The Macau Government’s recently announced plans to limit casino growth in China’s Special Administration Region is likely to draw positive reaction from existing operators such as US gaming leaders Las Vegas Sands Corp, Wynn Resorts and MGM Mirage, as this would control the supply of gaming tables in the market and increase the average yield per table. Currently, Macau has around 5,000 gaming tables and there are 6 licensed operators.
According to the plan, new projects would not be approved while only 500 new gaming tables will be allowed in the next three years. However, some of these operators have new projects under construction, which have already been approved, including the flagship project on Cotai by Galaxy Entertainment Group Ltd., and Sands' Cotai expansion project. Unapproved projects, though, have been withheld.
The aim of the Macau government, which derives nearly 70% of its revenue from gaming, is to diversify the city’s economy. It is questionable though the areas for development that the Macau government would target for growth as land is at a premium and the cost of living is higher than in mainland China.
What is certain is that the expansion of the gambling business in Macau has added to fringe illegal activities where corruption, addiction and prostitution are ripe in the region. At the same time Macau, the only Chinese city where gambling is legal, has survived the economic downturn relatively well.
Upon the announcement by the Macau Government, shares of Las Vegas Sands were up 96 cents or 4.59% to $21.89 while shares of Wynn Resorts were up $2.22 or 2.98% to $76.63 during last Friday’s regular session on the New York Stock Exchange. These companies have invested billions in the region and have promising ventures that would be further enhanced if gaming growth is limited in Macau, as planned. (E-03.30.10)
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