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MACAU HAS ENTERED ITS GROWTH STAGE, 2013-2030

​Macau, the only city in China where gambling is legal, is widely known as the Orient’s Las Vegas. Sociedade de Turismo e Diversoes de Macau controlled the city’s gaming industry for 39 years. This changed in 2001, when casino licenses were offered to other casino operators. Subsequently, major international casino operators like Wynn Resorts Ltd. and MGM Mirage Inc. entered the casino industry in Macau.

Macau’s gaming sector has seen tough times recently. It has been hit by double whammy of economic slowdown and anti-corruption campaign in China. We believe the industry has troughed and is poised for rebound. We deem it attractive at current valuations to value investors. The report provides an outline of the various factors affecting the industry and reasons to be optimistic about the industry’s future.

• ​ Macau occupies the top perch among global gaming destination: Macau has overtaken Vegas as biggest gaming destination. Its gaming revenue is three and a half times that of Las Vegas and is the top destination for high rolling casino lovers.
• Gaming is the most important sector in Macau economy: Gaming sector contributes almost 60% of the Macau’s GDP. The sector also influences other important sectors like construction. Further, gaming provides employment to 84,000 people (21% of the labor force).
• Gaming sector is heavily dependent on inflow of Chinese tourists: Chinese constituted two thirds of the tourist arrivals in Macau. Chinese also outspend other nationalities. Per capita spend of Chinese is considerably higher than the average spend of other tourists.
• Anti-corruption campaign in China has impacted gaming industry: Macau was the unintended victim of President Xi Jinping’s anti-corruption campaign in China, as increased scrutiny dissuaded China’s high-rolling gamblers from the gaming hub. The resultant decline in arrivals of VIP customers led to major downturn in gaming revenue.
• Steps undertaken to revive gaming sector: The government has undertaken the following steps to revive Macau’s gaming sector: 1) Gross gaming revenue shows first positive uptick in 27 months. The recovery was led by mass market segment. This portends recovery well for the sector going forward 2) The government has undertaken several infrastructure projects to have more seamless local and international travel which is expected to boost the gaming sector 3)Several new resorts which cater to wider number of tourists are coming up in the Cotai region. The increase in product offerings is expected to attract a wider spectrum of tourists. 4) In our view, Macau gaming sector has entered the growth stage and investors can expect high rate of return on investments over the next decade. 5) Macau is increasingly emerging as a regional luxury shopping destination.6)Companies expand room capacity and build resorts as they target more wholesome tourism and reduce dependence on VIPs.