In the latest instalment of Inside Asian Gaming’s new series of video interviews with leading members of the Asian gaming community, Galaxy Entertainment Group President and COO Michael Mecca discusses his company’s strong financial performance and expansion potential
Last year’s mid-May opening of the dazzling HK$16.5 billion, 550,000-squaremeter Galaxy Macau resort catapulted
Galaxy Entertainment Group to a record set of financial results in 2011. GEG believes it still has a long way to grow, however, as group President and COO Michael Mecca tells IAG publisher Kareem Jalal.
The INSIGHTS series—produced in collaboration with Aomen TV, a member of the Ignite Media Group—can be viewed online at staging.staging.asgam.com.
Kareem Jalal: You recently released a very impressive set of financial results. Has the performance here at Galaxy Macau exceeded your expectations?
Michael Mecca: During the planning of Galaxy Macau we intended on presenting to the community a set of game-changing amenities in a new style resort. We truly wanted Galaxy Macau to be the first integrated destination resort in Macau, and to do that we have a great set of amenities. We have 50 food and beverage outlets. We have three great Asian-centric hotels. We have a resort deck that is second to none in the world—the largest outdoor wave pool, the great Banyan Tree pool, great Okura pool, restaurants, the Banyan tree Spa, it’s an amazing 13-acre lush, green complex. So with all of the amenities of Galaxy Macau, and especially featuring the ‘World Class, Asian Heart’ service of our entire team, we had a great planning exercise, we had incredible vision by our Chairman and our Vice-Chairman, and we presented on opening day, May 15th, almost one year ago, we presented just a great resort. And we’re just very, very pleased with the reception of Galaxy Macau throughout this community and throughout mainland China and Asia.
Obviously the rising tide of Macau’s gaming industry is lifting all the operators’ fortunes. But what have you done in particular to improve margins and drive operating efficiencies to strengthen your financial position?
You know, in a property the scope of Galaxy Macau, there is a ramping up period. It took several months to open all of our 2,200 hotel rooms. It took a few months to open all of our food outlets and to understand the flow of our guests through the casino. And through that process, the effectiveness of the opening and making sure that our “World Class Asian Heart” service was presented in every area became a process of becoming more efficient as well. And through the ramping up process, through understanding the resort, through understanding our guests and the flow of our guests through this magnificent resort, the efficiencies started coming into play. And we can see over this period of time, over this first year of operation, the ramping up of efficiencies, the margins have become greater. And we are very pleased that the progress that we have made in becoming not only a great, spectacular destination resort, but a more efficient resort as well.
Are you still ramping up, or do you feel you’ve hit your stride?
Well, I think, as you know, recently with the opening of our nine-cinema complex, with the red carpet event of the new Jet Li movie, and with the opening of China Rouge, the most spectacular live performance venue anywhere, we are now completing all of the amenities of phase one. We are still adding new restaurants, we are still adding more retail to phase one, but phase one has evolved and has become, we believe, the most spectacular casino resort in the entire world.
There’s been a lot of speculation about who will get permission to build on Cotai next. But one thing that’s sometimes overlooked is that Galaxy Macau sits on the largest land bank on Cotai and you’re free to expand it in additional phases?
You’re exactly right.
What have you got planned in terms of additional development on Cotai?
As we have been master planning the entire piece of land that we have, you made the point that Galaxy Macau, as significant as the scope of this resort is, it sits on only one-third of the land base. It gives us a great opportunity to understand the market and grow with the market. It gives us a great opportunity to listen to the guests that come to Macau, to listen to all of the guests that come to Galaxy Macau and build our next phase to the requests and the desires of the guests that come here. So the master planning goes on. Actually, the master planning for phase two is well advanced, and there will be some significant news about the specific amenities of phase two soon.
Unlike the other Macau casino operators who seem to be making ever-larger dividend payments, Galaxy has decided not to offer a dividend to shareholders. Is that part of a strategy to maintain a strong cash position to fund this further development and growth?
As you know, we have a significant cash position because of the great performance of StarWorld, our City Clubs and Galaxy Macau. We have always intended to ensure a great return to our shareholders, and we also want to make sure that in the development of phase two that we use our capital very wisely.
Now StarWorld boasts one of the highest returns on investment of any casino property in the world. Obviously Galaxy Macau is a totally different kind of property, different scale. But how are you doing in terms of ROI so far on this property?
As you said, StarWorld and Galaxy Macau are two very special casino resorts, but very different casino resorts. As StarWorld opened a bit over five years ago, we celebrated our fifth anniversary at StarWorld in October, with our team members and with our guests that have been amazingly loyal to the process. We celebrated with over 3,000 of our team members that are over five-year team members. Their loyalty to this company is remarkable.
StarWorld was built for a price of around 3.4 billion, Galaxy Macau was around 16.5 billion Hong Kong dollars. So they are very different resorts. The return on investment for StarWorld is possibly the best in the entire industry at about 86%. So as Galaxy Macau ramps up, as our business model evolves, the margins, the cash flow, the return on investment continues to grow as well.
You mentioned the City Clubs. They were a great entry into this market. But profit growth at the City Clubs has lagged that of the rest of the group recently. What is your strategy in terms of the City Clubs?
The City Clubs continue to be a very valuable contributor to our company. The four City Clubs Waldo, Grand Waldo, President and Rio, are performing very well. Last year they contributed HK$185 million to the company’s total EBITDA, and it was a 16% growth over the prior year. So we are pleased with the continued efforts of our team members at all of our City Clubs, and again they continue to be a genuine contributor to our company.
Your earnings are still primarily driven by VIP gaming, even though you now have this great mass market property in your portfolio. What are you doing to drive higher-margin mass market play, and what segment of the mass market are you most interested in?
Well, we’re interested in all segments of the market at Galaxy Macau and at StarWorld. And through the ramping up of Galaxy Macau, our mass business has continued to evolve. Each month our position in the mass-market arena has grown, and in the fourth quarter of last year we had the most significant percentage growth in mass business of any resort in Macau. We have a fabulous team that is very focused on the mass business, and most recently we have opened our Pavilion Club concept. Just a few days ago, we opened The Pavilion High Limit Slots area, we feel the most luxurious high limit slot room in the industry, and we have three Pavilions on the mass floor that are devoted to mass and premium mass table games. So we have given great attention to a very special style of service through our Pavilion Club, we have a fabulous team that is devoted to the mass business, and we’re pleased that the growth of the mass business at Galaxy Macau is the most significant in the industry.
What would you like to see from the other Macau casino operators towards furthering growth of the market?
You know, we talk to the other concessionaires regularly, and I believe we all agree that in order for Macau as a destination to continue to evolve and become more and more popular, it’s very important that any new property follow the model of Galaxy Macau. That any new property must add value to the proposition of Macau as a great holiday destination; for gaming, certainly, but what our guests tell us about Galaxy Macau is that it’s a property where they can choose to come here for a holiday with their family. Where you can arrive at three great hotels, and you can arrive at beautiful, different lobby areas that present the theme and the identity of those three great hotels. Where you can go to any one of the 50 food and beverage outlets, you can come to the most fabulous resort deck in the world, and if you choose to go to the casino, that is your decision. But what needs to happen in Macau, and all of us agree, is that any new resort must add value to that proposition and again follow the lead and the model of Galaxy Macau.
And what would you like to see from the government towards helping further growth of the market?
We have a great relationship with the government. The government is very supportive in every area of the business of the resorts in Macau. And we all know that with the low unemployment rate in Macau, that new team members for the evergrowing set of resorts is an issue that is a concern, but we have great faith and in all of our conversations with the government, they appreciate all of the challenges that the industry faces, and they work very closely with us to resolve those issues.
 
Chic Retreat Considering that Galaxy Macau is booking well more thanHK$1 billion a month in revenue from its VIP rooms, it seems onlyright that all those high rollers should be gifted with a place toparty worthy of their lavish betting habits. With the opening ofChina Rouge, now they have. Galaxy unveiled the sumptuous 1,600-square-metermembers-only club at the end of March with three days ofappropriately amped-up festivities. There was a press tour. Therewas a photo shoot. There was a “media roundtable” with AlanChan, the award-winning Hong Kong artist and designer whocreated the club’s décor, and the club’s executive manager,Noel Furrer, a European-trained chef and habitué of the HongKong jet set. There was a press conference hosted by GalaxyEntertainment Group Vice Chairman Francis Liu. There was notone but two red carpet ceremonies. But then it’s not like Galaxy to do things in a small way.Billed as an “ultra-sophisticated retreat for power brokers andsociety’s elite”, China Rouge doesn’t want to be perceived asmerely another dimly lit space for the closeting of big playersaway from the prying eyes of the rest of us. Rather, the aim hasbeen to fashion an ambiance that with a bit of imaginationwill transport the legendary spenders who get to go inside—access is invitation-only—back in time to eras legendary fortheir sinful elegance: Belle Époque Paris and Shanghai of the’20s and ’30s. RelatedPosts“It has been an amazing project to work on, and I mustapplaud the determination of Galaxy Macau to createsomething truly exceptional,” said Mr Chan, who conceivedof the room’s palatial spaces, selected its appointments, andfilled it with original works commissioned from some of China’smost celebrated contemporary artists and several pieces hecreated exclusively for the club himself. “One of my passions is the fusion of Asian and Westerndesign,” said Mr Chan. In this manner, China Rouge is being trumpeted as anotherelucidation of Galaxy Macau’s “World Class, Asian Heart”theme. “The opening of China Rouge continues our track record ofbringing exciting, new and unique experiences to the Macaumarket,” Mr Liu said. “And everything we do is underpinned byour commitment to being the only authentically Asian resortof its kind.” Officially, the club seats 165, with standing room for 400. It willfeature live Asian and Western entertainment in a showroomoverlooked by a mezzanine floor. The food is gourmet, ofcourse, the wines the finest, the liquor the top of the top shelf.Dress is “casual chic”. Recently named one of the “Top 10 Resort Hotels of China”by the prestigious China Hotel Starlight Awards, China Rougewill add to that reputation a lustre of its own. |
