The gambling industry has been on a roller coaster the last four years from pre-pandemic highs to being shut down, to record revenue on the Las Vegas Strip in 2022. But the recovery from the pandemic hasn't been even. Las Vegas is back and better than ever, generating all-time record revenue in 2022, but Macao is still a shell of its former self.
That could change in 2023 as China's zero-COVID policy ends and travel begins in more meaningful ways in and around Macao. So is MGM Resorts (MGM 0.16%) and its huge Las Vegas presence and small share in Macao a better investment today, or does Las Vegas Sands' (LVS 0.71%) Asia focus have better odds?
Image source: Getty Images.
Where we stand today
Below is a chart showing revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA), a proxy we use for cash flow from resorts and casinos for both MGM and Las Vegas Sands. You can see the operating environment has gotten much better for MGM Resorts, which is now churning out cash like crazy, while Las Vegas Sands is still struggling.
MGM Revenue (TTM) data by YCharts
Despite much higher EBITDA, Las Vegas Sands still trades at a big premium with an enterprise value 2.5 times that of MGM Resorts.
But the first chart shows just how much money Las Vegas Sands was generating at over $5 billion per year pre-pandemic. And there's a case to be made that Macao and Singapore, where the company generates most of its revenue, will have a boom over the next few years.
Is Las Vegas a precursor to an Asian gambling boom?
From 2007, when Las Vegas Strip gambling peaked at $6.8 billion, the industry bumped along between $5.5 billion and $6.8 billion in gambling revenue per year. After the COVID shutdowns of 2020, the region surged back, pulling in $7.1 billion in gambling revenue in 2021 and $8.3 billion in 2022. Not only did Las Vegas recover; it's growing.
Is this a precursor to what will happen in Asia?
Macao's gambling revenue was $36.6 billion in 2019 (see Las Vegas Sands' peak above) and was down to just $5.3 billion last year. So, what will "normal" be post-pandemic? If Las Vegas is any indication, a bounce to $40 billion or $50 billion in gambling revenue isn't out of the question.
Marina Bay Sands in Singapore may be showing the way, generating $2.5 billion in revenue in 2022, up from $1.37 billion in 2021 and not far from the $3.1 billion in revenue in 2019. Once China's population can travel freely again, I think there's going to be a surge in gambling revenue in Macao and Singapore.
The winner, for now
Las Vegas Sands certainly has more exposure to Asia, but MGM Resorts has two casinos in Macao and is hoping to build another in Japan. And we know the Las Vegas Strip is an absolute cash machine right now. For that reason, I think MGM Resorts is the better buy today.
If Las Vegas slows down and Macao does have a sharp increase in activity my opinion may change, but right now the risk outweighs the reward for Las Vegas Sands.
