Credit-rating agency Standard and Poor’s (S&P) said on Tuesday it is bullish on Macau’s booming casinos, whose earnings would overtake those of all of Las Vegas’ gaming centres within four years.
But it also warned that over-investment, competition from other Asian gaming cities and a lack of infrastructure in the southern Chinese territory could pose risks in the future.
“We expect growth in Macau to remain in double digits for several years to come,” said S&P director of corporate infrastructure ratings, Mary Ellen Olson, explaining that compound growth over the past four years had worked out at a whopping 26%.
“Its key advantage is that it draws its customers from the local region — China and Hong Kong,” she said. “That is likely to insulate it against outside competition.”
S&P estimates that Macau’s casino revenue will top $6,4-billion for 2006, a growth rate in excess of 15% and already above earnings on the Las Vegas Strip.
“In the next three to four years, taking into account the growth differentials, we think Macau will overtake all of Las Vegas,” said Craig Parmelee, managing director of ratings services.
Such growth is being driven by continued increases in tourism, with visitor arrivals jumping to almost 20-million in the first 10 months of 2006, more than half of whom came from mainland China.
Official figures are expected later in the week from the Macau tourism authority.
As Macau is the only Chinese city where gambling is legal, S&P expects tourism arrivals to continue to grow in the near future.
It also believes the Cotai Strip, a gaming district rising on reclaimed land, will become a major focus of the industry in Macau.
“Take up will be slow to begin with for a new facility like this but we expect that with good management and on-time construction … Cotai will be a major milestone for operators,” Olson said.
Macau’s casino sector has rocketed since a law passed in 2001 stripped tycoon Stanley Ho os his 40-year monopoly on casino operations in the former Portuguese enclave.
The move attracted US operators, such as Las Vegas giants Sands, Wynn and MGM, whose new glitzy casino-hotel complexes transformed the sector, ushering in an era of massive growth.
While Macau’s success was built on strong fundamentals, Olson also cautioned it could all unravel in the face of several risks.
One particularly stubborn problem remains a chronic labour shortage in the city. While the gaming industry employs 30 000 people, it needs another 5 000, which it is increasingly having to source from overseas.
“With the Cotai Strip expected to treble casino supply, a lot of people are going to be needed,” said Olson. – AFP