Macau Stocks Fall As Government Plans To Review Overcrowding

According to a report by Bloomberg, shares of the major Macau casino operators are falling on Tuesday after a senior Macau official made comments indicating that the city plans to have discussions about overcrowding in the city.

The stocks of Melco Crown Entertainment Ltd (ADR) MPEL, Wynn Resorts, Limited WYNN, MGM Resorts International MGM and Las Vegas Sands Corp. LVS are all down more than 3 percent in early trading Tuesday.

'Too many Tourists'

On a local Macau radio show, the Social Affairs and Culture Secretary Alexis Tam Chon Weng explained that the Macau government plans to approach the Chinese central government about “too many tourists” impacting Macau residents’ “quality of life.” The Macau Daily Times reported that talks will in fact happen between Macau officials and representatives from the mainland government; but what, if anything, will result from those meetings is unknown.

Related Link: Bullish On Macau Stocks? Sterne Agee Is

How Overcrowding Poses A Problem With Visitor Numbers

Since 2003, mainland Chinese residents have been allowed to visit Macau by obtaining an entry permit. The number of mainland visitors to Macau during the first four days of this year’s Chinese New Year was up 6.7 percent over last year totaling 443,421.

These rising numbers would seem good for casino operators on the surface, but if overcrowding forces new visiting restrictions, the growth potential of the casinos could be capped.

As the Chinese central government has cracked down on money laundering and other illegal activities occurring in Macau, gaming revenue from wealthy VIP gamblers has plummeted.

A major part of the casino operators’ plan to recover lost VIP revenue revolves around growing mass market numbers in the future. However, any new restrictions on the number of visitors allowed into the city could put a damper on mass market revenue growth in the future.

 

Disclosure: the author owns shares of Melco Crown Entertainment