Galaxy Entertainment Group (GEG) has acknowledged that hotel capacity could become a significant constraint on Macau’s long-term growth. The company is hopeful that further policy breakthroughs will facilitate the development of Hengqin, which could help alleviate some of the current limitations in the hotel sector.
This insight was shared by Goldman Sachs following a roadshow with investors in Singapore earlier this week, featuring Galaxy’s Chief Financial Officer, Ted Chan, and Senior Vice President of Integrated Resorts, Peter Caveny.
Currently, Macau has approximately 48,000 hotel rooms, with 38,000 of them rated four stars or above. This number is only sufficient to meet roughly half of the 80,000 to 100,000 daily inbound visitors Macau has been receiving in recent months. The remaining visitors are primarily day-trippers from Hong Kong or other nearby areas in the Greater Bay Area. In contrast, cities like Las Vegas boast 150,000 hotel rooms, Hong Kong offers over 80,000 rooms, and Singapore has more than 70,000.
Galaxy Entertainment’s management has emphasized that this shortage of hotel rooms underscores the need for more policy support to enhance connectivity and facilitate the construction of additional hotels in Hengqin. Over time, these efforts ‘would require ongoing coordination between Macau and Guangdong’.
In April this year, Hengqin introduced new policies allowing vacant, idle commercial buildings to be temporarily converted into hotels.
According to data from the Multi-Economic Development Research Institute of Hengqin, the average hotel occupancy rate for 2023 was 51.17 percent, reflecting the robust growth of the tourism industry.
During the 2024 Chinese New Year period, 16 key hotels in Hengqin hosted 156,000 guests, with peak-day occupancy reaching 21,000 and room occupancy hitting 97 percent.
Meanwhile, the average occupancy rate for homestays in Hengqin exceeded 80 percent, with some well-rated homestays nearly fully booked, boasting occupancy rates as high as 99 percent.
As of August 2023, Hengqin has more than 8,000 hotel rooms, of which approximately 2,000 are for business or leisure use (apartments). Reports indicate that Hengqin may increase its number of hotel rooms to 100,000 in the future, although no official confirmation has been made regarding the future scale of hotels in Hengqin.
It is also worth noting that Macau is about to open its first 80,000-capacity outdoor concert venue in Cotai, with the inaugural show scheduled for December 28th of this year. Meanwhile, the Macau LRT (Light Rapid Transit) train will soon launch the Hengqin Line, enhancing connectivity between Macau and Hengqin, particularly between Cotai and Hengqin. This will help alleviate traffic issues and improve overall access to the region.
Key challenge for long-term growth
The investment memo from Goldman Sachs also sheds light on the differing hotel room capacity among Macau’s major casino operators. It notes that capacity growth will be a critical driver of future expansion for Macau’s tourism and gaming sectors.
According to analysts Simon Cheung, Alpha Wang, Leah Pan, and Dorothy Wong, the key challenge lies in addressing the insufficient hotel rooms to sustain long-term growth.
‘Galaxy has 85 percent of its hotel rooms comped out. Capacity growth is the key to drive growth further down the road. One of the long-term issues the government needs to address to sustain Macau’s long-term development is insufficient hotel rooms,’ the memo revealed.
Wynn and MGM, on the other hand, are already nearing their capacity limits, with over 90 percent of their rooms already comped out.
The brokerage indicates that these operators have no major new hotel projects in the pipeline, except for MGM’s plan to add 28 villas by the end of fiscal year 2025. This focus on high-end offerings aligns with their strategy of premiumization and capturing the luxury market segment.
Galaxy, however, is in a more favorable position when it comes to hotel capacity. With 85 percent of its rooms already booked, the company plans to add 100 ultra-luxury Capella suites in mid-2025. This expansion will enhance Galaxy’s ability to compete in the high-end market.
In the medium term, Galaxy has plans to expand further with the addition of Phase 4, which will introduce 1,500 rooms under six different hotel brands. The company is also considering redeveloping its Broadway property, which currently has 320 rooms, by adding up to 1,000 more rooms.
Galaxy’s management believes that ‘having a variety of hotel brands across different segments will help enhance Galaxy Macau’s attractiveness as one of the “must-visit” properties in Cotai’.
