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I'm not making the case that City of Dreams is off to a rip-roaring start.  Mass visitation has been disappointing and up until this past weekend, the VIP hold percentage was actually negative.  However, with the maturation of the Macau market and Beijing pulling the Mass visitation strings, new properties need time to ramp. 

The good news is that there are signals that the property may indeed already be ramping.  The big VIP push was not initiated until this past Friday and indications are that the property held very well.  On the Mass side, CoD only began advertising in China mid-month.  Thanks to a Signal No. 3 Typhoon that hit the area this past weekend, visitation was probably not at the level expected.

On the cost front, margins may ramp faster than expected.  Labor costs look as though they may come in lower than expected, partly due to a higher percentage of part-time employees.  Any positive commentary in this regard will be a positive catalyst.

MPEL management will issue a detailed press release on Thursday pre-market.  Considering the very negative sentiment surrounding the name and City of Dreams, any signs of a ramp discussed in the release will likely be taken favorably.

A month of data is not significant; it is still early.  Structurally, we see no issues and believe that our $180 million EBITDA estimate for 2010 is reasonable.  While $180 million is not very good next to a $2.1 billion price tag, whisper expectations are lower. 

Here are some observations from our Macau trip last week that may be discussed by management in their 7/2/09 press release.

  • Negative VIP hold % (-0.5% to -0.7%) due to 5-6 players plagued the property, not widespread through the casino - not sustainable
  • Margins should be better than expected - probably due to part-time staffing and lower wages - 75% of what they expected
  • Hard Rock doing 60% more per position than CoD casino
  • Rolling Chip (VIP) launch was Friday night (6/26)
  • The go ahead for advertising in China was given on 6/24 - only 13% of customers are from mainland, needs to be 30%
  • Have not gotten the mid-Mass business yet - advertising in China will help
  • Signing 2,000 Mass customers into City Club database daily - faster pace than the Venetian after 3 weeks
  • Former Venetian marketing people running the database
  • Generally positive commentary from competition