Macau And Las Vegas Gaming Revenues Are Headed In Opposite Directions: What's Next?

Las Vegas, Nevada, and Macau, China, are two of the largest global casino gambling hubs. Both gaming destinations took big hits during the COVID-19 pandemic, but the latest gross gaming revenue numbers suggest Vegas is bouncing back strong while Macau is still struggling.

The Numbers: Many Americans think of Vegas as the top gambling destination, but Macau’s gross gaming revenue dwarfs Las Vegas. Unfortunately for Macau investors, its gross gaming revenue is still roughly 70% below 2019 levels, according to Bank of America analyst Shaun Kelley. Meanwhile, Las Vegas GGR is up 30% from pre-pandemic 2019 levels, suggesting the worst of the pandemic is now in the rear-view mirror.

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On Monday, Kelley said he models fourth-quarter Las Vegas GGR growth of 17% for MGM Resorts International MGM and 10% for Caesars Entertainment Inc CZR compared to the fourth quarter of 2019. Meanwhile, Kelley is also modeling fourth-quarter Macau GGR to be down roughly 60% from 2019 levels for Las Vegas Sands Corp. LVS and Wynn Resorts, Limited WYNN.

Macau Headwinds: In addition to sluggish gaming revenues, Macau is also suffering from negative investor sentiment after 10 casino junket officials were recently arrested.

“This development, in our view, is more of a crackdown/intervention risk than the concession process from back in September, but is yet another example of the 3 C’s (COVID, crackdown and concession) risks that make Macau difficult for investors at the moment,” Kelley said following the arrests.

Prior to COVID-19, VIP gaming represented 46% of Macau’s total gross gaming revenue, Kelley said. As of the third quarter, that percentage had dropped to 34%.

Benzinga’s Take: Gaming investors looking for less risk in the space should take a closer look at U.S. stocks that have no exposure to Macau. Kelley recently named several of his top gaming stock picks heading into 2022, including Boyd Gaming Corporation BYD, Churchill Downs, Inc. CHDN and Caesars Entertainment.

Photo by Susan Q Yin on Unsplash