There is little certainty about the recovery of the tourism market (gambling…) in Macau, but these two acronyms will be decisive. When will the recovery be complete? Nobody knows.
MB July 2020 Special Report | Crossroads of Macau tourism
“Habits are radically changing. Business travellers aren’t going to step onto a plane and fly 5 – 8 hours, then walk about on a conference floor with hundreds or thousands of other people if they’re not convinced they will be safe,” Andrew Pearson stated to Macau Business. He is Managing Director of Intelligencia, a company working with G2E Asia 2020, (now pushed from May onto December).
Mr Pearson, who confesses to being amazed at how Macau reacted to this virus and astounded at how few cases there have been, is one of the voices that it makes sense to take into account when projecting the future of the tourist market in Macau in the short to medium term.
“The Chief Executive is now talking about working with Guangdong to lift the suspension of its IVS, but not the group tours, and there in that statement lies the future. Even if the Chinese were ready to travel outbound again, which destination would be comfortable being flooded by masses of Chinese again? Would Macau be comfortable with 27 million mainland Chinese next year? [last year Macau received almost 40 million visitors of whom 28 million were mainlanders. Of this 28 million, 13 million were IVS, transit 8.4 million and the rest group tours. Guangdong represented 72 per cent of total IVS”], asks Ben Lee, from IGamiX Management & Consulting.
The future, therefore, seems to be, at least in the coming months, with fewer tourists.
Macau wants the restart and maybe relaunch the IVS, but the tour groups will be for later.
The key, once again, will go to VIP players; few but good.
Otherwise, how would Steve Wynn’s recent (and rare) words be understood when he stated that, “when the borders open, Macau will recover very quickly”? MGM was even more direct in assuming that it will bet on VIP players in order to recover from the economic impact caused by Covid-19.
“Looking ahead, we believe VIP should see a faster recovery,” Credit Suisse equity analyst Kenneth Fong wrote in a research note. “We estimate the pent-up demand will help the VIP business to recover to 50 per cent once borders reopen and likely reach 100 per cent of the pre-virus level in summer time. On the other hand, mass recovery is likely to be more gradual.”
Gaming operators Melco Resorts, Wynn Macau and Galaxy Entertainment Group are better positioned for a post Covid-19 recovery due to their higher focus on premium mass and VIP players, analysts at Sandford C. Bernstein indicated in a recent report.
The first studies, carried out during the Covid-19 quarantine, seem to support the idea that VIPs will be the driving force of recovery: research by Macau Research Center has found that 60 per cent of those who visited Macau during last March came to gamble, with each willing to spend around MOP$87,000 on average.
2021 or 2022?
The Pacific Asia Travel Association (PATA) is forecasting that Macau will receive a total of 26.42 million visitors this year.
This outlook has a double importance: it is the first entity that advances a specific number of visitors and, even more relevant, it casts an overly optimistic eye: if in the first three months only 3.2 million tourists visited Macau, in the remaining 8 months, 23 million will arrive (over 2.8 million visitors per month), according to information disclosed by the Portuguese language newspaper JTM.
PATA’s optimism is not shared by all players.
Union Gaming and Nomura, for example, anticipate sequential recovery throughout 2021. The house of analysis Nomura even speaks in 2022 as the year in which Macau will return to 2019 figures.
For its part, JP Morgan Securities (Asia Pacific) understands that it is, “reasonable to expect 2021 earnings before interest, taxation, depreciation and amortization to be similar to that of 2019.”