Consensus: Future looks bright for Macau
Only months after its grand opening, the $4.2 billion Wynn Palace resort on Macau’s Cotai Strip will reconfigure its main casino floor to attract more mass-market gamblers, reports investment research firm Morningstar Inc.
Speaking at the Macao Gaming Show earlier this month, Morningstar analyst Chelsey Tam cited a report contending that the lavish resort’s slow ramp-up was due in part to “the design of its large and open casino space, which is leading to the perception of thin crowds and thereby reducing the feel of compressed energy that many gamers seek.”
The Wynn Palace, which opened on August 22, has also been hampered by construction around the site, which has made access difficult.
“Wynn plans to adjust wall configuration to reduce its gaming area while increasing casual dining options to meet demand,” according to the report by Dan Wasiolek, a senior equity analyst. “While the near term presents challenges for the Palace, our constructive long-term view of the property is unchanged, as is our forecast for low 30s EBITDA margins in 2025 and mid-single-digit annual revenue growth in 2018-25. We believe the facility’s stunning decor will prove enticing to many high-income travelers.”
Wasiolek said 2019 could be a game-changing year for Macau. Part of the Taipa light-rail line now under construction could be open around the Cotai resorts by that time, and the Hong Kong-Zhuhai-Macau Bridge should also be complete. The light rail system could “expand Macau’s annual inbound tourist capacity by around 3.5 million in 2025,” said Wasiolek.
Most analysts agree things are looking up in Macau, which is slowly emerging from a historic 26-month decline. According to analysts from Nomura, “The sector has been staging a solid recovery with gaming revenue growth accelerating from 1 percent year-on-year in August to 7 percent in September, 9 percent in October, and now November is on track to see 9 percent to 13 percent growth.”
The Macau Business Daily cited Sanford C. Bernstein analysts who say increased regulation of the gaming industry is also a long-term positive for the city’s chief industry, along with increased non-gaming that will drive visitation. The openings of two new properties on Cotai—MGM Cotai in 2017 and SJM’s Grand Lisboa Palace in 2018—should add to the attractions and increase tourism.
“In recent months, the anti-corruption campaign appears to have begun moderating,” say the Bernstein analysts. “The continued softening of the anti-corruption campaign would be very positive to recovery of high-end gaming” in the city.
“We view the positive commentary surrounding VIP to be reflective of the fact that Macau and China do not necessarily want to see large VIP revenue outflows going to foreign casinos, but rather retain the revenue and associated taxation in Macau.”
They say the future of Macau is “supply-driven. In particular, the nature of that supply—more hotel rooms, greater non-gaming features and experiences—will lead to rejuvenated growth.”
