It’s no secret that Macau gaming revenue has plunged in the past two years following the government crackdown on corruption. While overall monthly revenue numbers in Macau have declined by more than 50% since hitting all-time highs in February of 2014, the VIP gambler segment has been hit much harder than the mass market segment.
Macau bears argue that these VIP gamblers have been chased off forever. While there has yet to be any evidence to the contrary, here are several reasons why shareholders of Macau operators Melco Crown Entertainment Ltd. (NASDAQ:MPEL), Wynn Resorts, Limited (NASDAQ:WYNN), Las Vegas Sands Corp. (NYSE:LVS) and MGM Resorts International (NYSE:MGM) have to be hopeful the VIPs will soon come trickling back to Macau.
What happens in Macau…
While not all VIP gamblers are involved in nefarious activities, it’s probably fair to assume that many Macau high rollers have a “what happens in Vegas stays in Vegas” attitude about Macau. In other words, VIP gamblers that weren’t necessarily involved in organized crime and money laundering might still be leery of increased government scrutiny in the near-term.
Wealthy Chinese businessmen, particularly newly-wealthy VIP gamblers, likely have a wide range of vices that they would not want turning up in a government investigation. However, the intensity of the government’s corruption initiative should fade over time, and at some point VIPs will no longer worry about being under a Macau microscope. Once the heat dies down, so to speak, at least some of the VIP gamblers will likely return in the future.
Betting on the big board
There is certainly a valid argument that investing is…
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