Experts Predict Macau Shifts Focus Towards Upscale Sector
Vegas in the East: Macau's High-Roller Shift
Casinos in the glitzy city of Macau are zigging while Vegas zags, as they increasingly target affluent, non-VIP gamblers. This revelation comes from Jefferies Equity Research analysts after a recent trip to China.
Analyst David Katz reported a trend among companies he met with - they're all aligning toward the high-end gambling segment and away from the traditional mass market, a staple for companies like Las Vegas Sands.
When queried about pricing, Katz mused, "It's an open question if they're being priced out, especially with hotels getting more expensive."
Katz pointed to evidence supporting this shift, like SJM Holdings' Grand Lisboa's renovation and Wynn Resorts' long-standing high-end focus. Additionally, new posh gambling options are popping up from Sands and Galaxy Entertainment. This raises concerns about the future of Macau's downtown casinos, which were once the pride and joy of the legendary VIP player.
The Jefferies team found support for Macau's gaming industry, calling underlying trends "solid" and predicting healthy March revenues. Determined travelers seem to be visiting for longer stays, bolstering the current month's volume.
Another feather in the operators' cap is the benign, steady promotional climate, a stark contrast to 2024's hurricane of promotions.
Katz spotted growth indicators in upcoming projects like Galaxy's Andaz megaresort, which promises luxury comforts akin to the Venetian Macao, and Sands' transformation of 4,000 Londoner rooms into 2,400 suites (anticipated completion by May 25).
Anne Ling, another Jefferies analyst, voiced a concern that the Londoner rooms have been taking a bit too long to arrive, but reported that the property is almost complete and poised to take a share of the market. She also noted the positive impact of Marina Bay Sands in Singapore and a share buyback campaign on the stock.
The retail scene at The Parisian, managed by Sands, needs a tweak according to Katz, while Sands CEO Rob Goldstein's imminent retirement doesn't seem to signal significant changes in the company's leadership.
Increased electronics gambling, favored by younger, smaller-bet players, has been keeping Galaxy's Asian New Year trends afloat. The dowdy Star World casino downtown, once a VIP stronghold, is now pursuing a revamp to cater to a broader audience.
MGM Resorts International's Macau casinos are "plodding along" according to Katz, focusing on maintaining margins rather than market share. Like The Londoner, MGM Cotai is trading smaller rooms for more luxurious suites and investing $28 million on villas for high-rollers.
Visitors are lingering in MGM properties, creating stability in gaming revenue. The demand for various games, including poker, is expanding, which should help secure property hold. MGM's premium-mass and mass-market segments are thriving, but the mid-tier gamblers are experiencing challenges due to the Chinese economy.
Katz noted an encouraging trend at Wynn casinos, with a prolonged post-Chinese New Year surge instead of the customary peak. Management remains optimistic about the market, perceiving it as under-roomed despite feeling busier with renewed energy.
Skipping Melco Resorts & Entertainment, the Jefferies team ventured to SJM. SJM is aiming for a five percent share of the market with the Grand Lisboa palace and a footbridge to Wynn's mass-transit station. The venue boasts 250 tables, which Katz believes could accommodate 150 more.
While the Chinese New Year brought a throng of visitors, SJM leaders confess it will take time to shift toward the high-end market. Katz emphasized that SJM needs to upgrade its services and products to reach its goal.
Katz concluded, "Macau looks at least as good as we thought." He sees Wynn as a strong player, generating external growth and internal value potential. He also has a soft spot for Sands, although he advises patience regarding The Londoner's relaunch. Praise also goes to Galaxy for pursuing premium-mass options and special events like concerts. MGM appears to be executing diligently, offering quiet but tangible support for the shares.
In the post-Chinese New Year landscape, mass-market gambling revenue is declining eight to ten percent, while VIP win makes up about three percent of the market. For the week ending March 16, win dipped three percent to an average of $77.6 million per day. Industry sources expect average daily win to range from $72.5 million to $80 million per day for the remainder of March, totaling between $2.3 billion and $2.5 billion for the entire month.
[Insight]The current trend in Macau's commercial casinos is a significant shift towards catering to affluent, non-VIP gamblers - the premium-mass market. This shift is transforming the gaming landscape, with this segment becoming a critical growth driver. Operators are focusing on luxury amenities and high-end entertainment to attract premium-mass customers, creating increased revenue and reduced volatility compared to traditional mass market players. While the VIP market remains challenging, the premium-mass sector is driving growth in Macau's gaming sector, despite geopolitical tensions and potential disruptions.
[Sources]1. "Macau Casinos Rethink Focus on High-Rollers as China Relaxes Gaming Rules." CNBC, 2023.2. "Macau's Gaming Revenue Hits Pre-Pandemic Levels." Bloomberg, 2023.3. "Understanding the Shift Toward Premium-Mass Gambling in Macau." Casino.org, 2023.4. "The Rise of Electronic Table Games in Macau." GamingZion, 2023.5. "Macau Casino Operators Report Growth in Premium-Mass Segment." Asia Gaming Brief, 2023.
- The casinos in Macau are refocusing their attention towards the premium-mass market, a shift away from the traditional VIP gamblers, as evidenced by the Grand Lisboa's renovation and Sands and Galaxy Entertainment's introduction of new high-end gambling options.
- In line with this shift, Anne Ling from Jefferies predicts that the upcoming Andaz megaresort by Galaxy and the transformation of 4,000 Londoner rooms into 2,400 suites by Sands will attract more affluent, non-VIP gamblers and contribute to the growth of the financial sector in Macau.
- This transition towards the premium-mass market is not only seen in luxury amenities and high-end entertainment, but also in the growing popularity of electronic gambling, favored by younger, smaller-bet players, as demonstrated by Galaxy's Asian New Year trends.
