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First, growth was to be derailed by China's corruption crackdown. Then it should have been hurt by China's slowdown and/or credit tightening. But betting against the world's biggest gaming market has so far proved a mug's game: revenues are still growing by a fifth year-on-year and Melco Crown, the casino operator, has literally just doubled its profits. Jackpot?
Macau continues to confound its sceptics. Its casinos do not, alas, look anything like the one James Bond visited in Skyfall but they are enticing to the higher end of China's mass market. That is the ultimate sweet spot for the territory's casino operators: the customers are not VIPs expecting freebies and credit, but those happy to splash cash. Mass-market gaming revenues is growing at 30 per cent a year, three times that for VIPs. Earnings forecasts for other China consumer-facing sectors such as retailers have been revised downwards by a quarter in the past year, according to CLSA. Macau operators' forecasts have instead been rising for the past six months. Melco Crown's profit jump was powered by City of Dreams, its flagship on the fast-developing Cotai Strip. The company's shares have shot up, gaining 150 per cent in a year. Relative to forecast earnings however, they have risen a more circumspect two-thirds.
Will the boom ever end? Sure, China's pool of gamblers has limits, eventually. And regional rivals – Singapore, the Philippines – are also eying mainland tourists. China could clamp down on how gamblers sneak funds past its capital controls. Macau itself could cause problems: the six operators work under a concession system which will be renegotiated in the coming years. Maybe the casinos' still huge development plans will overload the market. But with all operators looking for now at rising free cash flow and enjoying resilient demand, it will take a big shock before gamblers give up on these growth bets.