It may have taken five years but China's gaming capital appears to have finally recovered from its earlier losses. From 2014 to 2016, Macau's economy contracted, shrinking as much as 21.6% in 2015, as a perfect storm caused by Beijing's anti-corruption campaign, a weakening RMB, and tighter capital controls weighed on gaming activity.

Following an economic rebound of 9.7% in 2017 and 4.7% in 2018, Macau's economy is expected to return to where it was in 2014 (in USD terms) before the end of 2019, with stable projected annualized growth of 4% over the following years.

If you build it, they will come

Several factors are helping Macau's resurgence. New casino developments, including Morpheus, opened by Melco Resorts & Entertainment (NASDAQ:MLCO), and designed by the late renowned Zaha Hadid, have opened alongside the Wynn Palace, owned by Wynn Macau (SEHK:1128), and the MGM Cotai, owned by MGM China (OTC:MCHVF). Together, the cluster adds an additional offering to the burgeoning Cotai Strip. Other large casino players with prominent properties on the strip include Sands China Ltd (OTC:SCHYY) and Galaxy Entertainment Group Limited (OTC:GXYEF).

The critical pull factor also includes better infrastructure, particularly the Hong Kong–Zhuhai–Macau Bridge, which opened in October 2018, providing an additional channel for tourists that previously traveled to Macau by boat. While the 55-kilometer bridge-tunnel links three major cities in the Pearl River Delta, the structure itself has also become an attraction, particularly among the Chinese visitors that view the mega-project as patriotic engineering.

Strong tourist numbers not helping yet

The bridge's opening came at an opportunistic time for Macau, with its tourism numbers already beginning to rise. For the first nine months of 2018, 25.8 million tourists arrived, an 8.3% increase over the same period last year. When the bridge opened, almost 10 million arrived during the final three months, a 13.8% jump from the same period the previous year.

While Macau officials are projecting 38 million visitors for 2019, early reports suggest this may be conservative. Visitors during the Chinese New Year holiday and the Easter holiday period increased by 27% and 40%, respectively.

Overhangs remain

With tourism expected to trend higher, the same data show that the length of stay and average spend per visit remains relatively unchanged. This would suggest that the bridge acts as an immediate earnings drag for casinos as visitors are able to take more frequent, but shorter visits. This then results in more cyclical demand that is harder to manage.

Casino operators are also facing an expiring gaming concession in 2022. As the license expiration nears, finding long-term financing for planned projects becomes complicated. Besides analyzing return on investments for casino projects, operators need to monitor policy change, as the Macau government might use the expiration to implement social reform.

Bottom line

Better interconnectivity is also helping more gamers travel overseas, particularly to Southeast Asia, increasing overall competition in Asia Pacific. Additionally, Macau casino operators still remember Beijing's anti-corruption policy, and that a sudden surge in gaming activity would likely warrant another clampdown. Asia gaming remains an interesting investment but I believe it's perhaps better for investors to look outside Macau first and come back when there is better clarity on the concession issue.

A version of article originally appeared on our Fool Asia site. For more coverage like this head over to Fool.hk.en