It's no secret that Macau has replaced Las Vegas as the mecca of the gambling world. Gambling in China's Macau has grown at a torrid pace since the government ended Stanley Ho's monopoly and opened the market to outside operators in the early '00s.
But not all of Macau is equal, and the vision Las Vegas Sands (NYSE: LVS ) CEO Sheldon Adelson saw when he started building on the Cotai Strip is starting to take shape.
Macau is split into three gambling regions; the Macau Peninsula, Taipa, and the Cotai Strip. Las Vegas Sands started the move to Macau in the Peninsula area when it built Sands Macau, and operators like MGM Resorts (NYSE: MGM ) have followed with hotels of their own.
Now, the biggest developments are going into the Cotai Strip, an area of reclaimed land between Taipa and Coloane. Las Vegas Sands controls a big portion of the area, but Melco Crown Entertainment (Nasdaq: MPEL ) has the City of Dreams and Wynn Resorts (Nasdaq: WYNN ) has property for a future development.
Revenue flowing from the older Macau Peninsula to the newer Strip is reminiscent of the transition from Las Vegas Downtown to the Las Vegas Strip, as more casinos were built there. The table below has revenue changes at six casinos around the area to show where the money is moving.
Q3 Revenue Change (YOY)
|Sands Macau (LVS)||Macau Peninsula||+2.6%|
|Wynn Macau (WYNN)||Macau Peninsula||+49.7%|
|Four Seasons Macau (LVS)||Cotai||+139.0%|
|City of Dreams (MPEL)||Cotai||+75.2%|
|Venetian Macau (LVS)||Cotai||+25.6%|
Source: Company data. YOY = year over year.
Macau as a whole saw third-quarter gaming revenue increase 49.1% from the year-ago period, so we can use that as a baseline for comparison. As the table shows, Cotai Strip casinos City of Dreams and Four Seasons Macau outpaced gaming growth, taking share from the rest of the industry. Cotai as a whole wildly outperformed the other two areas in terms of growth. The only anomaly is Wynn Macau, which opened its Encore addition in April, adding 414 suites and more gaming area, pushing its numbers higher.
When you're looking at gambling investments and Macau in particular it's important to understand the trends. The growth on the Cotai Strip gives a huge advantage to Las Vegas Sands, which will open more hotel and gaming space there in 2011 and 2012, tightening its grip on the new growth engine of Macau.
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