Tickers in this Article: WYNN, MGM, LVS, JPM, MS, MPEL
Las Vegas' gaming revenue was justifiably poor in 2008 and even in the early part of 2009. We were, after all, in the throes of a recession. Who can justify gambling when jobs and money are scarce? But now, after six months of an improving economic outlook - supported by five straight months of rising personal spending - gambling revenue is surely at least doing a little better, right? Well, no...unless you're in Macau.

Mentioning today that China's Macau territory is the new gambling Mecca not only qualifies me for a "Master of the Obvious" award, it also puts me about a year behind the times. That's not my point. I want to talk about the persistent and alarming numbers behind that trend, and highlight the looming threat to that sole bright spot.

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Numbers Don't Lie
If it were just a mild difference, it probably wouldn't matter. It's hardly mild though - Macau is the only thing casino investors have to be excited about.

Take Wynn Resorts (Nasdaq:WYNN) for instance. Total company revenue was up last quarter as well as last year, for both Macau as well as Las Vegas. The only problem is Wynn's Las Vegas revenue was only up 11% in 2009 even though the company had the benefit of its new (opened very late 2008) Encore resort for 2009. Las Vegas' EBITDA was actually lower.

Conversely, Wynn's Macau revenue was actually a hair lower in 2009, yet EBITDA was up (and still more than twice that of Las Vegas' earnings).

That same Macau/Las Vegas disparity has held up through the first three fiscal quarters of 2009 for Las Vegas Sands (NYSE:LVS) as well. The same is likely true for MGM Mirage (NYSE:MGM), which has a decent interest in a few Macau/Asia properties, yet still managed to post a weaker top line in Q4-2009 than in Q4-2008.

And things are supposed to be better in the U.S.? Just wait - the more recent data gets even less encouraging.

Not Getting Any Better Here, Much Better There
Las Vegas' gaming revenue was lower by 10.4% in 2009, and didn't kick the new year off right either, dropping 3.2% in January. Granted, the Super Bowl fell in February of this year, which certainly had a negative impact on January results. Las Vegas' February numbers aren't out yet, and they may well be better - probably will be, in fact. But, will they be meaningfully better? If Atlantic City's February results are any indication, it's doubtful.

In February, New Jersey's version of Vegas saw its gaming revenue slide by 15%. The snow storm was plausibly cited as the cause but remember, excessively nice weather was cited as the cause for last August's 16% dip in gaming revenue, while Atlantic City's December casino revenue was down 9.8% just because it was down. Now compare that to the 55% increase in Macau's January's gaming revenue and February's 70% lift. That's more than "a little difference" - that's a red flag of the pitiful condition of the gaming industry in the United States.

No wonder Morgan Stanley (NYSE:MS) is looking to sell - at a loss - the half-built Revel Casino in New Jersey - it's a dog. And, no wonder JP Morgan (NYSE:JPM) upgraded Melco Crown (Nasdaq:MPEL) - a habitual loser - to "overweight" this week - it's got Macau exposure.

Why It Matters Now
So what's this pending risk? In simplest terms, the growth surge in gaming has just been capped by the Macau government.

As it stands right now, there are about 5,000 gaming tables in Macau. But Macau's top gaming official Francis Tam has placed a limit of 5,500 tables on the new Las Vegas. In other words, capacity is only going to grow another 10% before hitting a ceiling. Then, the easy money for U.S. based casino companies (and the only real growth to speak of) won't be so easy anymore because U.S. gamblers sure don't look like they're going to help on that front

The Bottom Line
If the U.S. consumer was going to get back in a gambling mood anytime soon, he would have at least dropped a hint of it by now. With Las Vegas and Atlantic City still in their indefinite slump, and now with Macau effectively establishing a revenue ceiling, it looks like gaming stocks have an expiration date. (For more, check out Sinful Investing: Is It For You?)

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