In the first quarter this year, Sands Cotai Central, an integrated resort operated by Sands China with four hotel brands, the St. Regis, the Conrad, the Sheraton Grand and Holiday Inn, reported US$577 million in revenue, up from US$549 million for the same period in 2018.

The Venetian reported US$897 million in the first quarter, while The Parisian brought in US$454 million, an increase of 26 per cent over the same period last year.

“It’s a pretty large redevelopment. It’s important to keep fresh – some of the Sands properties are getting a bit aged and you always need freshness in Macau,” said Vitaly Umansky, a gaming industry analyst at privately-owned investment manager Sanford C. Bernstein, noting Sands’ success in developing and promoting its city-branded properties.

An April 2019 research note from Sanford Bernstein maintains outperform ratings for Sands China and its Paradise, Nevada-based parent company, Las Vegas Sands. According to the note, Sands China’s Ebitda margin leads the industry average by about 480 basis points, and Umansky said the company was underlevered and should have no trouble financing the project.

Grant Govertsen of Union Gaming, an investment bank and advisory firm focusing on the gaming industry, also viewed the Londoner positively, saying the property would help the Macau government with its aim of developing premium mass-market gaming and non-gaming businesses. “It will allow Sands to capture a higher wallet share of visitors who will be more inclined to spend their time in Macau, bouncing between the properties that highlight favourite European destinations,” he said.

For the unveiling of the design plans for The Londoner, Sands China brought in a troop of trapeze artists and drummers dressed as the queen’s royal guards and Beatles cover band the Fab Four to perform. Former footballer David Beckham, Sands China’s brand ambassador since 2013, was also flown in to talk about London, his hometown.

A replica of the Big Ben will be built to rival The Parisian’s Eiffel Tower and The Venetian’s canals, while the exterior of The Londoner will resemble London’s Houses of Parliament. A new arena with seating for 6,000 is also planned, along with London-themed food and beverages as well as shopping, and more than 34,000 square metres of meeting and convention space. Sands China properties currently have about 160,000 square metres of Mice (meetings, incentives, conventions and exhibitions) space.

Sands Cotai Central has been underperforming, according to Sanford Bernstein’s Umansky, who said the property did not have a branding element like that of The Venetian, and had too much capacity geared to the lower end of the market. “It’s not really ideal for what Macau is today,” he said, adding that higher-end facilities will result in higher-end gamblers, boosting gaming revenues.

Robert Goldstein, president and chief operating officer at Las Vegas Sands, has, however, stressed the importance of non-gaming revenue to the Sands operations in China. Globally, the US company earns about 27 per cent of its revenue from non-gaming sources, including malls and retail property, hotels and conferences and exhibitions.

Goldstein said the opening of the Hong Kong-Zhuhai-Macau Bridge and the expected increase in traffic was a major factor behind the improvement in Sands’ non-gaming facilities. The company expects Macau to evolve into a business and leisure centre.

“The bridge is a big positive for the Mice business – it is the future of the Mice business,” he said.

While its use is currently limited, this will change drastically in the next 24 months with the opening of international traffic from the Hong Kong airport straight to Macau, the company said.

Las Vegas Sands’ overall investment of US$15 billion in Macau rests on confidence that its concession will be renewed after 2022.

But the company could face new competition. Sands China has a sub concession linked to Galaxy Entertainment Group, and two other operators – Melco and MGM – also have so-called sub concessions. SJM has a number of “satellite” casinos that operate under its concession. Creating a separate legal status for these entities could result in more concessions being granted.

And while most observers doubt that current concessionaires will be removed in 2022, Dr Jorge Godinho, a professor of law at the University of Macau, said the end of the concession period would be an appropriate time for the government to look at reforms. And among these would be legally recognising operators that work under umbrellas as independent concessionaires, which would increase competition substantially.

Union Gaming’s Goversten said: “The only question is whether or not there will be any new entrants via the creation of one or more new concessions. We think it is no lower than a 50/50 proposition that there will be at least one new concession, and as of today, Suncity must be considered as one of the front-runners for said licence.”

In a recent report, ratings agency Fitch said casino operators in Asia-Pacific faced a potential oversupply, with Japan planning to grant concessions and Vietnam, South Korea, the Philippines and Cambodia all attempting to gain market share.

Dr Godinho said any goals Macau has about broadening the base of its economy could be built into the terms of new concessions.

Macau has tried to diversify its economy to mitigate risks to the gaming industry, the main driver of growth in its GDP. The latest IMF report on Macau, released on May 9, forecasts its GDP growth at 4.3 per cent for 2019, 4.2 per cent for 2020 and 4.1 per cent for 2021-24. In 2010, Macau’s GDP grew by more than 25 per cent, and in 2015, it dropped to 21.6 per cent.

And it would seem that Sands China is well aware of the challenges ahead. “We’ve always done the right thing,” Goldstein said. “We’ve been the leader in non-gaming since Day One. All our competitors haven’t spent what we have on non-gaming.”