Gambling revenue and visitors
Here, the relationship between gambling revenues and the number of visitors is graphed. It is a somewhat surprising relationship. Intuitively, there must be some relationship between those two variables and, random variations or omitted variables aside, it could be assumed it would be a direct one.
That is not apparent when we look at revenue and visitors’ series together in Table 4. On one hand, the relationship is inverted in about one-third of the observations, which seems a high frequency. On the other, their ratios vary wildly. It is apparent there are other factors influencing the relationship between revenues and variations in tourist arrivals and they appear to be “hidden”.Table 5 takes the arrival numbers and breaks them down further into the number of visitors on organised tours and Chinese nationals travelling on independent visas. Combining the two and deliberately using only line charts, it becomes clear how difficult it is to gauge any stability in the relationship between them. In fact, if we compute the series averages, which are close to zero, and the standard deviations showing very high multiples of the average, the values suggest a highly random factor is at play.
The two biggest source markets for tourism arrivals to Macau are the mainland and Hong Kong. As in the case of Table 4, the casual observer would expect there to be a relationship. Again, the analysis of Table 4 could be repeated here almost word for word. Of note are these somewhat puzzling and extreme cases. In July 2008, visitors from Hong Kong and the mainland increased by 30 percent and 21 percent respectively, and yet revenue fell by seven percent. In May last year, Hong Kong visitors decreased by 20 percent and mainland arrivals by 12 percent, while revenues increased by six percent. Macau’s revenue engine seems not to be in the number of visitors but lies somewhere else. Contrary to what might have been thought previously, expectations about high visitor arrivals do not seem to be driving the sector. One final note is that the analysis here does not make a distinction between high-rolling, VIP visitors to Macau and regular visitors. It has long been understood in the gaming industry that this sector provides a substantial proportion of the “big money” in gaming, right across Asia. Unfortunately there are no reliable statistics available for either high roller arrivals or the volume of money they spend at Macau’s casinos. The VIP segment may possibly be the “hidden” factor at play in the relationship between gaming revenues and arrivals.

Gambling revenue
The gambling sector’s share of the local economy is so great that the topic deserves interpretation frequently. Looking back over the period of the global financial crisis and immediately after, what are the big picture trends in the sector’s performance?
The graph shows the total gaming revenue recorded by the government from the start of 2008 until the end of the third quarter. There is a clear decreasing trend throughout 2008. It was followed by what could be characterised as a stabilisation phase in the first half of last year. Since then, the trend has been upwards in a mostly sustained way. These movements suggest that the uncertainty in the financial markets and the tightening of credit, have a direct impact on Macau’s gambling sector. Even if, overall, the figures suggest that the effect has been relatively mild. Increasingly relevant to any future analysis will be mounting inflation pressures. The past few months have seen prices of consumer goods rise, resulting in a gap between the monetary and “real” size of gaming revenues. The latter have been deflated here using the consumer price index.
This graph breaks down the previous series according to year, looking for some seasonal fluctuation in the data.
The overall, greater trends mentioned above are even more obvious. But there is no clear suggestion of seasonal behaviour. If the first halves of 2008 and last year hinted at a developing pattern, that was clearly absent this year.
One trend, however, is comforting: the cumulative revenues since the beginning of 2008 seem so well behaved that the trend line on the graph has an r2 in excess of 0.985. An r2 is a measure of goodness-of-fit of a linear regression. It seems the public finances will only face the prospect of growing surpluses, as tax income appears to be rising faster than our ability to devise ways to spend them wisely or not.

by José I. Duarte
Economist /Macau Business
Senior Analyst Data source: DSEC Charts and graphics in our paper edition and MB online browseable