June marked Macau’s 11th straight month of rising gross gaming revenue (GGR), following 26 months of year-on-year declines. The rebound has been dramatic and dynamic, so much so that analysts called June’s 26 per cent rise to HK$19.4 billion a disappointment. Over those 11 months of recovery, GGR has risen 13 per cent to HK$217 billion, but since the start of this year, VIP revenue has grown faster and the trend is accelerating. In this year’s first quarter, government figures show VIP revenue – from high rollers in private rooms, often playing on credit provided by the casino or junket promoters – grew 17 per cent, double the rate for mass market revenue from the main casino floor. A second-quarter breakdown from Macau’s casino regulator will be issued later this month.

Three strange links between Macau, North Korea

Most analysts contend official numbers overstate VIP revenue and rely on other sources including casino operators. But even Union Gaming’s managing director in Macau, Grant Govertsen, long a cheerleader for Macau’s mass-market future, concedes that VIP revenue is now growing faster. Rather than a “mass led” recovery, Govertsen now calls it “mass anchored”.

JP Morgan analysts DS Kim and Sean Zhuang estimate VIP revenue growth overtook mass market in the second quarter (28 per cent vs 17 per cent; 42 per cent vs 14 per cent in June) for the first time since the third quarter of 2011. For the six months through June, JP Morgan estimates VIP revenue has grown 19 per cent, compared with 16 per cent for mass. It upgraded full-year growth forecasts to 17 per cent for VIP and 13 per cent for mass.

What a mysterious death tells you about the future of Macau

Investment bank Sanford Bernstein credits robust VIP growth to China’s economic improvement, a “recovered” junket system – following multiple high-profile thefts in the hundreds of millions dollars since 2014, plus widespread consolidation as debt collections plummeted – strong liquidity to finance lending to players and a moderating anti-corruption campaign.

The arrest of Australian casino operator Crown Resorts employees in China last October – 19 were convicted last month – has also boosted Macau’s VIP sector. Many casino firms reportedly shut their mainland marketing operations after the arrests, making them more reliant on Macau junket promoters to deliver VIPs. Wynn Palace, opened last August, further revived VIP interest.

However, the city’s nod to the mass market is also helping. Melco Resorts’ Studio City and Sands China’s Parisian, which both took literally the government’s directive to make Macau a centre for tourism, are both proving popular. Studio City has a Hollywood theme, multi-stage magic show, the world’s highest figure-of-eight observation wheel and more.

Riffing off the Venetian, the Parisian reproduces more than a dozen City of Light landmarks. Steve Wynn said Wynn Palace aimed simply to be “the most beautiful hotel in the world”, and tourists would have to come see it. There is also some crossover – Wynn Palace might be tempting the tourists, but it has also proven very popular with VIP gamers.

David Bonnet of gaming and real estate adviser Delta State Holdings sees “significant recovery underway, primarily driven by incremental visitation due to the Wynn Palace and Parisian Macao openings. Revenue gains consistent with a long-term sustainable recovery [are] due to increased competition but are also helped by a revenue shift from VIP to mass casino business and therefore increased gross profit.”

Why Trump’s travel ban puts Macau, Malaysia in Islamic State’s sights

Indeed, VIP profit margins are one-third or less than those of mass market play.

Casinos won’t make up the difference on volume: at this year’s growth rates, VIP revenue will barely reach half of what it was in 2013. Macau’s future remains its transition to mass market.

WATCH: The making of The Parisian Macao

“This shift in the market should continue over the coming years, driven by incremental capacity expansion [new hotels, casinos, retail, and entertainment offerings] and transportation improvements in and around Macau, with increasing visitation and greater penetration of China,” said Sanford Bernstein analysts Vitaly Umansky, Zhen Gong and Yang Xie in a report on Macau titled Ascent of the Masses.

Increased overnight stays, up 14 per cent this year according to the latest Macau government figures, illustrate growing tourist appeal.

But new guests are most likely to come from the high end of the market. Unlike Las Vegas, Macau is still searching for its formula to open mass market wallets outside the casino.

For now, Global Market Advisers senior partner Andrew Klebanow observes, “The highest and best use of a Macau hotel room is still a premium gambler.” ■