Growth in Macau is supply driven... (a little review on CNY numbers)
“Demand for hotel rooms is exceptionally strong with 100 percent occupancy,” Yoko Ku, a spokeswoman at Galaxy Entertainment, said in an e-mail responding to a Bloomberg News inquiry.
Sands China has been adding more hotel rooms under the Sheraton brand and received government approval for more gaming tables at Sands Cotai Central, its newest resort that opened in April.
“The novelty factor will drive more mainland visitors to Cotai,” Capital Securities’ Li added.
Starwood Hotels & Resorts Worldwide Inc. (HOT) operates Macau’s biggest hotel under Sheraton brand at Sands’ latest resort with 3,900 rooms.
Sheraton Macau “is fully-booked for the first three days of Chinese new year,” Josef Dolp, managing director of Sheraton Macau, said on Jan. 28.
Sands China has 9,210 hotel rooms in Macau, which account for about 40 percent of the city’s hotel room supply, while Galaxy has more than 2,700 hotel rooms.
“Even though Sheraton’s new Earth Tower had only just opened last week, it is already fully booked on four out of eight days,” Tang of Deutsche Bank wrote in a report. These advance booking trends seem even stronger than last year’s October Golden Week.’’ October Golden Week refers to the 7-day National Day holiday.
Sands which operates the Venetian, Macau’s biggest casino resort, plans to invest at least $2.5 billion to build its fifth integrated resort, to be called the Parisian, in the former Portuguese colony.
The Parisian, which is scheduled to begin construction in the second quarter this year, will have a replica of the Eiffel Tower, 3,000 hotel rooms and other family-oriented facilities to attract middle-class gamblers from China, who provide wider margins.
Macau casino revenue climbed 14 percent to a record 304 billion patacas ($38 billion) last year.
“Growth in Macau is supply-driven,” said Li of Capital Securities. “As long as we have more hotel rooms to support the increase in the number of travelers, the growth can be sustainable.”
Re: Taxx's concern, Parisian should have no impact on EPS or EBITDA during construction as it will be almost entirely capitalized.
Cotai Central hammered EPS because Sands was piling so many pre-opening expenses of the un-opened phases into the income statement of the entire development. Thus, last summer, the expenses of both phase 1 and phase 2 were being applied against revenues coming from phase 1 only. Given that Q2 and Q3 were such "throw-away" quarters last year, I definately got the sense that the company was "piling on" those expenses in case where they "could" have capitalized some of them... an action that would serve to pair depreciation on CC later on, in future quarters that are NOT throw-away quarters.
Parisian is far less likely to be opened in phases, with a much higher portion of costs being capitalized. That resort shouldn't impact the overall Sands income statement until both revenues and expenses are impacting it together following the launch date.