The same forces that drove a massive decline in Macau's gaming revenue a few years ago are driving the region's recovery in 2017.  Chinese VIP baccarat players, who shunned the region from 2014 to 2016, are slowly making their way back to its gaming tables. 

How this return of the VIPs will impact casino operators will vary significantly depending on the market's they're catering to. Wynn Resorts' (NASDAQ:WYNN) focus on the high-end player is paying off compared to the mass market appeal of Las Vegas Sands' (NYSE:LVS)properties. 

View of The Parisian from the Cotai Strip in daytime.

Image source: Las Vegas Sands.

Where Macau is growing

If you look beneath the headline numbers, like Macau's 19.1% gaming growth so far in 2017, you'll see that the growth is not evenly distributed. Macau's gaming scene is dominated by baccarat; the game provides the vast majority of the region's gaming revenue -- in the neighborhood of 90%. But within that, the casinos split the take into two categories -- VIP and mass market.

In the first half of 2017, mass market baccarat revenue was up 6.1% and VIP baccarat play was up 25.2%. This continues a gradual recovery from the VIP market's massive decline in 2014 and 2015, when over half of the high-roller take disappeared. 

Chart showing sharp decline in VIP gaming play from 2014 through mid-2016 with a rise since then.

Image by the author. Quarterly revenue data via Macau's Gaming Inspection and Coordination Bureau.

Mass-market play has actually been extremely steady over the last two years, potentially showing a level of play that gaming companies can rely on long-term. But VIP play continues to be volatile, a situation that will likely continue as Chinese gamblers see business fortunes won and lost, and regulations on their gambling activities change. 

The impact on gaming operators

The trends displayed above are key for gaming operators as well. The starkest contrast is between Las Vegas Sands, which focuses on the mass market, and Wynn, which caters heavily to VIPs. 

In the second quarter, Las Vegas Sands' mass-market play was down 24.7% at The Venetian Macau, down 18.2% at Sands Cotai Central, and up just 1% at The Parisian. VIP play, which is measured with rolling chips, was up 2.3%, down 9.5%, and down 1% at the three properties respectively. But to put Las Vegas Sands' VIP business into perspective, total VIP play was $4.04 billion at these three resorts. 

At Wynn Macau, VIP play was up 35.3% to $16.02 billion and Wynn Palace, which opened earlier this year, contributed another $11.6 billion in high-roller play. In other words, Wynn's two resorts have nearly 7 times the VIP volume as three of Las Vegas Sands' biggest properties. I will note that mass-market play fell 9% at Wynn Macau, but that was overshadowed by the massive uptick in VIP play. 

Las Vegas Sands is almost entirely reliant on the mass market, so if there isn't any growth in that demographic, the company won't grow overall. And new resorts like Wynn Palace, Studio City, and The Parisian are pulling gamblers away from Las Vegas Sands, reducing its overall mass market revenue. 

Wynn, with its VIP focus, is simply riding the wave as those gamblers return to the region, and the opening of Wynn Palace is giving them more Wynn tables to play at. 

Macau's gaming trends matter

Depending on how trends evolve, Wynn or Las Vegas Sands could benefit. Right now, the VIP market is hot, which favors Wynn in a big way. And while further policy moves in Beijing or downshifts in the Chinese economy could cut into the willingness of high rollers to visit Macau's tables, and derail Wynn's growth, I think the company has a bright future there. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.