IAG December 2015

Insights
“The three golden rules in retail mall value
are location, location and location.
In Macau? It’s gamers, gamers and gamers!”
branding is still VIP-oriented, the retail mix
will follow. If the retail area is big enough,
it would be ideal to have a full range of
offerings to cover all clusters.
IAG: What specific difference are there
doing retail in an IR setting compared to
normal retail say in Hong Kong or Shanghai
for example?
GS: The three golden rules in retail mall
value are location, location and location. In
Macau? It’s gamers, gamers and gamers!
Well, at least it still is right now. In a normal
retail industry, rental income is the major
revenue for a mall, therefore everything is
retail leasing oriented, while in Macau, retail
is a relatively small proportion compared
with gaming, therefore things are more
gaming oriented. It shows in many ways.
The first is mindset, which is not how other
business and operations would help retail,
but how retail would help gaming. Then
there is marketing, in that different target
customers decide different marketing
strategies and promotion and membership
systems. The population and customer
bases are more versatile in Hong Kong
and Shanghai – there’s a bigger pie for
differentiation. Properties in Hong Kong
and Shanghai are normally a mix of office
and retail or residential and retail, where
office workers and residents are regarded
as providing important spending power in
the mall, while in Macau it is mostly IR and
tourist-oriented. Then you have HR factors,
it is more difficult to get retail professionals
and qualified staff in Macau, which limits
some good brands or interesting concepts
from entering Macau. In places like Hong
Kong and Shanghai you can easily find lots
of interesting designer or niche brands –
not so easy to do in Macau!
IAG: How are retail space deals
struck between the retailer and the
concessionaire? Typically what’s the mix
between fixed cash monthly rental and
percentage of sales? Has this been changing
over the years?
GS: Normally a typical retail lease has a fixed
rent and a turnover rent, with the retailer
paying whichever is higher each month.
However, every landlord is different and
every deal is different, depending on how you
negotiate and the attitudes of both sides. It
has not changed too much over the years in
the Hong Kong and Macau markets.
IAG: We’re hearing Hong Kong is getting a
bad reputation with mainland tourists with
analysts predicting much lower growth
rates in the future. Is this a boon to Macau
retail?
GS: It can be a risk or an opportunity to
Macau. The risk side is that tourists may
choose to come to Hong Kong and Macau
on the same trip. If the number of tourists
entering Hong Kong decreases, it might
affect Macau too. The opportunity side is
that if Macau can offer better hospitality
and customer experiences than Hong Kong,
together with entertainment, gaming and
other elements, Macau might benefit from
the current Hong Kong situation.
IAG: Will greater critical mass of retail on
Cotai propel Macau into more of a shopping
destination in the minds of tourists? Could
it help extend the average stay in Macau?
GS: Cotai is becoming the shopping
destination for tourists, although it still
has a lot to improve to catch up with Hong
Kong. I don’t think shopping alone can help
extend the average stay in Macau. Tourists
won’t stay in a city for three days or more
purely for shopping. Instead, if Macau
offers more attractions, entertainment,
resort facilities, F&B and places of interest
combined with shopping, it will significantly
help to extend the average stay.
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inside asian gaming December 2015