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Limassol and the City of Dreams

Limassol and the City of Dreams

City of Dreams Mediterranean is the official name of the integrated casino resort that will open in Limassol in three years’ time. The consortium behind the project – Melco International Development Limited and Cyprus Phassouri (Zakaki) Ltd – recently presented the final plan at the Presidential Palace. Lawrence Ho, Chairman and CEO of Melco spoke to GOLD about the €550 million investment and how he expects the new resort to enhance the island’s tourism offering and significantly raise visitor numbers.


What made you decide to invest in a casino in Cyprus rather than somewhere else in Europe?

Lawrence  Ho: We are a company headquartered in Hong Kong and traditionally very focused on Asia. Macau is our main base, where we have invested US$10 billion over the last 10 years and have one of 6 licences, plus one of four in Manila, but we've had global aspirations ever since the company was listed on the NASDAQ over 10 years ago. We have looked all over the world for the right opportunity and Cyprus ran a very good, transparent process; we were extremely impressed by that. Cyprus as a destination has great rule of law as part of the European Union, a great government, it is the closest for legalised gaming to the countries of the Middle East and, of course, it already has many Russian and UK tourists. These are among the important factors that we considered. Every time we go into a jurisdiction we invest heavily. In Macau we were not required to invest US$10 billion but we did it anyway. In Manila, we didn't have to invest US$1 billion but we did. So we always look at what we are doing as a Private/Public Partnership. We like working with governments and growing the market and this is one reason why we didn't choose a more mature destination to be the first place we are going to outside Asia. Given that Cyprus has 3.7 million tourists this year and with more infrastructure to come – more hotel rooms – the potential is certainly there. If we are successful, tourism is successful and the government is successful so everybody wins. The terms of the licence here – 30 years’ duration and exclusive for 15 years – were attractive too. We would much rather be in an environment where things are controlled and we can work wholeheartedly with the Government to maximise the benefits and Cyprus gives us that.


GOLD: As you know, presidential elections will take place at the end of this month. Are you concerned that a change of government might cause difficulties for you?

L.H.: A stable government and a stable political environment are critical. As a foreign investor, I hope that the investment environment will continue to be stable and supportive. Stability is key. So far we have had a great working relationship not only with the Government but also with the bureaucrats in the Working Group so, regardless of who is in power, I expect that those people will remain.


GOLD: Your investment has already been increased to $550 million. What can we expect from such a project in Limassol?

L.H.: This is the first time we've taken our flagship City of Dreams brand outside Asia, where it is very well known. Hopefully the biggest exporter of tourists in our lifetime will be China where the brand is very well known and so when people in China hear that there is a City of Dreams Mediterranean, they are going to be very excited. We have a very large database of customers and guests and so we will cross-promote our resorts and I think there is further potential and not just for visitors from places that are geographically close to Cyprus or from the current major markets like Russia and the UK.


GOLD: Are you planning to arrange junkets to attract High Net Worth clients from China and other parts of the world?

L.H.: Our main business model has always been focused on developing our own customers so even in places like Macau or Manila, where junkets are possible, we're not especially reliant on them because we like to develop our own relationship with our guests. Junkets tend to focus on VIPs but our goal for the Cyprus resort is really to try and bring in more tourists directly ourselves and to go after the middle and upper class tourists. This is ultimately a much more sustainable business model and we always like to say that we attract the 'right type' of customer. We want the people who will continue to increase their spend per visit and become repeat customers.


GOLD: One of the goals behind the Government’s decision to grant a licence with a 15-year exclusivity clause was to increase the number of tourist arrivals by 500,000 per year. From your experience, do you believe that this is feasible?

L.H.: In the long term, yes. Once City of Dreams Mediterranean is open, our forecast for the second year of business suggests that its economic contribution will be around 4% of GDP. In order to make that number work, we need additional 350,000-500,000 visitors in terms of induced tourism. One of the beauties of Cyprus is its natural environment and its over 300 days of sun, which is incredible. That's why we have done so much landscaping and made outdoor activities an important part of the resort and we redesigned the resort so that it has a local, very Mediterranean architectural feel to it. Ultimately, I think this is going to be a great destination in the Mediterranean and we will achieve those visitor numbers.


GOLD: Are you concerned about the competition that already exists in the form of the many illegal casinos located in the occupied north of Cyprus?

L.H.: We know about the casinos in the occupied north of the island but, ultimately, we are not concerned. A very important point is that this is an integrated resort. Even the casinos in Europe – go to Spain, France, Italy or the UK – are very small whereas what we are proposing is a resort to which we hope to bring people for weekends and multiple night stays, rather than those who will go anywhere that happens to be closest to where they are. So we know about the illegal casinos. An important ingredient in our success will always be working with the Government and it knows that there illegal ones on this side too which need to be closed. We've had good experiences in Macau and Manila in this area (and we've had bad experiences in Russia where the government totally refused to close anything) and, given the first couple of years during which we've worked with the various ministries and had a very open and transparent dialogue with the Government, I'm confident that this will not be a problem.


GOLD: In many countries, conferences and conventions are a familiar and significant aspect of casino resorts. Given that Cyprus has a lack of suitable space for large-scale conferences, is this an area that you intend to operate in?

L.H.: Traditionally, the gaming and leisure business is very much focused on weekends and peak periods like July and August. The weather here is much nicer than in most places at this time of the year, so I can envisage expanding that period but yes, a lot of the business from Monday to Thursday is going to be reliant on conventions and conferences. We shall have 500 hotel rooms and about 100,000 square feet of conference and convention space, so we'll be working very hard with our sales colleagues to sell it. We’ve already discussed this with the Cyprus Tourism Organisation (CTO) which will be working very closely with us because, ultimately, promoting Cyprus is now our shared Number 1 goal.


GOLD: Can we also expect shows featuring big-name entertainers, which are a significant feature of many casinos, especially in the US?

L.H.: We have a great partner in CNS and we'll be working with them, as well as the CTO and the Ministry of Tourism to discover the right type of show or entertainer to bring in. There will be an outdoor amphitheatre and the conference and expo space can also be converted into a large concert venue, so the fact that Cyprus doesn't have a proper indoor venue is very exciting for us. Different types of entertainment work in different jurisdictions and events certainly drive a lot of visits but they need to be well-chosen. In Macau, for example, we brought Madonna for two nights and lost a lot of money because our Chinese customers didn't like her or care who she was. On the other hand, they love the older generation Chinese singers, so we will have to work on the proper formula and not just on what I like! In Manila, on the other hand, they really like American singers so we'll be working to find out what type of entertainment we should have – a concert, sports, a show? The space is being built to make it as flexible as possible and there will certainly be plenty of entertainment.


GOLD: The consortium that won the licence for Cyprus originally included Hard Rock. Did their exit affect you?

L.H.: It wasn’t a case of them leaving. We bought them out. With its Hard Rock Cafes, Hard Rock is what it is but, as a brand, it's not aligned with where we're trying to take Melco and City of Dreams so we preferred to go it alone.


GOLD: How will this massive project be funded?

L.H.: Traditionally we look at projects that are 50-50 debt-equity, but more likely than not a lot of it will be our own equity, although we've also been in discussion with local banks and Bank of Cyprus, for example, has been very supportive.


GOLD: Although, as you mentioned earlier, Cyprus is a politically stable country and an EU member state, you are obviously aware of the island’s continuing division. Does the current stalemate in the reunification efforts give you any cause for concern?

L.H.: No. We've looked at it and we are not worried. To give you an idea of how confident we are in Cyprus, I should mention that, at the same time as the bidding in Cyprus, there was a similar process going on in Catalonia (in Barcelona). We were the final candidate but we dropped out because we had decided to come to Cyprus instead. With hindsight, that move looks very clever! Absolutely. If you look at our track record, we've never failed the government and as a company we've been very successful and that's why we're one of the Top Five global gaming companies. We don't do small projects. They are always big so we are staking our reputation on what we do here. We are confident that this is a fast-growing market and ours is a very sustainable business model. We haven't been wrong yet!


*The interview was first published in Gold Magazine (Issue 82)


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