The opening of SJM Holdings’ Grand Lisboa Palace is set for June, but the resort’s long-delayed Cotai debut will feature only a fraction of its planned attractions, leaving analysts guarded about its initial prospects.
SJM unveiled the US$5 billion project back in 2014 but has yet to enter the fray on Cotai, the last of Macau’s six casino concessions to do so. Since then, the resort district, located on reclaimed land between the islands of Taipa and Coloane, has eclipsed the Macau peninsula as the territory’s center of gaming and tourism by virtue of its more expansive, Las Vegas-style resort offerings, and the wait has cost SJM heavily in terms of market share.
The opening will comprise only one of Grand Lisboa’s three hotels, around 300 of a planned 1,829 rooms, and won’t include, at least for the time, the highly touted Karl Lagerfeld- and Gianni Versace-branded boutique hotels aimed at honing a competitive edge for Grand Lisboa with a more upscale Chinese clientele.
There will be only a handful of food and beverage, retail and other attractions as well. So, while Grand Lisboa, priced at US$5 billion at full buildout, will open with what is likely a complete complement of table games, an expected 300 or so, it will be going up against entrenched destination-scale competition handicapped in terms of the non-gaming bells and whistles the market has come to expect.
Management said recently it expects to achieve “better than fair share” on the gaming side by focusing on premium segments, namely VIP.
In this regard, analysts with Credit Suisse note that junkets are reported to be “optimistic about prospects at the property and according to management eager to start operations.”
“Premium mass operations and marketing are ready to go,” they said, “and the success of Grand Lisboa Palace largely hinges on the ability to execute on that very competitive segment.”
Brokerage Sanford Bernstein, for one, isn’t so sure the property can make good on its forecast.
“We are skeptical this can be achieved,” the firm said in a client note. “Competition on Cotai is very strong and product offering is very competitive (and in many cases will be superior). We do not expect GLP to even get fair share on Cotai (at least in the first few years).
“Management believes junkets are very keen on the product. That may be so. Grand Lisboa Palace will take some junket share in the market. However, margin will be very questionable.
“We need to wait and see what GLP will offer with respect to junket incentives and credit, which could be a key driver of share gain (with significant impact on profit potential).”
The firm’s dour outlook came after Hong Kong-listed SJM reported first-quarter results that fell short of consensus and included an EBITDA loss of HK$319 million (US$41 million), down 60 percent year on year, a 59 percent drop in VIP win, a 21 percent decline in mass-market win, and a further slide in the company’s share of total Macau gaming revenue from 13.3 percent in Q1 2020 to 11.6 percent.
