeded because of its ability to appeal to Chinese customers with its unique and over-the-top stunts.
Cirque du Soleil and Sands China said they are “currently discussing a variety of options for working together on other projects,” but neither provided further details.
“In view of the market trend and customer demand shown in the research we’ve conducted, the company will again be investing to redesign the theater,” said Gus Liem, vice president of entertainment at Sands China.
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