For the thrill of it: Does Macau have a role in China's theme-park craze?

With the construction of a theme park on the cards for Galaxy Macau, could this form of family friendly entertainment prove crucial in enticing mass-market tourists in their droves? 

A natural byproduct of China’s burgeoning middle class has been more discretionary money to spend. Research from the Boston Consulting Group predicts that China’s consumer economy will expand by about half, to $6.5 trillion, by 2020 with services overtaking goods as the chief engine for spending. The booming theme-park market is likely to be a key beneficiary, but could it drive traffic to Macau?

Leisure activities will form a key part of the consumer economy and theme parks appear to be a sought-after attraction. U.S. consultancy Aecom has forecast that China will surpass the U.S. as the biggest theme park market in the world by 2020, drawing 221 million people to such facilities by that time.

Walt Disney Co. is scheduled to open its $5.5 billion Shanghai Disneyland Park this June and is already drawing in crowds. According to media reports about 30,000 people traveled to the Disney park on the second day of a test run. 

Aecom estimates there are a further 59 new theme parks and five new water parks scheduled to be built by 2020, with planned investments of more than RMB148.13 billion ($23 billion).

Not wanting to miss a trick, Galaxy Entertainment Group, is set to construct a theme park as part of the next two development phases of its $11 billion mega-resort project, Galaxy Macau.

Galaxy chairman Lui Che-Woo has said phase 3 and 4 of the project will include “something special and high-tech” similar to the 3D-blockbuster movie Avatar. Compared to Shanghai Disneyland Park, “our park will be smaller but unique,” the 86-year-old multi-billionaire revealed.

Mass market lure
“Galaxy is likely choosing this path as they see it as a roadmap to delivering an outsized share of mass-market customers to their doorstep,” says Union Gaming Group analyst Grant Govertsen. “This is important in the context of Macau’s VIP story not getting better.” Galaxy’s move may mean rival casinos look to follow suit with an alternative thrill ride besides the ubiquitous baccarat tables."
Despite Melco Crown Entertainment unveiling the Hollywood-inspired Studio City last autumn, Macau still lacks a diverse abundance of non-gaming amenities to appeal to risk-averse tourists. Theme parks could lure more mass-market customers to operators’ properties, which would help cushion the blow from the sharp decline in the lucrative high-roller segment.
Furthermore, a directive from president Xi Jinping has ordered the city to diversify and target becoming a leading tourism destination in the region, rather than just the gambling epicentre of Asia. “It is important for the gaming companies to maintain a good relationship with the government as the concessions are due for renewal in 2020 or 2022,” says CLSA analyst Aaron Fischer.
Yet the inescapable quandary facing casino owners is the fact that the densely populated former Portuguese colony simply isn’t blessed with sufficient space to accommodate theme parks. And land is scarce on 5.2-square kilometre Cotai, home to most of the upmarket integrated resorts. “There is no space on Cotai for large-scale theme parks, unless the golf course was available for redevelopment,” says Fischer. “So we don’t envisage theme parks such as Universal Studios Singapore [a 20-hectare theme park situated at Resorts World Sentosa].”

An obvious alternative location is neighbouring Hengqin – the largest island in the city of Zhuhai and a place that is poised to become a leisure and entertainment hotspot. Home to just a few thousand, Hengqin, which was declared a special zone by the State Council in 2009, is three times larger than Macau at 106 square kilometres and is no more than 200 meters away across a narrow stretch of water. It’s on the southern tip of Hengqin that Chimelong Ocean Kingdom ­– dubbed the ‘Orlando of China’ – sits. Opened in March 2014 with the title of the largest marine theme park in the world, this attraction reportedly racked up over 5.5 million visits in 2015.

Chimelong expansion

Last December, Chimelong Group president Chen Jie said his company intends to plough 50 billion yuan into building five more theme parks on Hengqin with the goal of attracting 50 million visitors a year. Govertsen says it makes perfect sense for theme parks to be built on the island, as well as for travel rules to be simplified so that visitors can come and go to Macau and Hengqin as they please. “That would be the ideal solution, although this would require notable regulatory changes in order to make it a reality.” When the Hong Kong-Zhuhai-Macau Bridge is eventually finished, Hengqin will be a 40-minute journey by car from Hong Kong.

So while Hengqin seems set to be irrevocably transformed into a leisure hub, Galaxy Macau’s planned theme park could very well end up being the first – and quite possibly the last – of its kind to be built in Macau. “It is unlikely that any of the peers would even consider building a theme park for the simple reason that there is not enough developable land to do so,” says Govertsen. “Angela Leong [SJM Holdings] has had a chance to build one on land she controls, although there doesn’t seem to be any progress with respect to this concept.”

Yet the jury is still out as to whether this type of leisure facility can provide a much-needed shot in the arm for Macau’s casino industry (the city’s six casino operators lost roughly $46 billion of their market value last year). Govertsen says amusement parks are just “one way” of drawing a new breed of mass-market visitor. “I think the reality is that the Macau operators are still trying to figure out what the best amenities will be to attract incremental visitors to Macau. We would expect a fair amount of trial and error to occur over the coming years as they hone in on attractions that will work.”

Similarly, Fischer doesn’t see theme parks as a priority right now in Macau. “Theme parks are not the best use of space,” he asserts. “We still believe there is a massive shortage of hotel rooms so we would like to see a lot of the available land dedicated to hotel rooms – across a wide range of price points. We would like to see one more arena being added as we do believe there is potential to bring more music and sporting events to Macau.” Either way, Galaxy Entertainment must believe a theme park at its Macau resort is a gamble worth taking in the battle for the discretionary cash of those all-important mass-market visitors.