Macau Hotel Expansion

Macau Hotel ExpansionMacau hotel expansion will increase by more than 39% over the next few years as new hotels open across the gambling enclave. The hotels are mostly being provided to serve the increase in casinos being constructed. This is so because mostly they are being gambling operators.

Figures provided by the Macau Government show that there are 17 hotel projects in construction and a further 32 in the Government approval process. Altogether an additional 14,150 hotel rooms will be provided.

At the end of 2016 Macau had an estimated 36,300 hotel rooms due to previous rapid hotel expansion.

Most of the hotel rooms will be provided on the Cotai strip where two new large-scale casino resorts are being constructed.

The Lisboa Palace Hotel will be completed at the end of 2017 at a cost of $4.64 billion, It will have 2000 additional rooms according to the promoter, SJM Holdings.

The MGM Casino Resort also on the Cotai strip will be completed during the second half of 2017 at a cost of $3.1 billion. Completion was recently put back. The hotel will have 1,500 hotel rooms and suites, according to MGM.

In addition, Melco Crown is constructing a fifth hotel tower at its City of Dreams casino resort also on Cotai. Melco Crown have announced it will have 780 guest rooms including suites. It will also feature sky villas and duplex villas a sizeable element of hotel expansion.

Macau Hotel Room Supply and Demand

The downside of all this hotel development will be an oversupply of rooms until the slack might be taken up. Since prices are coming down, there have been more overnight visitors to the enclave. Data from the Macau Hotel Association in January showed that overnight visitors exceeded day visitors for the first time in 10 years. The data also showed that rooms rates decreased by 12.7% during the past year.

The Macau Government has been keen to promote mass market visitors rather than gamblers. The fact remains that the majority are gamblers and many visitors are still day trippers. On the face of it, Macau hotel expansion would appear to be a risky business.

Looking at this hotel development logically it would seem the demand would be for low-cost hotel accommodation and maybe the increased supply will lower prices further. Currently, around 60% of hotel accommodation is five-star which maybe why there are so many day trippers. The average cost of a five-star room in Macau is more than $200 per night.

The supply of budget hotel rooms would surely attract more stopovers. Maybe in the future, hotel price wars will dictate the market due to oversupply.

Also due to the extent of casino investment, maybe attractive casino bonuses may play a role in occupancy levels. Is the format of Macau hotel room expansion going in the right direction for the casinos who are investing so heavily?

Source: GGRAsia

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