A bridge to far (from a casino)

MB November Special Report | The ghost bridge

Not only did the bridge not benefit the gaming industry, but it even coincided with less positive months for the casinos. Changes are only in the long run.

In early March this year, Morgan Stanley analysts wrote, “We are incrementally turning more positive – leading macro indicators are suggesting GGR improvement from 2H19.”

Analysts Praveen Choudhary, Jeremy An and Thomas Allen added, “Mass revenue should improve with the help of strong visitation: we believe better infrastructure, notably the HZMB, will drive strong visitation to Macau.”

It is true that Chinese visitation continues to grow, but perhaps today Morgan Stanley experts did not write the same: Not only has GGR stopped rising in these months that coincide with the opening of the bridge (January was the first ‘black month’ in 29 months…), but it is now clear that more tourists have not translated into more revenue.

“What we have seen so far is that a significant volume of the traffic that would normally have come through the ferries have been diverted to the bridge,” states Ben Lee, the managing partner of iGamix, to Macau Business.

In the same way goes Grant Govertsen, from Union Gaming, interviewed by Macau Business. “In our view, the bridge has had a very minimal impact on GGR at best. The reality is that while one can get to Macau quicker than before via HKIA, it isn’t driving incremental gamblers. It just makes life a little easier for said gamblers to access Macau,” adds Mr Govertsen, to whom “these are people that would have come to Macau anyway, so the bridge shaves off a little time and therefore might result in a very modest increase in the amount of time a gambler stays on the casino floor. But that’s about it.”

Even in the explanations Grant Govertsen and Ben Lee agree. “The primary reasons for the diversion would appear to be the costs, followed by convenience. As there have also been a myriad of other factors in play recently, such as the protests in HK and China’s warning to junkets, it has been somewhat difficult to try and ascertain the reasons for the direction in GGR growth,” underlines Mr. Lee.

“What has been evident so far is an increase in visitation from grind mass customers and non-gaming visitors,” points out the team of researcher from Bernstein. “Casinos are not seeing a benefit as a large percentage of the visitation coming via the bridge are low value day trippers and nongaming tourists, with some travelling the bridge purely to experience it.”

So everybody agrees: Macau’s 3 million visitors coming in during the first half of this year via the bridge can help tourism but not gambling.

Can the situation change, however?

“Is hard to imagine the situation changing for the foreseeable future. That said, the bridge could have positive impacts on certain non-gaming segments, like the MICE business,” answers Grant Govertsen, advising that it “will take several or many years though as MICE events, especially the big ones, tend to have long contracts that will have to expire with their current hosts before they could consider switching to Macau.”

Ben Lee is bolder in future perspectives: “We projected that Macau may even become a dormitory for Hong Kong, in the same style as Shenzhen is, and the infusion of talent and indirect impact may hopefully provide a long-term sustainable platform for the diversification of Macau’s economy.”

Recent events in Hong Kong seem to give reason to the managing partner of iGamix: “Anecdotally, we are seeing a lot more Hong Kongers coming to Macau for day trips, and during the protests, overnight, and this was something we had anticipated with the launch of the bridge.”

Some are more optimistic.

It is the case of legislator Davis Fong, to whom although in its first stages the HZMB will increase the number of same-day and mass market, the bridge will attract more VIP players and MICE sector visitors in latter stages.

 “The first phase of the impact will basically be the lower mass market and one-day trippers. The second wave I strongly believe is the VIP. Why? Because many people told me it takes only one hour from Hong Kong Central to Macau Peninsula […] More and more VIP will choose to drive from Hong Kong to Macau,” the legislator said this year at the Legislative Assembly.

The reality is that one year is too little to come up with definitive ideas: for example, the numbers show the arrival of 3 million visitors in the first six months of this year. But how many just chose a different way of making an entry that would happen anyway?

Another example: what is the weight of Zhuhai tourists using the bridge to enter Macao and then taking the boat to Hong Kong, as they are safe conductors to Macau, and so take advantage of the ease of entry into the territory to go to Hong Kong? On the other hand, it is known that there are also tourists from Hong Kong heading to Macau from the bridge, then heading to the Siege Gate and entering Zhuhai.