Hengqin to be key for visitation growth – Fitch

Infrastructure improvements in Hengqin and Zhuhai, namely the Lotus bridge/immigration checkpoint and the high-speed train extension from Gongbei, will have the largest benefit to tourism visitation growth long-term and considerable impact to Cotai integrated resort properties, a note from Fitch Ratings described.

China’s National People’s Congress (NPC) has recently approved the handover of the Henqgin lotus border checkpoint to Macau jurisdiction, with Fitch considering the new border crossing could be open in December.

Meanwhile, Zhuhai city authorities have also announced that the Zhuhai Airport Urban Rail Transit section, which will connect the Gongbei Border to Hengqin New Area, could open on November 20.

This new line is expected to cut travel time between Gongbei and the airport to half an hour and offer more choices for travel between Zhuhai and Macau.

‘Further development of Zhuhai and Macau airport is also welcomed, as these are primarily used by Chinese visitors,’ the brokerage noted.

Local analysts also previously told MNA that tourism flows coming from Mainland China will likely start to be diverted from the Gongbei Border to the Lotus Bridge checkpoint in Cotai

The Fitch Ratings gaming team held a tour to Macau in October, meeting with most concession holders, five Macau government agencies and visiting most major properties.

The financial company noted that it remained positive on the mass market long-term potential, as ‘China’s middle class’ wealth grows and infrastructure improvements in and around the Greater Bay Area continue’.

‘The mass market continues to exhibit double-digit growth (up 17 per cent year to date through third-quarter 2019) and is less affected by the headline risks that VIP is exposed to […] Mass has comprised 53 per cent of total gaming revenues in Macau for 2019 YTD, the first time it has exceeded VIP,’ Fitch said.

Accumulated VIP baccarat revenues dropped 17 per cent year-on-year in the first nine months of this year to some MOP102.9 billion, while mass-market casino gaming went up by some 18 per cent to MOP117.9 billion.

Fitch also noted that supply targeting premium mass at Melco’s Morpheus, Sands’ The Londoner, SJM’s Grand Lisboa Palace and Wynn Palace Phase 2 further supported this segment’s growth trajectory aided by incremental room supply.

‘Operators emphasized the need for incremental nongaming offerings to remain competitive for premium mass customers (entertainment, F&B),’ the note indicated.

Concerning the drop in VIP, Fitch commented that the decline in the VIP segment was mainly attributed to the weakening macroeconomic conditions in China, exacerbated by the ongoing US-China trade tensions.

‘Secondary factors include weakening of the Chinese renminbi, tighter liquidity for junkets, unsanctioned online gaming on mainland, existing money movement challenges, and other lower-tax APAC jurisdictions attracting VIP’.

The brokerage considered that the unrest in Hong Kong was ‘widely downplayed’, as most visitation comes through the Zhuhai border gate, while the packaged tour groups for Hong Kong/Macau, which are being impacted, are generally not VIP.

Between January and September this year, the growth in the number of visitors on excursions also slowed down by 4.5 per cent year-on-year to 6.8 million, with the overall number of visitors having increased 17 per cent to more than 30 million.

The Macao Government Tourism Office (MGTO) Director, Maria Helena de Senna Fernandes recently stated that authorities still believe the final number of tourist arrivals for 2019 should reach 40 million or close to that, despite external disruptions to the tourism market.

‘Nobody was optimistic about the [VIP] segment heading into 2020 and felt additional downside risk remains, should U.S./China trade tensions escalate and further impact Chinese business and real estate owner,’ the note read.