Macau's Big Losses Could Mean Big Gains For Other Gambling Destinations

The Chinese government's recent crackdown on corruption in Macau, the world's largest gambling destination, has led to a precipitous drop in VIP gaming revenue in the region. China has strict currency laws that wealthy Chinese gamblers had been skirting in Macau in recent years, and the crackdown has kept many VIPs off the island all together lately.

But does this absence mean that Chinese high-rollers are giving up the dice all together? According to Alcaraz Equity Research, once a gambler, always a gambler.

Same Game, Different Place

In a recent article on Seeking Alpha, Alcaraz argues that gamblers will not be discouraged from gambling by tighter policy enforcement in Macau. If Macau remains under the Chinese government's magnifying glass for an extended period of time, Chinese gamblers will simply find somewhere else to gamble.

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"Unless the Communist leaders of China threaten to jail its casino-loving citizens," the Alcaraz article explains, "millions of Chinese gamblers will not stop from travelling to and gambling in foreign countries."

Specifically, Alcaraz is referring to Asian gambling destinations Singapore and the Philippines.

Singapore

The outflow of gaming revenue from Macau is likely already benefiting Singapore. In Q4 of 2014, revenue from Las Vegas Sands Corp. LVS's Marina Bay Sands resort, one of two major casino resorts in Singapore, jumped 27 percent.

Singapore is less than a four-hour flight from Hong Kong.

The Philippines

Melco Crown Entertainment Ltd (ADR) MPEL opened its brand new City of Dreams Manila resort in the Philippines last month. Alcaraz sees the Philippines property as a major feather in Melco's cap and a potential way for the company to offset Macau's falling VIP revenue numbers.

A flight from Hong Kong to Manila takes less than two hours.

Outlook

As the world gaming market continues to grow, companies like MGM Resorts International MGM and Wynn Resorts, Limited WYNN are counting on growth from properties in Las Vegas or a rebound in Macau to support falling revenue numbers. However, Las Vegas Sands and Melco Crown Entertainment are hoping that their other Asian resorts will serve as an appealing alternative destination for former Macau VIP gamblers.

Disclosure: the author owns shares of Melco Crown Entertainment.