Good news for casinos in Macau?

Buildings of Macau Casino with fireworkWhile Macau remains a massive hub for casino games and gambling, its recent dip in revenue has been widely documented. Lower numbers of incoming gambling tourists from mainland China, challenges with local financing operators, and a couple of high profile thefts, have all combined to leave the casino operators of Macau feeling a little battered and bruised.

However the early reports of October performance appear to at least be a little encouraging.

In this article we take a look at some of the news emerging from Macau’s casinos and try to take a look ahead to see if luck is going to be on their side.

The China effect

The economic woes of China seem to have taken everyone a little by surprise, so there was an immediate shock to Chinese stock markets that sent more than a ripple through the rest of the world. Reports from China suggest that a range of stimulus packages are being developed and that this is already translating into increased numbers of inbound gambling tourists from mainland China to Macau.

Las Vegas Sands

The Las Vegas Sands group has a number of casino properties in Macau as well as a number of non-gaming revenue streams. In Macau, the Las Vegas Sands group tends to focus on the mass-market gaming segment which means it is less reliant on the junket financing operators, so it should be well poised to benefit from increased gaming activity in the destination.

Wynn Resorts

In Macau the Wynn Resorts group aims for the higher-end of the market, actively targeting the VIP gamblers who rely on junket finance. The Junkets are local Macau operators who provide short-term finance to inbound gamblers from mainland China (who are restricted on the amount of cash that they are allowed to travel with). To try and adapt to the changing market in Macau, Wynn has been trying to shift some of its activity into the mass-market gambling segment, and this strategy does seem to have been successful in spreading some of its operating risk.

MGM Resorts

MGM Resorts is in the final stages of opening a new casino resort in Macau which has the potential to increase its exposure to the risks of operating in Macau, but will also boost its revenue as we start to see a resurgence in Chinese gamblers visiting the destination.

Where are the high rollers

While there is some good news for Macau’s casino operators in terms of higher numbers of inbound gambling tourists from mainland China, early indicators are that the main rise has been in the mass market segment. For real profitability the casinos are relying on a resurgence in the VIP gamblers, the high rollers and big spenders. So far the VIPs seem to be missing. The VIPs are essential for sustaining the local junket financing system which appears to be essential for the long-term viability of the Macau casinos.

While there are some encouraging signs emerging from Macau’s casino operators, it does seem too early to call the crisis as being over.