All you need to know about Macau’s recoveryBy Muhammad Cohen, Inside Asian GamingSeptember 2, 2017 at 12:19 pmMacau’s recovery keeps producing surprising numbers and serious questions. Gaming revenue powered ahead 19% though the first seven months of 2017, with both the mass market and VIP segments delivering double digit growth. Lucrative overnight visitors increased 10% in the year’s first half, filling new hotel rooms and seemingly fulfilling political and economic imperatives to shift Macau’s profile toward tourism and leisure.Yet investor enthusiasm remains tepid, with industry sentiment more cautious than triumphant. Renewed growth followed a 26-month slump from mid-2014 that shaved US$16 billion off Macau’s annual gross gaming revenue and cost operators US$6 billion in EBITDA. Rescaling those heights remains a distant dream. Meanwhile, with US$13 billion worth of integrated resorts opened since mid-2015 barely producing double digit returns, some Macau watchers wonder whether to call it a recovery at all.Sands Macao opened in May 2004 and recouped its US$265 million initial cost in nine months. For projects that followed, gaming’s standard 20% return on invested capital (ROIC) proved a modest hurdle. The first 10 large Macau casino projects after liberalization averaged 30% annual returns, according to HSBC research. But the latest Cotai projects are barely averaging 10% ROIC.“The recent respective performance of Wynn Palace and Parisian Macao illustrates over-scaled developments generating cash flows that are not consistent with investor expectations,” David Bonnet of gaming and property advisor Delta State Holdings says. With China’s outbound tourist count forecast to increase by two-thirds to 200 million by 2020, Macau’s relative under-penetration of mainland provinces beyond neighboring Guangdong, favorable market reaction to lavish US$4.2 billion Wynn Palace and government insistence on non-gaming attractions, the fact is that smaller, cheaper projects aren’t an option.