Red Hot Macau Gaming Industry Cools On Chinese Slowdown

by Trefis Team
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The Chinese economy plays a crucial role in driving growth in Macau’s gaming industry. For May, Macau reported 7.3% growth in gambling revenue, the slowest growth rate witnessed since July 2009. A slowdown in economic growth in China has been attributed as the main reason for slower expansion. In March, the Chinese government set a GDP growth target of 7.5% for the current fiscal, the lowest in past 8 years. [1]

Despite fears of a Chinese slowdown, casino operators including Las Vegas Sands (NYSE:LVS), MGM Resorts International (NYSE:MGM) and Wynn Resorts (NASDAQ:WYNN) are moving ahead with their expansion plans in the region.

In Macau, VIP Baccarat brings in close to 84% of all table games revenue. The majority of these VIP gamblers are high net worth individuals (HNIs) from Mainland China where strict laws prohibit gambling. Therefore, the overall economic growth in China directly affects the spending ability of China’s high rollers on gambling, specifically VIP gaming.

Macau’s gaming industry is susceptible to the prevailing political and economic conditions in China. According to statistics by the Tourist Office, more than 28 million visitors visited Macau in 2011 and about 25 million of these visitors were from Mainland China, Hong Kong and Taiwan. [2]

Growth in the number of HNIs and a burgeoning middle class in China are the key growth drivers of the Macau gaming industry. We believe growing competition and future performance of the Chinese economy would likely determine the growth prospects of Macau’s gaming industry in coming years.

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Notes:
  1. See: China Cuts Growth Target to 7.5% As Wen Seeks Sustainable Growth, Bloomberg []
  2. See: Betting on Macau, Say They Still Need More Rooms, Forbes []
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