Macau Searching for Las Vegas-esque Revenue Mix

Of the world’s major casino markets, Macau is the most dependent on gaming revenue. Authorities there want to change that.

The desire of Chinese and Macanese officials to diversify the special administrative region’s (SAR) economy and make it less gaming-dependent is well-documented. It is also reflected in the latest batch of gaming laws. Analysts believe officials are seeking inspiration from rival markets, namely Las Vegas and Singapore.

We expect Macau’s gaming operators to transition to the Las Vegas Strip/Singapore model with a lower gaming revenue contribution at approximately 40 percent/68 percent, respectively,” noted Macquarie analysts Chad Beynon and Linda Huang in a recent report.

It’s estimated that wagering activities will account for 83% of revenue generated at Macau integrated resorts this year.

Macau Nongaming Efforts on the Books

It’s estimated that over the next decade, Macau concessionaires will be required to spend approximately $15 billion combined on nongaming projects. The SAR’s six license holders are Galaxy Entertainment, Melco Resorts & Entertainment, MGM China, Sands China, SJM Holdings, and Wynn Macau.

The Las Vegas revenue model is an enviable one. From 1984 through 2022, gaming win declined from 59% to 38% of Sin City operators’ top line, according to a report published earlier this year by the UNLV Center for Gaming Research. Still, the US casino center flourished over that period, as room revenue surged fivefold.

Last year, Strip operators generated $2.89 billion in food-related revenue — the second-best year on record — while beverage sales of $1.46 billion represented an all-time high, noted UNLV. In 2022, rooms, food, beverage, and entertainment combined for almost 63% of Strip revenue, a template Macau would like to follow.

Macau Transition Will Take Time

It’s expected that over the coming decade, the bulk of the aforementioned spending will come by way of Sands China and Galaxy Entertainment, which are the two largest operators on the peninsula. Analysts say Sands China, a unit of Las Vegas Sands, has a lengthy record of directing capital to nongaming projects.

“We expect Macau’s mass GGR to return to 2019 levels in fourth-quarter 2023, helped by the removal of transport, hotel room supply, and labor supply bottlenecks,” added the Macquarie analysts. “The increase in hotel room supply and the removal of transport bottlenecks should help to attract more tourists.”