Macau Leaves Las Vegas in the Dust

Think of Macau as the talented football running back who finds an extra burst of speed in the open field and it's easy to visualize how the Asian tourist destination is leaving Nevada and the rest of the gaming world far behind.

Of all the numbers crunched by the UNLV Center for Gaming Research, arguably none are more dramatic than the rapid increase in Macau's gaming revenue when stacked up against Nevada casinos.

In 2002, just three years after the former Portuguese colony was converted to a special administrative region governed by the People's Republic of China, Macau generated $2.8 billion in gaming revenue. That was barely more than half of the gaming revenue generated on the Las Vegas Strip and less than one-third the revenue accumulated by all Nevada casinos with non-restricted gaming licenses.

Fast forward to 2012, when Macau resorts raked in more than $38 billion, while Nevada's industry managed only $10.9 billion, including $6.2 billion from the Strip.

Macau became the global gaming leader in 2008 when it first topped Nevada in gaming revenue. The state was just beginning to feel the pinch of the recession, and its gaming industry is still struggling to return to pre-recession highs. But Las Vegas-based gaming companies, led by Las Vegas Sands, Wynn Resorts and MGM Resorts International, have enthusiastically embraced Macau gaming and now rely heavily on that market.

In its annual report filed in March with the Securities and Exchange Commission, Las Vegas Sands said:

"We believe that Macao (alternate spelling) will continue to experience meaningful growth in both gaming and non-gaming revenues and the record 28.1 million visitors Macao welcomed in 2012 will continue to increase. We believe this growth will result from a variety of factors, including the movement of Chinese citizens to urban centers in China, the introduction of new transportation infrastructure and the coming increase in hotel room inventory."

The company also said: "More than 1.0 billion people are estimated to live within a three-hour flight from Macao and more than 3.0 billion people are estimated to live within a five-hour flight from Macao."

Likewise, Wynn Resorts said in its annual report also released in March: "We believe that Macau is located in one of the world's largest concentrations of potential gaming customers."

Contrast those assessments with how Las Vegas Sands views Las Vegas, where it operates the Venetian and Palazzo resorts.

"The continued proliferation of gaming venues could have a significant and adverse effect on our business," Las Vegas Sands said. "In particular, the legalization of casino gaming in or near major metropolitan areas from which we traditionally attract customers could have a material adverse effect on our business.

"The current global trend toward liberalization of gaming restrictions and the resulting proliferation of gaming venues could result in a decrease in the number of visitors to our Las Vegas Operating Properties, which could have an adverse effect on our financial condition, results of operations or cash flows."

The company also said a December 2011 decision from the Justice Department that relaxed enforcement of the federal Wire Act could hurt its Las Vegas gaming business such as by allowing other states to expand their lotteries across state lines through the Internet.

Wynn Resorts, observing the "economic disruptions" that have impacted Las Vegas in recent years, offered this take:

"During 2012, the economic environment in the gaming and hotel markets in Las Vegas continued to improve with increased levels of gaming revenue, visitation and hotel room demand. While these gaming and hotel statistics have increased from prior year levels, uncertainty still exists in the Las Vegas market."


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