Shift to mass market
As VIP business remains sluggish, casinos are increasingly turning their attention to woo mass market. The shift to mass market from the VIP segment continues in 2016. The reclassification of VIP tables to “premium” mass tables has also helped.
According to CIMB Research, premium tables (bets of more the 2,000 Hong Kong dollars, or $258) made up 34% of all operations in August 2016, while mid tables (bets between 1,000–2000 Hong Kong dollars) made up 42% share. Grind tables (bets below 800 Hong Kong dollars) made up the remaining 24% share.
Casinos have made huge investments in the mass segment. Sands China (LVS) was the first to do so, followed by Melco Crown (MPEL) and Galaxy. Wynn Macao (WYNN) also recently opened its Wynn Palace on August 22, 2016—the most expensive resort yet in Macao and worth $4 billion. MGM China (MGM) and SJM holdings were the last to adopt to this change.
What else are casinos doing to attract mass market visitors?
In order to attract the middle-class tourists that make up the mass market segment, casinos are moving to a new concept: integrated resorts. These resorts host a wider selection of entertainment options and restaurants, instead of just gaming tables and slots, as had previously been the trend.
Such entertainment options include theater, street markets, adventure rides, magic theaters, retail, and restaurants. Resorts will also host conferences.
Is mass market working?
The success of the wider mass market in this industry can be seen in the fact that Galaxy, which previously held the third-highest market share, moved into the first place in 2Q16 with a 23% market share. With its recently opened new resorts, Galaxy has the highest non-gaming offerings and saw a 22% increase in its mass-market revenues in 2Q16.
However, with Wynn Palace’s recent opening and Sands Parisian set to open in September 2016, most analysts believe that Galaxy will not be able to retain this position.
Investors seeking diversified exposure to casino companies may be interested in ETFs that invest in casino stocks, including the VanEck Vectors Gaming ETF (BJK) and the Consumer Discretionary Select Sector SPDR ETF (XLY).
Continue to the next part for a discussion of why the Cotai Strip recovery through the new integrated resorts is so important.