Gaming | Analysts weigh in on new casino openings

Gaming analysts are questioning the impact of Macau’s new casinos on the city’s declining gambling sector.
Wynn Macau opened a USD4.2 billion resort in Cotai this week, and Sands China will open the doors to its newest casino-hotel, The Parisian, on September 13. The Lisboa Palace, MGM Cotai and “ultra-luxury” resort, The 13, are all expected to open in the next 18 months, further saturating the market.
Operators hope that the new casinos will stir fresh excitement in the territory and surrounding areas and draw crowds to explore the developments’ offerings.
The question on observers’ minds: Will the new resorts give the MSAR the stimulus it needs to shake off 26 consecutive months of declining gambling revenue?
Like many others, Daiwa Capital Markets is skeptical that the openings will grow the total gaming market in Macau and shift the balance in favor of the new resorts’ operators.
“[Wall] Street expects the back-to-back openings of Wynn Palace and the Parisian to expand Macau’s gaming market meaningfully, with market share seen shifting in favor of these operators,” wrote Daiwa’s Jamie Soo and Adrian Chan earlier this month, as cited in nikkei Asian Review. “But this expectation seems unrealistic to us.”
Daiwa’s rationale is that past expansions by Wynn, Sands and other operators “have not been successful in growing the market and gaining meaningful incremental [GGR] market share in a sustainable manner.”
The analysts argue that Wynn’s mantra of “build it and they will come” has been effectively debunked over the course of the operator’s experience in Macau.
“Wynn has been steadily losing market share since Wynn Macau [casino] opened in 2006,” they wrote.
While other casino operators have felt similar strains in the market, and from the competition that ensues whenever a new resort is unveiled, they are nevertheless pushing their capacity expansion; delaying but not halting new projects.
This is despite the gaming slump that has swept away more than 20 percent year-on-year of the VIP betting volume of Wynn, MGM, SJM Holdings and Melco Crown. To adjust to this “new normal”, operators are trying to maximize revenue from mass gaming sources and non-gaming entertainment.
In the meantime, other destinations a little further from Beijing’s reach are booming. The Times reported yesterday that Best Sunshine Live, a temporary casino on the Pacific island of Saipan, generated more profit in the first half of this year than operators such as Melco Crown Entertainment.
However, sources familiar with the matter told the Times that “they [the Saipan casino] have massive bad debt.”