While rising revenue is a positive for casino operators, the way the revenue is broken down between the so-called mass market gamblers and the VIPs makes a big difference to the bottom line profit.
As such the revenue split is closely watched by gaming analysts. Although VIPs spend more they are often brought in by agents, known as junkets, to whom the operator will pay commission. They are also given perks such as free hotel rooms and drinks, so although they are big revenue drivers they are more costly, reducing the profit margin.
In 2018Q2 in Macau, the mass market was the main driver of gross gambling revenue growth, gaining 21 percent compared with 14 percent for the VIPs. That’s a switch from the prior few quarters when the VIP market had been leading.
“That mass, once again, drove growth in 2Q is great news for operators as it has been the backbone of the recovery and is generally less sensitive to political winds,” Union Gaming wrote in a note. “That mass outpaced VIP is also an upside surprise relative to most expectations and, trade war fears notwithstanding, is reason to remain bullish on the Macau names.”
Macau’s 41 casinos generated 265.7 billion patacas (about $32.9 billion) in gross gambling revenue in 2017, that’s almost double the revenue generated by casinos on the Las Vegas Strip. (AGB)