The Real Key to Growth in Macau

The single biggest limiting factor to growth for casinos in Macau isn't hotel rooms or entertainment attractions. It's table games. Table games generate such a disproportionate percentage of a resort's revenue that all of the bells and whistles around the games are really just a way to get gamblers to sit down and play.

That's why the government's allocation of tables is so important, as is the impact that new resorts will have on future revenue and profits. So, it's important to understand who is getting the most out of its existing tables and who is getting more in the future.

The gaming area in Macau is teeming with gamblers and is the hub of profits for casinos. Source: Las Vegas Sands.

Table games matter
Macau is a constrained gaming environment so, in general, the company with the most table games will generate the most revenue. Having those games as Macau's growth has exploded is key to increased profitability.

Between 2008 and 2013, Macau's gaming revenue was up 230% to $45.2 billion, but the number of table games only increased 43% from 4,017 to 5,750. Las Vegas Sands (LVS -0.63%) has the most tables of any U.S. traded company, followed by Melco Crown (MLCO 0.64%) and Wynn Resorts (WYNN -0.47%). MGM Resorts (MGM -1.24%) doesn't break out the same detail as the others but we can use them as a proxy.

Below, you can see the number of tables and win per day from each of the U.S.-traded companies in Macau. These figures are before discounts and commissions, which are paid to players and junkets.  

Source: Company earnings releases.

You can see that the numbers are enormous, as is the potential for any company able to add games to their lineup.

Sands Cotai Central in Macau, Las Vegas Sands' latest addition. Source: Las Vegas Sands.

The key to growth in Macau
The next phase of growth in Macau is taking place today with Las Vegas Sands building The Parisian, Wynn building Wynn Palace, Melco Crown building Studio City, and MGM building a new resort as well. Each has targeted 500 table games for the new resort and if they get them the growth could be enormous.

Wynn, Melco Crown, and MGM could easily double existing casino revenue with their new resorts, although Studio City still isn't slated for a casino. Las Vegas Sands will add about one-third to its table games and grow its mass-market presence on Cotai.

The upside for investors is enormous, particularly for companies who get the tables they're planning on early in the process. Keep an eye on table allocation over the next two years because that's what will really drive growth in Macau.