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Macau Gaming Revenues Decline 8.6% in August: What's Next?

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Macau, the world’s largest gambling hub, witnessed a decline in Gross Gaming Revenue (GGR) in August for the second straight month. Notably, this was the fifth decline in the last eight months.

Gaming revenues from Macau have declined 8.6% in the month. The metric decreased to 24.3 billion patacas ($3.01 billion) from 26.6 billion patacas a year ago. The dip was also below the analysts’ expectation. The same decreased 3.5% in July. A slowdown in China and the trade war between Beijing and Washington continues to impact casino operators in Macau. Further, protests in Hong Kong as well as regulatory uncertainty over high-roller junkets negatively impacted the gaming industry.

The recent volatility in gaming revenues from Macau is likely to impact companies such as MGM Resorts International (MGM - Free Report) , Melco Resorts & Entertainment Limited (MLCO - Free Report) , Wynn Resorts, Limited (WYNN - Free Report) and Las Vegas Sands Corp. (LVS - Free Report) . This is because these companies generate majority of revenues from Macau.

Year to date, the industry has increased 4.4% compared with the S&P 500's 15.3% gain.

Las Vegas Operations & Sports Betting to Drive Growth

In the gaming space, companies with huge Macao operations are bearing the brunt of tariff wars. Also, the flagging China property prices are affecting the high-end VIP segment. Increased costs due to the current situation are likely to prove detrimental to these companies. However, we believe that casino operators have substantial opportunities in their domestic operations. Rising tourist visits to Las Vegas is a positive for most companies.

Improving tourism in Las Vegas and rising demand for gaming and leisure will continue to boost the industry. Additionally, casinos operators are collaborating with the hospitality sector, setting up luxury hotels and taking initiatives to improve gaming businesses. Since these non-gaming services generate higher margins, companies are increasingly focusing on other streams to drive revenues. Moreover, increase in millennial visitation and robust non-gaming revenues bode well for the industry.

Furthermore, the legalization of sports betting outside Nevada has given the industry a new lease of life. Most of the casino operators are focusing on expanding their sports betting footprint. Sports betting has been legalized in Delaware, Mississippi, New Jersey, New Mexico, West Virginia, Pennsylvania, Rhode Island, Montana, Indiana, Tennessee, Illinois and New Hampshire. In the coming months, Connecticut, Kentucky, Michigan, Massachusetts. Maryland, Minnesota, Missouri, Kansas, Louisiana, Oklahoma, South Carolina, California, Oregon, Arizona and other states are also likely to tread the same path.

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