What Happens in Vegas...Goes to Macau
Chase is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This is interesting. As of 2011, casino revenue in Macau was $34 Billion while Vegas was only $10 Billion. Our own capital of vice, the mecca of gambling here in the US, is being trounced. What's going on here? When you first step onto the strip in Las Vegas, you are swept up in a kind of insane energy. The crowds, signs, music, everything works together to shake your reality and make you feel as if you just walked into the world's largest, non-stop party. Even if you're a stone cold teetotaler, you still feel hung over on the plane ride back from Vegas. The stimulation is such that, after your two or three days, you feel deprived.
When you first get to Macau, on the other hand, you wonder where all the people are. The entire city is disjointed. The two main casino clusters are connected by a 20 minute cab ride across a barren bridge. On one side, the Macau Peninsula, you have the old city (beautiful) and spots like the Wynn, MGM Grand, and the iconic and oddly shaped Grand Lisboa. None of these are really within walking distance. On the other side, most of the action is at the "Cotai Strip," an area looking to be like Vegas but at this point feeling more like Laughlin. The best way I can describe it is it feels like that scene in Back to the Future where Marty travels back to Hilldale and sees it is nothing more than a sign and some cordoned off land. It's a feeling of emptiness and possibility at the same time.
The strangest part of Macau, for the Western tourist, happens once you enter the casinos. Silence. You don't have the constant ching-ching-ching and clinking of chips as they hit those strategically loud tin baskets at the bottom of the slot machines. There are no crowds of jubilant craps players (my favorite game). The game played by the overwhelming majority of players in Macau is baccarat. Similar to Blackjack and almost completely devoid of sound. People don't just drop in for a casual hand in Macau either, on more than one occasion I was regaled with stories of how people will wear diapers just so they can play longer and not break a lucky streak, something very important among the notoriously superstitious Chinese.
So, Macau: not a place for the Westerner looking to find a bigger, glitzier version of Vegas. Macau is, however, definitely a place to invest. If it were up to the overlords of Vegas, they would design it just like Macau. No $220 Million shows, no three star Michelin restaurants, no roller coasters, just pure old-fashioned gambling. Macau and the companies involved in developing it, Wynn (NASDAQ: WYNN), Las Vegas Sands (NYSE: LVS), and MGM Resorts (NYSE: MGM), have truly happened upon the golden ticket. Although many are grousing about the China slowdown, one has to keep in mind that a slowdown in Chinese terms means a GDP growth rate of 7.5%. This is a torrid pace by world standards, and more than enough to fuel Macau.
Regarding the growth in Macau, one can look to one place to see the action: Cotai. The major companies holding "sub-concessions," granted by the Macau government allowing to operate within the Special Administrative Region, include:
-Las Vegas Sands, which opened the Sands Cotai Central in April 2012, a 5,800 room, $4 Billion complex
-Wynn Resorts, which was approved in May to begin construction on Wynn Cotai, a $3 Billion development
-MGM, which is currently waiting on approval for their Cotai site, has said their approximately 3 Million square foot project will most likely begin construction in 2012 and take 2-3 years to complete
These are all very different companies that should be looked at individually. But in researching these three companies, I would definitely be remiss in not taking into account the location of their focus and Macau's amazing growth. They all have a very interesting future and I will definitely be watching Cotai and Macau very closely.
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