(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.) By Ethan Bilby
HONG KONG, Nov 1 (Reuters Breakingviews) - The high rollers are back in Macau. Gambling in then eclave has boomed again this year, defying the mainland's slowing growth and corruption crackdown. Most gaming stocks have doubled in the past twelve months. But disappointing results from MGM point to growing competitive pressures.
A year ago Macau had hit a rough patch. Growth in gaming revenues had stalled, and VIP customers were staying away due to economic pressures. Both customers and share prices have bounced back since that low. In October, gambling revenue in the former Portuguese colony hit a record $4.6 billion, up more than 30 per cent on the previous year.
There's plenty of potential for further growth. A spate of new casinos being built on Macau's answer to Las Vegas Boulevard, the Cotai Strip, could raise hotel room capacity by roughly a third, according to Sands China. The number of visitors from mainland China jumped by a fifth from last year to 1.5 million in September. More of them are arriving under their own steam, rather than as part of pre-paid tours which are subsidised by casino operators.
However, not all casinos are getting an equal share of the bonanza. Third quarter results from MGM China's U.S.-listed parent company showed turnover from VIP gamblers was roughly flat from the second quarter. The casino makes about three times more from VIPs than it does from other gamblers. In an attempt to get more punters through its doors, MGM has also increased the amount it spends on marketing.
.Such optimism leaves little room disappointment. China regulates the nu
VIPs are slowly migrating to Cotai as well, but slowly given their connections with the junkets and the junket rooms they operate out of. VIP migration to Cotai will be slower than mass market adoption "the strip".
Interesting that Bilby mentions the economic impact on the dearth of VIPs last winter, but refers to the crackdown without mentioning the 10- year government change last november. The crackdown itself has been less acute than many feared, but the actual fear of a crackdown as the leadership handoff took place had more of an impact, IMHO.