A scale of two cities – Macau and Las Vegas

Jan 5, 2016 3:00 AM

As Macau bemoans its dramatic year-over-year decrease to $28.9 billion in gaming revenue, Las Vegas is almost ebullient that it is pacing to finish the year at close to $10 billion in gaming revenue. Of course Macau has seen a 34.3 percent decrease in gaming revenue on a historical dollar basis and close to a 36 percent decrease on an inflation-adjusted basis, while Las Vegas is looking to come in flat from the prior year on a historical dollar basis and around a 3 percent decrease on an inflation adjusted basis.

However, there is more to the respective stories than just these hard stats.

Both Macau and Las Vegas have seen material decreases in high-roller play, but where Macau struggles to replace its premium customers with a mass market, Las Vegas has enjoyed the mass market filling in the hole created by the exit of certain premium play. While Las Vegas has enjoyed a certain amount of luck in that there has been a segmented economic recovery in the US, Macau was hit by not only a financial crackdown but a slowdown in several of the economies of its feeder markets.

Gas prices made it much easier for domestic mass market customers to make the trek to Las Vegas and leave a few extra bucks in their pockets for their discretionary spending. On the other hand, Macau is still developing its infrastructure of highway accesses and airport size to even accommodate the serious tourist volume it will need to offset the departed high-roller play.

Oddly enough, as time marches on, Macau seems destine to become a “Mini-Me” of Las Vegas. From a tourist-based gaming perspective, Las Vegas has the Strip and Downtown and as the Strip was developing a lot of the business, historically destined for downtown, migrated from there to the Strip. The same thing is happening to Macau. It has its own older downtown and it also has its new Cotai area, often referred to as the Cotai Strip, which as it continues to open new properties is also pulling business from the older downtown Macau.

While Macau enjoys a tourist population highly focused on gaming, and thus the reason for its general lead over Las Vegas in gaming revenue, Macau lags in comparable revenues from hotel, food and beverage, entertainment and collective other revenue sources. Macau’s customers just do not currently spend their money on those services in Macau and seem to prefer preserving their discretionary funds for gaming. By contrast, Las Vegas has matured to become a balanced market that now sees gaming only accounting for about a third of its revenues, and whose customers come for memorable experiences beyond gaming.

About the only area in gaming Las Vegas excels at over Macau is in sports wagering and its related event activities. For Las Vegas this works as every casino can have a sportsbook, which leads to a myriad of marketing events to drive traffic. Macau though granted a sole operator concession for sports wagering to one company. That concession will be expiring mid-2016 and it will be interesting to see if the government opens it up to all licensees or extends the concession. If the government opens sports wagering to all licensees, a whole new range of marketing tools will come to life for the properties in Macau. Macau has hosted fights, grand prix and other significant sporting events, but as there was only one legal sportsbook, there was no real motivation for the casinos to get behind aggressively marketing the events.

Imagine the traffic that could be generated if some of the larger Cotai properties were to sponsor or host NBA games in Macau. Imagine the excitement if mobile sports wagering was available at the host property for a world class fight. No different than how Las Vegas gets during certain world championships or NCAA tournaments, Macau could have the potential to absolutely explode in both traffic and sports betting if it were to apply the same marketing principles pioneered in Las Vegas.

If Macau really wants to emulate Las Vegas and have equal diversity of revenues from sources other than gaming, they should finish the copy job and quickly complete their infrastructure improvements, become a major player in the convention business and eliminate anti-competitive practices. If Macau completely emulated Las Vegas in all areas, then, with their regional access to almost 2 billion people, their scale would completely dwarf Las Vegas.

The Analyst is an experienced gaming industry executive who offers insight each week on events and issues affecting the industry. Contact The Analyst at [email protected].