Why 2015 Could Be a Great Year for the Macau Gaming Industry

By Markets Fool.com

Last year marked the first in its decade long post-monopoly history that Macau has not seen an increase in gaming revenue year-over-year. Following disappointing December numbers, and similarly poor reports since April 2014, Macau posted total gaming revenues in 2014 slightly lower the previous year. This is a big change from 2013 when total gaming revenue came in nearly 20% higher than the year prior.

Continue Reading Below

All of the missed growth that was expected during 2014 has hurt investors that had bet on companies like Las Vegas Sands,MGM Resorts International, andWynn Resortswhose shares lost as much as 35% since April 2014.

"Old" Macau, across the water from the newer developed area where the Cotai Strip sits. Photo: Bradley Seth McNew

Why Macau has suffered
There are a few reasons why Macau has suffered so much in the last year. A tempered outlook for the Chinese economy and housing market has taken some of the blame. A partial smoking ban on casino floors has often been cited as well.

However, the main reason for the downturn has been the loss of the VIP segment. Coming largely from mainland China, these high net worth players have been hammered over the last eight months by tightened government regulations following multiple money-laundering scams.

Continue Reading Below

2 reasons why Macau could bounce back this year
For investors who weathered the storm that was 2014 and even those looking to make their bets now, the bottom for this Macau-mayhem seems to be in sight, and 2015 could enjoy a turnaround.

First, we are seeing a continued rise in mass market gamers. While the VIP segment in Macau has been volatile, the trend towards developing a "mass market" segment is still a long-term growth driver for the region. Casinos focused on the growing Chinese middle class, international visitors, and those enjoying Macau for more than just gambling are set to see increases in visitation and spending in 2015 and beyond.

Avenida de Cotai (Portuguese). Photo: Bradley Seth McNew

Second, to host this increase in visitors and make good on the promise to offer more than just slot machines, each of the major players in Macau are planning new integrated resorts on the Cotai Strip, an up-and-coming area where Wynn and MGM first made their claims in the city.

Two of these new casinos are set to open this year with two more coming in 2016. The ones coming this year, from Las Vegas Sands and Melco Crown , should mark the beginning of renewed growth for Macau.

Melco Crown will be opening Studio City -- this cinematic-themed property is the first of what should be a relatively large influx of hotels and gaming facilities on the Cotai Strip. Las Vegas Sands is launching The Parisian toward the end of 2015 at a cost of $2.7 billion. This spectacular resort, shown in construction in the picture below, will eventually house 450 gambling tables, 2,500 slot machines, a retail mall, and a 500-foot (50% scale) replica of the Eiffel Tower.

Parisian construction from Sands Cotai balcony across the strip. Photo: Bradley Seth McNew

MGM and Wynn will each open their own major resorts in 2016. Once the new attractions are open, Macau revenue should benefit from the surge in mass market visitors. For these reasons, Macau looks like it could have a turnaround year in 2015 and once again be a great bet for investors, especially those with a long-term outlook. But take note, there could be more tough news ahead for this Chinese Sin City before the recovery kicks into high gear.

The article Why 2015 Could Be a Great Year for the Macau Gaming Industry originally appeared on Fool.com.

Bradley Seth McNew owns shares of Las Vegas Sands. 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.