Success Returns at Different Speeds in Las Vegas, Macau

As any veteran gambler knows, sometimes you win, and sometimes you lose. For the two biggest gambling capitals in the world — Las Vegas and Macau — the odds appear to be no different.

While Lady Luck has looked quite fortunately at the casino owners in the shimmering strip in the Mojave Desert, the casinos on the neon-blazed island city off the coast of China are stuck in a slump. That’s just the luck of the draw.

Fear and Loathing in Macau, Cheers and Gloating in Vegas

You can’t always help the hand you’ve been dealt. While Macau operates as a “special autonomous zone” from China with its own systems and government, it’s still largely dependent on tourism from the mainland nation. Unfortunately for the city’s six licensed casinos (of which three are subsidiaries of American casinos, China’s Covid crackdown includes strict limits on unnecessary outbound travel. And wanting to play a few hands of Baccarat or Pai Gow doesn’t qualify.

Fortunately for MGM, Wynn, and Sands, which had long found growth prior to the pandemic operating in Macau, business in Vegas is much better. Covid-era capacity limits in casinos were mostly lifted in March last year, and travel to the city is restricted only by soaring airfares. Now Vegas is on a heater, while Macau casinos can barely afford to play the penny slots:

• In May, Macau’s gaming industry saw revenues drop 68% year-over-year, and are down about 87% from pre-pandemic 2019 levels on the year so far. The six major casino operators burned a daily average of $12 million in the first quarter, according to Morgan Stanley and Goldman Sachs estimates, and a worst-case scenario could see a few of the operators folding their hands within two years.
• April marked Nevada’s fourteenth consecutive month with over $1 billion in gambling revenue, of which casinos on the strip contributed a record $593 million (figures from May have not been released, but we’d bet a few chips on the streak continuing).

Don’t Double Down: Will the Vegas hot streak continue? Fitch Ratings has a rosy outlook, despite saying the city is still two years away from a full recovery. “While the current period of inflation may increase the city’s labor cost pressures and limit discretionary spending on travel and entertainment, current trends show ongoing improvement,” the agency said in a recent report.