New moves to relax visa requirements for mainland Chinese visitors to Macau is seen as a ‘positive signal’ by analysts, signalling China’s ongoing support for Macau’s economic development, to the possible detriment of other regions.
Goldman Sachs notes in its latest investment memo on Monday that the launch of a multi-entry visa for tour groups between Macau and Hengqin, as well as faster visa processing measures, ‘should bode well for the casino industry, especially for the grind mass and low-end premium mass segments’.
The investment bank states that ‘It will facilitate more frequent travels to Macau by mainland Chinese, who may find it easier and less time-consuming to apply for visas. Business travelers, some of whom stay behind for leisure purposes, can stay in the city for longer’. At the same time, ‘it will address the hotel shortage issue in Macau and potentially extend the length of stay by Chinese travelers,’ notes the brokerage.
Macau visitors’ average length of stay has improved slightly from 1.4-1.5 days before the pandemic to 1.6 days as of late. Goldman Sachs have long argued that Macau’s hotel room supply is quite tight especially during longer holidays, as its 48k total hotel room count is only able to accommodate no more than 20 million overnight visitations each year, while in FY19 Macau had 19 million overnight visitors versus 14 million last year.
Hengqin has about 9,000 hotel rooms, priced at an average of MOP400 ($50) to MOP600 ($75). This compares to Macau’s hotel rooms normal asking rate of MOP2,000 ($248) to MOP3,000 ($372).
The same investment memo mentions that Chinese airlines are lowering airfares to attract volumes for the upcoming Labor Day holidays. Some investors have expressed concern that Macau’s visitation and GGR data may be softer than anticipated, especially compared to the trends observed during the CNY holidays.
Analysts maintain a constructive view, despite concerns this may lead to share price volatility in the near term, expecting ‘the gradual return of grind mass or lower-end premium mass customers will drive incremental GGR growth in the quarters ahead’.
Macau seen as preferred gambling destination by China
In another investment memo by JP Morgan, analysts describe the relaxation measures as a ‘surprise gift from the Motherland’, suggesting the policy shows that the Chinese government views Macau as the preferred gaming destination.
JP Morgan indicates that the news, alongside the Individual Visit Scheme (IVS) expansion news two months ago, suggests the Chinese mainland is ‘fully supportive’ of Macau’s economy and travel/leisure industry.
‘This shows a stark contrast to China’s rising scrutiny on cross-border gambling this year, such as government warnings on gambling in Singapore, South Korea, and Sri Lanka, or crackdowns on illegal gambling in the Philippines and Cambodia, or online gambling.’
In this context, the analysts interpret that the series of news indicates that China’s government views Macau as the obvious and relatively preferred destination when it comes to gambling, and ‘we wouldn’t be surprised if the Chinese gambling demand will be increasingly “ring-fenced” around Macau.’
