News / Economy

New Macau Casinos Have Luck of the Draw in Second Expansion Phase

FILE - A croupier counts the chips at a baccarat gaming table inside a casino during the opening day of Sheraton Macao Hotel at the Sands Cotai Central in Macau.
FILE - A croupier counts the chips at a baccarat gaming table inside a casino during the opening day of Sheraton Macao Hotel at the Sands Cotai Central in Macau.
Galaxy Entertainment Group and Melco Crown Entertainment look best placed to benefit from the next phase of Macau's development as the world's gambling capital adds eight more mega-casinos by 2017.
The expansion will take place in the Chinese territory's glitzy Cotai Strip and is expected to more than double Macau's annual gaming revenues to $115 billion in four years, according to research from U.S. brokerage Wells Fargo.
Cotai is an area of reclaimed land that is becoming a Las Vegas-style tourist hub with shopping centers, hotels and entertainment to complement the casinos.
U.S. billionaire Sheldon Adelson's Las Vegas Sands Corp was the strip's pioneer, setting up the Venetian casino there in 2007. Adelson's Hong Kong-listed Sands China Ltd is set to open its final casino planned for Macau at the end of 2015 in Cotai, but for Melco and Galaxy, their growth in the area is just beginning.
Galaxy and Melco's casinos will be the first properties to open in the second expansion phase, starting in early 2015.
That puts them ahead of peers like MGM China and Wynn Macau in the race for dealers and gaming tables, which are both in short supply. MGM and Wynn are also planning to open casinos in Cotai, but at a later date.
Galaxy, owned by Hong Kong construction tycoon Lui Che Woo, has the largest plot of land on Cotai and will still have half the area left to build on after its new resort opens next year.
Sands, in contrast, will use up the last of its Macau land for its Parisian complex, slated to open at the end of 2015.
"Sands has had a great run here with the last property to open... Clearly from the beginning of next year it is going to get tougher from a competitive standpoint," said Philip Tulk, who tracks gaming companies at Standard Chartered in Hong Kong.
Adelson, in an email to Reuters, brushed aside the competition, saying Sands China was still the dominant player in Cotai, a strip he said he created.
"I was the visionary," Adelson said of Cotai. "I filled in the swamp and the bay, and was the first company to build there."
"There is not enough land left anywhere in Cotai to catch up to the number of hotel rooms that SCL (Sands China Limited) has. Galaxy doesn't have enough land to even equal our Sands Cotai Central, which has 6,000 rooms."
Diminishing returns
Macau, one of the world's fastest growing economies for the last three years, is the only place in China where citizens can legally gamble in casinos. Located on China's southern coast, Macau gaming revenues last year were nearly three times greater than Las Vegas, Australia and Singapore combined.
Some 29 million people visited the semi-autonomous zone in 2013, and new rail and bridge connections to Hong Kong and mainland China are expected to increase those numbers. New hotel rooms opening by 2017 will double current capacity.
The bulk of Macau's 35 existing casinos lie on the former Portuguese colony's tiny peninsula, whose skyline was dominated for years by the fluorescent, onion-shaped casino of SJM Holdings Ltd, owned by the family of Macau kingpin Stanley Ho. Lack of space led developers to reclaim land for Cotai.
SJM and Sands dominate the gambling scene in Macau, together accounting for nearly half of total gaming revenues that stood at $4.8 billion in February.
Competition is expected to heat up as other casino operators expand their portfolios, potentially crimping profits.
"I would not expect the share price performance to be comparable with last year but I would still foresee there would be a decent amount of growth," said Victor Yip, gaming analyst at UOB Kay Hian in Hong Kong.
With four Macau properties, Sands China raked in more revenue last year than all of the Las Vegas strip. Its shares have surged more than six-fold from their IPO price in 2009 and doubled since the last big casino opening in 2012.
While all operators in Macau are blessed with surging demand, analysts have become more selective as gaming revenue growth starts to mature.
Sands, which has more hotel rooms than the other gaming operators combined, remains a popular pick with 22 of 25 analysts awarding it a "buy" or "strong buy" rating, according to Thomson Reuters data.
Galaxy is slightly less popular among analysts due to a more expensive valuation, with 20 of 26 giving it a "buy" or "strong buy" rating. Its shares, however, have surged more than 350 percent since their launch in 2011, valuing it at $40 billion.
Several factors, however, cloud the outlook for all casino operators in Macau. Slowing economic and credit growth in China may pinch high-rollers and there is uncertainty over gaming license renewals due in 2020.
The labor market in Macau is also tight. Analysts estimate new casinos opening in 2015-2017 will require 12,600 new dealers, yet only about 700 are available per year. Macau laws dictate only locals can work as dealers, and the government is under pressure from residents who regularly take to the streets to ensure these restrictions remain.
Macau's government has also not confirmed how many new tables it will allow in the next phase of expansion for the Cotai Strip.
Casino operators, however, appear unfazed for now by these concerns, focusing instead on Macau's massive potential.
"When we come to Macau, we see potential in gaming,"  Francis Lui, Galaxy's deputy chairman, told Reuters in an  interview. "If you add entertainment with the gaming industry together you can certainly see a super industry."

You May Like

Video Obama: Action on Climate Change 'Economic, Security Imperative'

President spoke to reporters on sidelines of UN Climate Summit outside Paris, where leaders are working to agree on binding measures

IMF Bets on China’s Resolve to Reform

IMF announcement already raising questions about just how much Beijing is committed to such reforms

What Happened When I Landed in Antarctica

Refael Klein chronicles what it's like to visit one of the coldest, most desolate places on Earth

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
With HIV, Can We Get to Zero?i
Carol Pearson
November 29, 2015 1:23 PM
The theme of this year's World AIDS Day is "Getting to Zero." The U.N. says new HIV infections have been reduced by 35 percent since 2000 and AIDS-related deaths are down by 42 percent since the peak in 2004. VOA's Carol Pearson takes a look at what it might take to actually have an AIDS-free generation.

Video With HIV, Can We Get to Zero?

The theme of this year's World AIDS Day is "Getting to Zero." The U.N. says new HIV infections have been reduced by 35 percent since 2000 and AIDS-related deaths are down by 42 percent since the peak in 2004. VOA's Carol Pearson takes a look at what it might take to actually have an AIDS-free generation.

Video Political Motives Seen Behind Cancelled Cambodian Water Festival

For the fourth time in the five years since more than 350 people were killed in a stampede at Cambodia’s annual water festival, authorities canceled the event this year. Officials blamed environmental reasons as the cause, but many see it as fallout from rising political tensions with a fresh wave of ruling party intimidation against the opposition. David Boyle and Kimlong Meng report from Phnom Penh.

Video African Circus Gives At-Risk Youth a 2nd Chance

Ethiopia hosted the first African Circus Arts Festival this past weekend with performers from seven different African countries. Most of the performers are youngsters coming form challenging backgrounds who say the circus gave them a second chance.

Video US Lawmakers Brace for End-of-Year Battles

U.S. lawmakers are returning to Washington for Congress’ final working weeks of the year. And, as VOA's Michael Bowman reports, a full slate of legislative business awaits them, from keeping the federal government open to resolving a battle with the White House over the admittance of Syrian refugees.

Video Taiwan Looks for Role in South China Sea Dispute

The Taiwanese government is one of several that claims territory in the hotly contested South China Sea, but Taipei has long been sidelined in the dispute, overshadowed by China. Now, as the Philippines challenges Beijing’s claims in an international court at The Hague, Taipei is looking to publicly assert its claims. VOA’s Bill Ide has more from Beijing.

Video After Terrorist Attacks, Support for Refugees Fades

The terrorists who killed and injured almost 500 people around Paris this month are mostly French or Belgian nationals. But at least two apparently took advantage of Europe’s migrant crisis to sneak into the region. The discovery has hardened views about legitimate refugees, including those fleeing the same extremist violence that hit the French capital. Lisa Bryant has this report for VOA from the Paris suburb of Cergy-Pontoise

Video Syrian Refugees in US Express Concern for Those Left Behind

Syrian immigrants in the United States are concerned about the negative tide of public opinion and the politicians who want to block a U.S. plan to accept 10,000 Syrian refugees. Zlatica Hoke reports many Americans are fighting to dispel suspicions linking refugees to terrorists.

Video Thais Send Security Concerns Down the River

As Thailand takes in the annual Loy Krathong festival, many ponder the country’s future and security. Steve Sandford reports from Chiang Mai.

Video Islamic State Unfazed by Losses in Iraq, Syria

Progress in the U.S.-led effort to beat Islamic State on its home turf in Iraq and Syria has led some to speculate the terror group may be growing desperate. But counterterror officials say that is not the case, and warn the recent spate of terror attacks is merely part of the group’s evolution. VOA National Security correspondent Jeff Seldin has more.

Video Belgium-Germany Border Remains Porous, Even As Manhunt For Paris Attacker Continues

One of the suspected gunmen in the Nov. 13 Paris attacks, Salah Abdeslam, evaded law enforcement, made his way to Belgium, and is now believed to have fled to Germany. VOA correspondent Ayesha Tanzeem makes the journey across the border from Belgium into Germany to see how porous the borders really are.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

VOA Blogs

World Currencies


Rates may not be current.