Are New Integrated Resorts Expanding Macao’s Market?



Increasing market

In the past four months, Macao’s gross gaming revenue has grown. Many analysts believe that the growth is not coming from cannibalization of existing casinos, but growth in the overall market size due to a shift to the mass market. Macao’s revenue grew 18% YoY (year-over-year) in February and March, followed by a 16% YoY growth in April and a 24% YoY growth in May.

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The shift to the mass market

After the Chinese government’s crackdown on the VIP junket business, it became important for Macao casinos to find alternative sources of income. To attract tourists from the mainland, casinos built integrated resorts that included theaters, adventure rides, retail offerings, and restaurants. With margins three times higher than the VIP segment, the mass market soon became important.

Las Vegas Sands’ (LVS) new resort, The Parisian Macao, was the first to open to cater to the lower mass market segment, in September 2016. Wynn Palace (WYNN), which caters to the medium segment, soon followed in August 2016. MGM Cotai (MGM) opened in early 2017, and SJM Holdings’ resort is expected to open in 4Q17. Phase 3 and 4 of Galaxy Macau are slated for 2018.

Wynn gains

Wynn Resorts is emerging as a clear winner in the mass market battle, gaining market share from rivals Las Vegas Sands (LVS), Galaxy Entertainment, and Melco Resorts & Entertainment (MLCO). MGM Resorts (MGM) is also gaining market share. The impact of new resorts will be critical in determining Macao casinos’ future growth. Investors can gain exposure to casino stocks by investing in the iShares US Consumer Services ETF (IYC), which invests 1.6% of its portfolio in casinos.


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