Las Vegas Sands Seeking Further Expansion In Macau

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Thursday, March 15th, 2018 | Written by Shane Larson

Since the Chinese Government eased off on its anti-corruption campaign at the end of 2016, Macau’s casino industry has started recovering nicely and last year returned to double digit growth with revenues up by 19% at $33 billion. This has subsequently led to some of the world’s biggest casino operators increasing their investments in the Chinese gambling hub, with Las Vegas Sands Corp one of the gambling companies most eager to expand its operation on the island by building more casinos and hotels.

11% Growth Forecast for 2018

According to credit rating agency Fitch Ratings, Macau’s gross gaming revenue (GGR) is set to increase by 11% this year, helped in part by a healthy Chinese economy which is expected to grow by 6% based upon data provided by a Reuters poll.

Macau has also been shifting its focus more and more towards mass market tourists in recent times, as this segment is seen as being more stable for the industry, and subject to less volatility than the VIP sector which is more dependent on credit. As a result, the mass market is predicted to grow by 14% in 2018, with the VIP segment also expected to increase, albeit by 9% year-on-year.

Sands Positioned to Benefit

One of the casino operators most positioned to benefit from Macau’s growing casino market is Sands China Ltd, which is a subsidiary of US firm Las Vegas Sands Corp. The operator already owns five properties in Macau, including The Venetian, The Plaza, Sands Cotai Central, The Parisian, and Sands Macao, with the operator currently accounting for around 35% of all the resort’s four and five-star hotel bedrooms.

Sheldon Adelson, CEO of Las Vegas Sands Corporation, however, sees plenty of scope for continued long-term growth in Macau, though, and during last week’s 2018 JP Morgan Gaming, Lodging, Restaurant and Leisure Management Access Forum which took place in Las Vegas his Senior VP of Investor Relations, Dan Briggs, signaled the company’s intention to expand its presence further on the island.

During the annual forum, Briggs expressed his view that Macau’s casino business was set to get “even bigger” going forward as it recovers from three years of revenue declines following Chinese President Xi Jinping’s campaign targeting VIP junket groups. As he subsequently explained:

“Macau is really enjoying tremendous growth in the mass business, and that is driven by a number of factors. Greater transportation infrastructure, more hotel inventory, as well as a great propensity for people traveling who have more money in their pockets.”

Multiple Investment Projects

Although Las Vegas Sands has invested more than $13 billion in Macau’s casino market since 2002, the company has already earmarked a number of other major investments and developments going forward to help it consolidate its position further in China’s only legal gambling hub.

One of those projects includes transforming its Sands Cotai Central property into a London-themed venue re-branded as the Londoner Macao. The huge development is expected to cost $1.1 billion, and once completed will compliment its Parisian and Venetian casinos. As Adelson then explains:

“Having three iconic must-see European-themed destination resorts, with a broad range of amenities, will strengthen our marketing and customer-service capabilities and position us to grow faster than the Macau market.”

The company already has in the region of 12,500 hotel rooms in Macau, with that number set to increase to 13,400 hotel rooms upon the completion of this and its other projects. This is all forms part of Las Vegas Sands’ goal of increasing its hotel inventory in order to sustain and expand its footprint on the peninsula.

License Renewals

Lionel Leong Vai Tac, Macau’s Secretary for Economy and Finance, announced last year that new licensing regulations would be introduced ahead of the 2020-2022 license expiry date. The license belonging to Sands China, for instance, will expire on June 2022, with the Macau government still yet to provide any further information as to when its new concession plan will be announced.

In the meantime, Sands China CEO Wilfred Wong Ying Wai has said that his company is currently doing all it can to satisfy the government’s directives for the island’s casino market. This includes offering more conference and exhibition areas, and a greater level of investment in non-gaming facilities, such as hotels shopping malls, and entertainment areas. As Macau prepares to expand its operation in Macau, this month it was announced that the company was on the brink of raising more funds after agreeing to sell one of its properties in the US, with the Poarch Band of Creek Indians looking to purchase the Sands Casino Resort Bethlehem in Pennsylvania for $1.3 billion.