(Corrects the number of hotel rooms in second paragraph in a story published on Feb. 14.)
SJM Holdings Ltd. (880), Asia’s biggest casino operator, will spend HK$30 billion ($3.9 billion) to build its first resort in Macau’s Cotai area, HK$5 billion more than planned because of higher construction and labor costs.
SJM broke ground yesterday on Lisboa Palace, which will have as many as 700 gambling tables and 1,200 slot machines, according to a statement. Scheduled to open in 2017, it will have three hotels with 2,000 rooms, including a luxury hotel in partnership with Italian fashion house Gianni Versace SpA.
The company founded by Macau tycoon Stanley Ho is expanding in Cotai, Asia’s version of the Las Vegas Strip, to catch up with companies including Sands China Ltd. (1928) and Galaxy Entertainment Group Ltd. (27) that have resorts there. SJM, which runs 20 of Macau’s 35 casinos, is the last of the Chinese city’s six operators to get government approval to build on the isthmus of reclaimed land that link the islands of Coloane and Taipa.
“We made the HK$25 billion estimate about a year ago,” Ambrose So, Chief Executive Officer of SJM Holdings, said at the press conference in Macau. “Now that the costs of construction materials and labor have risen, we believe a HK$30 billion price tag is more realistic.”
Lisboa Palace will initially be built on a 70,500-square-meter (760,000-square-foot) site. The company plans to buy a stake in a neighboring plot controlled by Angela Leong, SJM’s executive director and a Macau legislator, to triple the size of the resort, Chief Executive Officer Ambrose So had said. The company will finalize the deal within this year, he said yesterday.
The resort was modelled after Versailles, according to WATG, the U.S.-based architectural design company employed for SJM’s project. Sands China’s Venetian Macao is modelled after the Italian city as is its parent’s Las Vegas casino, which was also designed by WATG.
A French theme “resonates well” with customers from mainland China, Grant Govertsen, a Macau-based analyst at Union Gaming Group, said in a research note yesterday. “Mainland consumers view Europe in general and France in specific as very aspirational destinations.”
SJM fell 1.6 percent to close at HK$24.55 in Hong Kong trading. The stock has climbed 20 percent in the past year, compared with a 4.5 percent drop for the benchmark Hang Seng Index. Sands China surged 62 percent while Galaxy more than doubled in the same period.
The 180,000-square-meter expansion site, which has been approved for non-gambling entertainment use, is owned by a company controlled by Leong, who is also the mother of Ho’s youngest children.
Ho, 92, held a casino monopoly in Macau for four decades until 2002, when the government issued licenses to overseas operators such as Sands and Wynn Resorts Ltd. (WYNN:US)
SJM is following the competitors, which built restaurants, malls and family-friendly attractions in their resorts to draw middle-class holiday-makers from mainland China to Macau. Casino revenue in the city jumped 19 percent to $45 billion last year, about seven times that of the Las Vegas Strip.
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