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Down and Out: Where Does Macau Go From Here?

Data source: Macau Gaming Inspection and Coordination Bureau. Chart by author.

No one likes to see declines, but if we assume that gaming is going to stabilize at about $2.5 billion monthly that's still about five times as much as the Las Vegas Strip makes. Just think about that. Macau is making five times as much money as the Las Vegas Strip at the tables and we're calling it "disappointing."

Profits are still going to be plentiful

If Macau gaming does go back to what the industry saw in 2011 it may not be as bad as you might think. Las Vegas Sands , Wynn Resorts , and Melco Crown were all highly profitable in 2011 and they'll likely all make money in 2015, despite the bad year.

LVS Net Income (TTM) data by YCharts

Sometimes some perspective is needed in gaming and Macau is still a great market for gaming operators even if the comparisons from a year ago are troubling.

Building on a long-term plan

The other factor to consider in Macau is that the government is trying to build an entertainment destination, not just a gambling enclave. It will take time to convince tourists to spend money on nightclubs, shopping, and shows the way they do in Las Vegas, but if Macau can succeed it can diversify away from its reliance on high rollers.

As long as Macau's gaming revenue has stabilized at about a $30 billion annual run rate the region should be able to maintain profitability as it expands offerings from new resorts by Wynn, Las Vegas Sands, Melco Crown, and MGM Resorts as well as Galaxy and SJM, which aren't traded in the U.S. When these new offerings are built it could attract millions more visitors from around the world.

There are definitely concerns for Macau right now but sometimes perspective is needed. The region is still highly profitable and gaming revenue is still about five times that of the Las Vegas Strip. So, companies there are still on solid footing, even if revenue and profits decline year over year. Long-term, this is still as place that I'm going to stay invested because cash is still flowing in and Macau's best days as an entertainment destination are still ahead of it.

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The article Down and Out: Where Does Macau Go From Here? originally appeared on Fool.com.

Travis Hoium owns shares of Apple and Wynn Resorts, Limited. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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