Macau – big changes in a little city

September 23, 2015 / By  

I recently took a short one-hour ferry ride from Hong Kong to Macau, the “Gaming Capital of the World”, to spend a weekend exploring the city. Although I have visited this small, densely populated city (20,500 people per sq km) many times since my first trip nearly 10 years ago, I am always astounded by the changes that have taken place between each visit – whether it is a new casino that has opened, progress on a bridge linking Macau and Hong Kong or the plethora of new retailers that have entered the market.

Since the opening of the Macau gaming industry in 2002, there has been a rapid development of the property landscape, in large part stemming from the completion of big integrated casinos which draw millions of tourists (32 million in 2014) and employ thousands of people. Although gambling is the main draw for tourists – with revenues seven times larger than Las Vegas in 2014 – this city’s rise as a gaming hub has also fuelled the development of major hotels, shopping centres and residential complexes.

Following what seemed like an insatiable appetite by Chinese consumers, casino operators attempted to catch up with the strong demand by undertaking large expansions. However in mid-2014, market conditions abruptly changed following a collection of factors including anti-graft measures undertaken in China and the tightening of visitation restrictions on Mainland tourists. As a result, gaming revenues started to trend lower (almost 40% lower y-o-y for the first 8 months of 2015) while visitor arrivals growth also weakened (-4% y-o-y as at YTD July 2015). Although the decline in tourist traffic has been modest, the changing profile of Mainland Chinese visitors has had a notable impact on the market much like it has in Hong Kong’s retail sector – a shift in demand from high-end to mass market.

Market conditions in Macau are likely to remain challenging and stay this way in the short term as businesses readjust their strategies to appeal to a wider target market and “new normal”. However, it’s not all doom and gloom with some positive developments likely to provide a more encouraging outlook for the long term. The government has recently relaxed the restriction on the length of stay for Mainland Chinese visitors that was imposed last year. Also in the next few years the entry of six new large integrated casinos which have large space dedicated to non-gaming services and entertainment should broaden the appeal of Macau to tourists, while the development of the Hengqin special economic zone which borders the city helps promote economic diversity in the region. At the same time, the completion of the Hong Kong-Zhuhai-Macau Bridge will facilitate easier travel between the cities and potentially broaden the city’s target market.

I “bet” there will be further change the next time I visit.

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