Analysts expect mass market gaming boom

The opening of Sands Cotai Central resort, scheduled for this spring, could be the ‘tipping point’ for the mass market gaming business, two Bank of America analysts wrote

The growth of local gaming revenue will slow down significantly this year but analysts believe mass market will begin playing a much bigger role in the industry.
“The story of 2012 is likely to be the mass market in Macau,” Bank of America analysts Shaun Kelley and Matthew Cole wrote in a note quoted by Business Insider.
During last year “the Macau ‘reality’ was quite different from the destination-driven ‘dream’ that Las Vegas (and increasingly Singapore) seem to promise, as Macau remains dominated by the VIP business,” they added.
Local casinos are highly dependent on high-roller business, which routinely account for over 70 percent of total revenue, a figure that tops 90 percent in some casinos, especially in the Macau peninsula.
“However, we see the potential for the growth dynamic to shift materially, and perhaps permanently, beginning in 2012,” the Bank of America analysts wrote. “The tipping point could be the opening of [Sands] Cotai Central beginning in March,” they stressed.
Gaming revenue surged 42 percent last year but Kelley and Cole believe the pace will drop significantly to 14 percent in 2012 as mainland China’s economic growth slows down as well.
But the analysts are confident that the impact from the global economic uncertainty on Macau will be small. They recalled that the local gaming industry recovered well and quickly from the 2008 financial tsunami.
The Bank of America note also stresses that six gaming companies operating in the MSAR market are better prepared for a new crisis, because their balance sheets show a much better picture than at the onset of the last economic downturn.
Back in 2008 and 2009 MGM was close to filing to bankruptcy while the credit tightening also forced Las Vegas Sands and Galaxy Entertainment Group to suspend the construction of their Cotai resorts.