Macao’s Hotel Inventory to Double amid Falling Occupancy



Hotel inventory

Macao casinos’ $28 billion investment in integrated resorts is set to change the city’s gaming business. All the capacity additions, which we discussed in the previous article, are set to double the number of hotel rooms. The absence of VIPs has also freed up a lot of rooms.

The new capacity will thus support more overnight tourists drawn to the expanding non-gaming entertainment, such as shows, events, and theme parks on the Cotai Strip and neighboring Hengqin Island. Gambling tables and slot machine numbers will also jump.

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With over 9,000 hotel rooms, Sands China (LVS) has the largest share at 60% of the total hotel inventory. It also boasts of the largest convention venue and the highest number of retail and restaurant outlets, thus giving it a competitive edge. Galaxy Entertainment has the next highest share of hotel room inventory at ~4,300, less than half of what Sands China has. Other operators include Melco Crown (MPEL), Wynn Resorts (WYNN), and MGM Resorts (MGM). LVS forms 0.43% of the Extended Market ETF (VXF).

Hotel occupancy continues to decline

Increasing room inventory makes sense only when resorts are able to actually fill up these rooms. Current data seems to tell a different tale.

For October 2015, hotel occupancy stood at 77.5%, a 8% year-over-year decline. Five-star hotels saw a higher occupancy of 81.6%, a decline of 5.1% year-over-year. Thus, Macao needs to see a significant increase in visitors. However, Union Gaming Research thinks that the Macao government would not allow for unlimited visitor growth.


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