| HONG KONG
HONG KONG (Reuters Breakingviews) - The Chinese gambling enclave of Macau has been going gangbusters of late, with gambling revenue rising for a ninth straight month in April. Shares in casino firms have rallied strongly alongside. The top three Hong Kong-listed stocks, Sands China, Wynn Macau and Galaxy Entertainment, have added $20 billion in market value. But the sector still lacks a family-friendly hedge against political and economic risk. Resort operators better hope their new luck holds.
The picture emerging from the first quarter shows most Macanese casinos rebalancing toward mass-market "grind" gambling. At Galaxy, revenue hit HK$14.1 billion ($1.8 billion), up 5 percent year-on-year, thanks mostly to a 15 percent rise from mass game tables. VIP revenue fell 5 percent. That's healthy: it was overdependence on corrupt officials betting embezzled money on baccarat that left Macau so exposed to China's massive anti-corruption crackdown.
Graphic: Rebound in Macau: reut.rs/2pFKQ7c
However, VIP gambling is neither dead nor dying. Wynn Resorts, for example, saw explosive growth thanks to its new Wynn Palace - a $4.2 billion VIP honey trap that Steve Wynn opened last year and which was built, as the magnate said, "for adults".
What hasn't changed much is the mild contribution of non-gaming "family-friendly" entertainment to the top line in Macau. At Wynn's Las Vegas operations, for example, non-gaming businesses make up 70 percent of net revenue. The same proportion at the company's Macau properties was just 14 percent, according to Breakingviews calculations; at the Wynn Macau, non-gaming revenue fell 16 percent year-on-year.
It might be that visitors don't really want Macau to be family-friendly. Galaxy's Broadway Macau, which is explicitly billed as such, has no VIP gaming; it saw revenue fall 25 percent on an annual basis.
There are upsides to being a pure gambling play, of course: no booking musical acts, fixing roller coasters or training dolphins. However, that leaves a thin cushion against the risk of a relaunched corruption campaign. As for Chinese retail gamblers, their enthusiasm for betting is closely linked to the availability of easy credit - and monetary policy is tightening. At some point even the house's luck can run out. But for now the business is in the best shape it's been in for years.