Double act on horizon
As Macao seeks to boost mass-market gaming revenue with diversification as its economic engine, the journey will likely connect in the near future with Hengqin in Zhuhai, analysts said.
“The development of Hengqin, which targets nongaming tourism, is the key to Macao’s economy,” said Billy Ng, head of Asia gaming at Bank of America Merrill Lynch Global Research.
“Diversification is the direction of Macao, which needs a lot more land. Macao government can reclaim more, but it is already available on Hengqin Island. It’s critical to see how the two places integrate in the next few years,” Ng added.
Linking Hengqin, Zhuhai’s largest island, with Cotai, Macao’s new gaming town, is the Lotus Bridge — which is less than 200 meters long.
The Lotus border gate began 24-hour service on Dec 18, boosting daily passenger capacity from 20,000 to 100,000. The round-the-clock border service is considered to be only a “small first step” for a tourism hub combining Hengqin and Macao, providing both gaming and nongaming attractions.
“It would be ideal if people could commute more easily between Macao and Hengqin,” said Ng. “There hasn’t been any relaxation on multiple entry to Macao for Chinese mainland tourists, who could then stay in Hengqin hotels and visit Macao gaming resorts several times. If things evolve in that way, there’s a huge potential for Macao to become a key tourism destination.” Ng said with attractions such as the Chimelong Ocean Kingdom, a theme park that mimics its Hong Kong peer, Hengqin is set to become a vast attraction for mass-market visitors, especially families.
Opened a year ago, Ocean Kingdom is said to be the biggest of its kind in the world. During the Spring Festival “Golden Week” last year, the theme park received more than 400,000 visitors.
At the same time, massmarket visitors are being desperately sought by Macao casinos, which have relied on VIPs for too long. “By increasing the share of mass-market business, Hengqin will be supportive to the sector in the long run,” Ng said.
According to a Barclays report, mass-market penetration is low in Macao. While in Las Vegas the domestic penetration rate was at 10 percent in 2013, the equivalent penetration number for mainland visitors was “very low” at 1.4 percent in Macao. However, it is already up from just 0.2 percent in 2011.
The spending power of potential visitors is also a source of comfort.
While Guangdong contributes 44 percent of visitor arrivals in Macao in 2013, the next top seven provinces combined account for just 18 percent. However, their average per capita GDP is 5 percent higher than that of Guangdong, while their per capita urban household disposable income is similar.
“We therefore believe that growth of visitors from these relatively more penetrated regions could likely continue,” the report predicted.
“After all, Macao is the best place to operate casinos worldwide. There’s no (other) jurisdiction as good,” said Lawrence Ho Yau-lung, cochairman and CEO of Melco Crown Entertainment Ltd. “In 2017, the Hong Kong-ZhuhaiMacao Bridge will be a fully transformational element.”