This hasn’t been a good year for investors to bet on Macau’s casinos. Shares of the six largest publicly traded casino companies there have fallen 20 percent through yesterday, Bloomberg News reports, giving back much of the lead they had built over Hong Kong’s Hang Seng Index over the past year. This chart, indexed as of May 8, 2013, shows the reversal:
The casinos are facing tighter enforcement of rules that limit how much money Chinese tourists can bring into the Macau “special administrative region.” Wynn Macau (1128:HK) fell the most yesterday, with an 8.5 percent drop. But the gambling center’s growth may not be over. The industry is undergoing a major shift—from focusing on an elite clientele of high-spending whales to the “premium mass” market.
While VIPs still contribute almost two-thirds of Macau casino revenue, Bloomberg Industries notes, margins on ordinary gamblers can be three times as high. That means profits could increase this year even as revenue levels off. Sands China (1928:HK), controlled by Las Vegas billionaire Sheldon Adelson, converted 20 percent of its VIP tables to a format friendlier to the middle class in the first quarter, Bloomberg data show.
The change is roiling the industry’s wealthiest men. Adelson, the 13th-richest person in the world, according to the Bloomberg Billionaires Index, has lost $1.7 billion in 2014. Lui Che Woo, who controls casino operator Galaxy Entertainment (27:HK), has lost $5.4 billion this year, nearly a quarter of his fortune.