A rendering of The Parisian, currently being built by Las Vegas Sands. Image source: Las Vegas Sands.
In Las Vegas, casinos rely on a number of revenue sources to turn a profit. Hotel rooms, nightclubs, slot machines, table games, and even malls add up to billions of dollars in revenue. But in Macau, the city is run by table games.
That's why when Melco Crown (MPEL +0.91%) received just 200 table games for Studio City when it opened, as opposed to at least 400 it had hoped for, it was a big deal for the region. Las Vegas Sands (LVS +1.67%), Wynn Resorts (WYNN +1.62%), and MGM Resorts (MGM +0.41%) all have new resorts under construction, and if they don't get the tables they asked for, it could mean far worse profits than they expect.
The power of the almighty table game
To see just how important table games are to Macau's resorts, you have to look at how much revenue is generated at these tables. You can see below that revenue from each table is well over $10,000 per day, or multimillions of dollars every year.
|
Table Game Win Per Day (mrq) |
Percent of Resort's Revenue From Casino | |
|---|---|---|
|
The Venetian Macau |
$11,563 |
83.1% |
|
Wynn Macau |
$18,422-VIP $11.319-Mass Market |
86.8% |
|
City of Dreams |
$15,041 |
90% |
Data source: Company earnings releases.
If we just assume that Studio City's tables would generate $10,000 per day in revenue, the lost 200 table games amounts to $730 million in potential lost revenue. That's an incredible lost opportunity for Melco Crown.
Rendering of Wynn Palace. Image source: Wynn Resorts.
The fear gaming companies have today
What's concerning for casino companies is that they may be in a similar position with their new resorts. Las Vegas Sands is spending about $2.5 billion on The Parisian, Wynn Resorts is spending over $4 billion on Wynn Palace, and MGM Resorts is spending $2.6 billion on MGM Cotai and all are hoping for 400 to 500 table games. If their allocations are short, it could cost them hundreds of millions of dollars.
Despite being months away from opening resorts, casino operators still don't know how many table games they'll get. That caused the outburst from Steve Wynn in his third-quarter conference call and has led to more than a little heartburn in Macau over the past year.
Table games are king and that's the problem
Like it or not, table games are the absolute most important item for a casino in Macau, and gaming companies are beholden to the government to give them allocations that will make resorts profitable. Early in its recent development, the government gave more than enough tables for companies to make a lot of money, but it's been more stingy lately as gaming revenue falls and the region becomes more reliant on gaming for its survival.
The allocation of tables for new resorts may tell us where gaming stocks are headed in 2016, and that's something not even high-level executives know at the moment. Betting on a strong allocation of table games is just another gamble investors are taking in the gaming industry.
