The City of Dreams, James Packer's latest Macau casino, has disappointed the market in its first month of trading with its lack of VIP and mass-market gamblers and its lower than expected market share.
Melco Crown Entertainment, the joint-venture company between Mr Packer's Crown and Lawrence Ho's Melco, said yesterday that rolling chip volume was $US1.94 billion ($2.4 million) in June. Rolling chip turnover is a key measure of casino profitability. It measures the number and value of chips gambled by VIPs, who are the City of Dreams's most valued and desired customers.
Shares in Melco Crown, which trade on Nasdaq, fell 3 per cent on the news on Thursday US time to close at $US4.55.
Before it opened last month, Mr Ho conceded there was a lot riding on the success of the project. He told Bloomberg it was "crucial" that the casino defied the global recession and had a successful opening.
"We know the pressure is on us," Mr Ho said. "The success of it will have major implications."
The casino is opening in the midst of both the worst global slump since World War II and as the Chinese Government tightens restrictions on the number of visits its citizens can make.
The Chinese enclave's gaming revenues have been hampered by soft economic conditions, a tighter credit environment and travel restrictions.
Across the whole of Macau revenues in June were 17 per cent lower than a year ago. Revenues also fell in May, when they dropped by 10 per cent.
The City of Dreams figures released yesterday also implied the casino had only grabbed an estimated 7 per cent share of the Macau market, below initial expectations of at least 10 per cent, and analyst consensus expectations of 14 per cent.
However, having only traded for a month, it is still too early to tell whether it will be a success.
Melco Crown Entertainment also owns a second casino in Macau, the Altira, which has a market share of about 8 per cent. Together the two casinos have about 15 per cent of the market.
Analysts are expecting the City of Dreams to post pretax earnings of $US300 million in the first year, less than the $US500 million a year its neighbouring casino, the Venetian, has been generating.
Yesterday the company emphasised that the trend of chip turnover throughout the month across its 127 VIP tables was positive and volumes were improving, with the casino taking 38 per cent of revenues in VIP tables in the final week of June.
The casino also makes money from gamblers who bet smaller amounts than high rollers.
These gamblers dropped about $US100 million on the City of Dreams's 376 mass market tables in June, which equates to about $1400 to $1600 daily net win per table. This is below the industry average of $US3000 per table. (Credit: The Sydney Morning Herald)
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