OPINION – Uncertain horizon

Macau Business | February 2021

Since mid-2018, and until the beginning of 2020, the monthly number of visitors to Macau was usually above the three million mark. That is roughly 100,000 or more people per day, on average. It was steadily sustained, with just a couple of exceptions, since then. Then in the first half of last year, January aside, lights dimmed. Numbers started to go down fast in February, and the second quarter in particular, and with less than fifty thousand visitors altogether, was an absolute disaster.

By José I. Duarte | Economist, Macau Business Senior Analyst

The second semester brought some hope with a sustained upward trend. Figures stayed above the 600,000 level in the last two months of the year.  However, the big push anticipated for the National Day, and the Christmas and New Year periods stood below expectations and did not provide the desired impulse. While much better than in the first half, the figures still hang at roughly one-fifth of what they were before. It does not require too much effort to conclude that an economic structure designed for the millions cannot subsist for long like this – even if numbers were to double in the coming months, which is unlikely. 

Businesses will inevitably go bust, and the survivors will have to re-evaluate their size and structure to remain viable. That will have further impacts on employment and income levels and, necessarily, the size of private expenditure, both consumption and investment. We will not avoid further contraction or, at best, a prolonged recovery if numbers do not pick up rapidly. 

Casinos may conceivably recover with lower flows of visitors if they attract ‘bigger’ gamblers, which cannot be taken for granted. But several businesses rely, directly or indirectly, on the spending of visitors. In particular, a sizeable number of shops, as well as restaurants and hotels. They depend critically on people actually coming and spending.

The prospects for fast recovery are not very strong though. There are several reasons concur for that rather negative stance. Firstly, no source of visitors shows growth prospects in ways that might change the general outlook. Remember that mainland China, Hong Kong, and Taiwan accounted for about 90 percent of the visitors’ flow, the remainder from the rest of the world. 

Travel from the latter is entirely barred, and there’s no indications that the situation might change in the foreseeable future. Taiwan connections are now closed, and even if they re-open shortly, the associated flows are liable to be limited. The situation in Hong Kong inhibits any dependable guess regarding the normalization of the border crossings. A resurgence of virus outbreaks means that, even from the mainland, visitors’ numbers are likely to be below what would be indispensable for a robust recovery. 

Furthermore, the visitors’ profile may be changing in terms of both their points of origin and spending patterns. The closest provinces, and Guangdong especially, have always represented a significant share of the total number of mainland visitors. The reliance on closer neighboring regions seems likely to increase. That is a development also suggested by the most recent numbers. If consolidated, such a trend might translate into more frequent visits, possibly associated with shorter duration stays, on average. And, perhaps, less diversified expenditure patterns and lower average spending levels – at least, both inside and outside the gambling rooms.

Even if the recovery turns out more robust than the lines above imply, the disruption caused for many businesses’ staff, both in absolute numbers and skill pools and experience, means the resumption of standard services may not be achievable shortly.  Heavy clouds of uncertainty are still hanging over the tourism sector.