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Vegas, Macau Or Cotai: Where Are Casino Companies Placing Their Bets?

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Vegas, Macau Or Cotai: Where Are Casino Companies Placing Their Bets?
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To American investors, Macau may be the Las Vegas of China. However, even after Macau’s revenue downturn in recent years, it still generates roughly three times as much annual gaming revenue as Las Vegas.

But size isn’t everything, and growth is extremely important for investors. Now that Macau’s downturn appears to be over, where should investors put their money?

Macau has a total of 33 casinos, the majority of which are located on the Macau Peninsula. But the most recent growth efforts by the major U.S.-listed casino operators Melco Crown Entertainment Ltd (ADR) (NASDAQ: MPEL), Wynn Resorts, Limited (NASDAQ: WYNN), Las Vegas Sands Corp. (NYSE: LVS) and MGM Resorts International (NYSE: MGM) have been focused almost exclusively on the Cotai Strip.

What's Cotai?

Cotai is an artificially-created 2.0-mile plot of land connecting the Taipa and Coloane islands in Macau.

In recent years, casino companies have focused on building Cotai up to be Macau’s answer to the Las Vegas Strip. In the second half of 2016 and 2017, the Cotai Strip is expected to add six new resorts that include an incredible 9,180 new hotel rooms.

Each of the four companies mentioned above either opened a new Cotai Strip resort since the beginning of 2015 or plans to open one by the end of next year.

There have been no significant construction projects on this scale in Las Vegas since the opening of Blackstone Group LP (NYSE: BX)’s Cosmopolitan resort in 2010.

Las Vegas Sands’ $2.7 billion Parisian Macao resorts opened in Cotai just last month. Wynn’s $4.1 billion Wynn Palace opened in August. MGM's new $3 billion Cotai resort is coming in 2017.

The Las Vegas Strip has delivered solid 2.2 percent revenue growth in the past year and may continue to contribute modestly to share price gains or the major casino stocks. However, all the major players are placing the biggest bets on Cotai.

Disclosure: The author is long MPEL.

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