Macau Casinos Anticipating Bumper 2018

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Saturday, December 30th, 2017 | Written by Stephen Smith

The future looks bright for Macau’s gambling industry, with the Chinese island resort returning to positive growth in 2017 and expecting record profits in 2018. This is excellent news for the world’s biggest gambling hub which had previously suffered three consecutive years of collapsed profits following the government’s high-profile anti-corruption campaign.

In 2012, The Chinese government initialized its plan in order to crack down on racketeering and money laundering taking place at Macau’s casinos, and also to ensure high-rollers attempting to evade paying taxes were caught. However, the crackdown subsequently led to Macau’s casino industry contracting by more than $100 billion, and it wasn’t until the campaign eased off at the end of 2016 that its casino industry started to recover.

This year has since seen monthly revenues return to double digit growth, and for the first 11 months of 2017 revenues generated have already reached $30.4 billion, thus ensuring that annual revenues will top $30 billion for the first time in more than three years. Moreover, gaming analysts also believe industry earnings will attain record heights in 2018.

Analysts Cautiously Optimistic

This year, revenues and profits have stabilized, although the situation is still dependent on Beijing’s positive support without which growth could be stemmed once again. All being well, however, Bloomberg analysts have predicted an average gaming revenue increase of 14% for the whole of 2018.

According to their report, the main driving force behind the predicted increase will be VIP gamers. In addition, there is expected to be a bumper number of leisure tourists traveling to Cotai next year to visit its newly opened luxury casinos and attractions. For instance, the MGM Resorts International is set to open its $3.5 billion MGM Cotai facility in January of 2018, with other exciting projects including The Grand Lisboa Palace which is expected to open by the year’s end.

Upgrades and Expansion

Several integrated casino resorts have opened up in the Cotai district in recent years, with two of the biggest venues drawing in the tourists being Wynn Palace and Parisian Macao.

Furthermore, the six major casino firms operating in Macau are also investing heavily into expanding their facilities there, including the construction of European-themed resorts that are expected to generate even more profits in 2018. As leisure tourism increases, investors’ profit margins will similarly soar as unlike their high-roller clientele, this group of customers do not require expensive perks such as private jets and discounted hotel rooms to attract them to these venues.

As a result, Deutsche Bank AG recently forecast that visitor numbers to Cotai will jump by 7% in 2018. This prediction subsequently led to Macau’s casino stocks experiencing an impressive rise recently, reaching highs not seen since 2014 before the anti-corruption measures were introduced.

Heavy Competition for Latecomers

Sands China and Wynn Resorts Macau opened their newest casino resorts in Macau back in 2016 and have since capitalized heavily on the Cotai district. MGM and SJM, on the other hand, have been a lot slower to establish a presence in the area, with analysts believing that this will ultimately result in a hit to their profit margins. Moreover, they are bound to face stiff competition from the casino operators that already have a foothold in the region when they do eventually open their resorts .

In fact, SJM will be the last operator to enter the Cotai district, meaning the company which has experienced large market losses in recent years may continue its downward spiral into next year. MGM has joined the party late, too, but it has said that it was confident that its new casino there will be a big hit with the public as it offers plenty of unique attractions, such as a hotel featuring 1,400 hotel rooms, a 2,000-seat theater, and the largest chocolate fountain in the world.

Sands, Wynn Macau, Galaxy, and Melco Resorts are already well-established in Cotai, though, and are likely to continue maintaining a stable market share going forward. In fact, these industry leaders are expected to see their earnings increase by around 11% next year.