Rendering of Wynn Palace in Macau. Image source: Wynn Resorts.
Despite all of the bad news coming out of Macau in the past two years, it still dwarfs Las Vegas from a gaming standpoint. Macau's gaming market generated $29.9 billion in revenue over the past year, which is down from $45.2 billion in 2013, but it significantly surpasses the $6.3 billion on the Las Vegas Strip.
It's that sheer scale that makes Macau so important for Wynn Resorts (WYNN 0.90%) and competitors like Las Vegas Sands (LVS +2.60%), MGM Resorts (MGM 1.53%), and Melco Crown (MPEL +0.53%). A look at the eye-popping numbers in the city shows why it's key in gaming.
Macau's incredible revenue generators
Everybody knows the casino is a huge moneymaker for gaming companies. But just how much money is made may surprise you. Below is a look at slot machine and table game win at Wynn Resorts' two properties in the first quarter of 2016.
|
Metric |
Macau |
Las Vegas |
|---|---|---|
|
Slot machine win per unit/day |
$710 |
$289 |
|
Table game win per unit/day |
$11,092 |
$5,792 |
Data source: Wynn Resorts first-quarter 2015 earnings report.
You can see that a table game in Macau generates nearly double the revenue it does in Las Vegas, and a slot machine brings in more than double the revenue. This same dynamic shows up at MGM and Las Vegas Sands, which have exposure to both Macau and Las Vegas. But the success of Macau investments also relies on limited supply that could cause table and slot machine win to fall if competition intensified.
Limited supply is key to Macau investments
What makes this kind of gaming numbers possible is the appetite of Chinese gamblers and the limit on supply in Macau. The government closely regulates how many resorts, table games, and slot machines there are in the region, and that helps protect profits in the long term.
As Wynn Resorts, Las Vegas Sands, and MGM Resorts all complete new projects to compete with Melco Crown's newly completed Studio City, over the next two years supply will increase, but there will be a cap long-term. So any future growth in Macau will be contained to the existing players in the market.
In the long run, that puts Macau gaming companies in a strong position to reap the benefits of the highly profitable gaming market. As long as Macau's revenue doesn't keep falling like it has the past two years, there's plenty of profit to go around.
How gaming will become a winning investment
The one thing holding back Macau gaming stocks from great returns is market growth in general. But if China's economy returns to more solid growth, and new resorts attract new customers to the region, we could see a surge in gaming stocks. And the incredible amount of money made at each gaming table and slot machine is a big reason why.
