How Big Could Macau's Gaming Market Be in a Decade?
Macau's gaming market is now seven times the size of the Las Vegas Strip and outgrew the Sin City 18.5% to 4.8% in 2013. So, we should at least be pondering if there's an upper limit to how large the market can grow.
It's the growth of Macau's overall market that will really drive Las Vegas Sands , WynnResorts , Melco Crown , and MGM Resorts over the next few years. Other than trading market share between one another and the other two concessionaires, SJM and Galaxy, that's the only way to grow.
First, let's look at the size of Macau's gaming revenue compared to China's GDP, a good proxy for the relative size of Macau's gaming business. I've provided the numbers below along with a comparison to the same figures in the U.S.
2013 Gross Gaming Revenue
Gaming Revenue as % of GDP
The Chinese are known for their gambling, but it's a bit surprising to see double the gaming revenue as a percentage of GDP versus the U.S. Keep in mind the total market for gaming in the U.S. is about six times the size of the Las Vegas Strip, so gaming in the U.S. is much more than just Las Vegas.
One advantage Macau has over Sin City is that it's the only place in China where gambling is legal. So, while expanded gaming in Kansas may take away from Las Vegas growth, as China's economy grows, so will Macau.
How big can Macau get?
When considering how big Macau could get over the next decade, we need to consider both China's economic growth as well as gaming as a percentage of the economy. If China's GDP grows between 7% and 8% over the next decade, the economy would double in size, giving a larger base for Macau to draw from.
So, China's growth alone will lead to growth in Macau, but so will access. As I pointed out above, Macau is the only place in China where gambling is legal and a limiting factor to tourism has been access. A high speed rail into mainland China and a bridge to Hong Kong, among other infrastructure improvements, will also lead to growth in Macau. These improvements will give China's growing middle class easy access to Macau and make it an international destination as well. Even when you consider the potential for gaming expansion around Asia, I think Macau can double its gaming revenue as a percentage of China's GDP to around 1% from 0.48% in 2013..
If China's GDP doubles, and gaming revenue as a percentage of the economy doubles, it's easy to conceive that gaming revenue could quadruple to around $200 billion by 2023. Put another way, that would be 16% annual growth, a level Macau has surpassed over the past decade.
A $200 billion gaming market may seem impossible to fathom, but as the region grows and resorts expand, it's a distinct reality. That would be a boon for Las Vegas Sands, Wynn, Melco Crown, and MGM, who will all share in the spoils of a growing Macau.
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The article How Big Could Macau's Gaming Market Be in a Decade? originally appeared on Fool.com.Travis Hoium manages an account that owns shares of Wynn Resorts, Limited. The Motley Fool has no position in any of the stocks mentioned. 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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