SJM Resorts‘ recent acquisition of office properties in Hengqin for conversion into a three-star hotel has sparked interest in the gaming and hospitality sectors. However, a top investment bank analyst noted that while SJM’s move is a positive sign, it’s unlikely to trigger a wave of similar deals from other operators.
The analyst, who specializes in the Macau gaming sector and prefers to remain anonymous, told AGB that SJM’s deal is an “encouraging” step for the company and the sector but emphasized that it is a rare opportunity.
“Other operators are still in the ‘wait and see’ phase,” the analyst commented. “There are no similar conditions elsewhere to make such a deal possible. The regulatory framework in mainland China remains challenging, and the difficulty of building hotels there is a major obstacle.”
Despite these concerns, the analyst believes that SJM’s acquisition could have a “catalytic effect” on other gaming operators but noted that replicating SJM’s initiative will be difficult due to the unique hurdles that other operators face.
As reported by AGB, SJM Resorts signed a Memorandum of Understanding (MoU) this week with Zhuhai Hengqin Shun Tak Property Development Company Limited, a subsidiary of Shun Tak Holdings Limited, to acquire office properties located at the Shun Tak Business Center near Hengqin Port. The RMB546 million ($75.1 million) deal will transform floors 21 to 29 of the business center—comprising office space and a retail unit—into a new three-star hotel under SJM’s Lisboa brand.
The deal was seen as a natural and seamless development as the chairman and executive director of SJM Holdings, Daisy Ho is also a director in the property’s owner Shun Tak, with her sister, Pansy Ho, being Chairman, CEO, and Director of the property and transport group founded by their father, Stanley Ho.
This acquisition is significant for SJM, as it allows the company to quickly add a cost-effective hotel to its portfolio in a highly strategic location. The property is well-connected to major transportation hubs, including the Guangzhou-Zhuhai Intercity Railway and the Macau Light Rapid Transit, making it an attractive option for visitors. The location, coupled with the favorable policy environment in Hengqin, allows SJM to leverage existing infrastructure and capitalize on regulatory support for converting commercial buildings into hotels.
As the analyst put it, “If you already have the space and there are policies in place to help you convert it into a hotel, it’s a ‘quick, good, and efficient’ solution.” This combination of an existing property, strong brand recognition, and operational efficiency makes the acquisition a highly strategic move for SJM.
A different approach from Galaxy Entertainment
While SJM is moving swiftly to capitalize on this opportunity, other major operators are taking a more cautious approach. Galaxy Entertainment Group (GEG), for example, owns substantial land in Hengqin but is unlikely to proceed with construction on multiple projects simultaneously.
“Galaxy tends to focus on one major project at a time, ensuring it is completed before taking on another,” an analyst explained. “With the Capella Hotel and Phase 4 projects still ongoing, it’s unlikely that Galaxy will break ground on its Hengqin land in the near term.”
Last month, Galaxy Entertainment acknowledged that hotel capacity could become a significant constraint on Macau’s long-term growth. The company is hopeful that further policy breakthroughs will facilitate the development of Hengqin, which could help alleviate some of the current limitations in the hotel sector.
Another analyst from an international investment bank told AGB that “The planned investments don’t appear to be high, and positioning it as a three-star hotel makes sense strategically to offer affordable accommodation. It’s certainly not a negative surprise.”
“I believe everyone is figuring out something about Hengqin. Galaxy is the best positioned for that among the rest”, as Galaxy Entertainment owns 2.7 square kilometers of land to be developed in Hengqin, notes the expert.
According to a report from Chinese investment institution GF Securities, GEG plans to invest RMB10 billion ($1.43 billion) to develop Maldivian-style low-density leisure resorts.
Galaxy’s Hengqin site is six times larger than the Galaxy Macau project (including phases 1-4). When the Galaxy Macau project is fully developed, in total, 8,100 hotel rooms will be provided. Therefore, although the floor area ratio of the Hengqin project is low, it can still provide a large number of hotel rooms.
SJM’s strategic timing
The timing of SJM’s acquisition is critical. Hengqin authorities introduced new policies in July 2024 permitting the conversion of commercial buildings into hotels, a move that has already resulted in five successful applications.
With these regulations in place, SJM is among the first to capitalize on the opportunity, setting a precedent for future developments in the area.
It is also worth noting that in March of this year, the Artyzen Hotel brand, under the Shun Tak Group, opened the new Habitat Hengqin Zhuhai, which features 230 hotel rooms.
