Macau can expect to welcome a record 40 million annual visitors by 2020, with increased overnight visitation and average visitor spend to boost mass market CAGR (compound annual growth rate) by around 11% over the next three years.
Those are some of the findings from a new Blackbook titled “Macau Gaming: The Ascent of the Masses” by brokerage Sanford C Bernstein.
Analyzing the past, present and future of Macau’s gaming industry across the mass, Premium Mass and VIP segments, the report provides a detailed look into the importance of mass market visitation in the coming years which it says will see tourist numbers soar from 31 million in 2016 to 40 million by 2020.
“The future growth driver for the Macau gaming industry will be mass, driven by increasing overnight visitation and increasing average visitor spend,” Bernstein’s comprehensive 215 page Blackbook predicts.
“Overall visitation to Macau reached its peak in 2014 at 31.5 million, experienced a 3% decline in 2015, followed by a 1% rise in 2016.
“However, the breakdown of visitation changed significantly during 2016, with overnight visitors experiencing 10% y/y growth while day-trippers saw a 7% decline.
“Overnight visitors now account for over 51% of overall visitors in Macau and this ratio will continue to grow as overnight visitation outgrows day-trippers. Due to growth from overnight visitation and from stabilization and a slow rebound in day-tripper growth, we estimate that visitation growth through 2020 can grow at a 7% CAGR to approximately 40 million visitors.
“Mass has long-term growth potential that can continue with the growth in supply that is coming to Cotai. We forecast mass to have a 2016-2020E CAGR of ~11%.”
Bernstein’s study notes that Chinese visitation remains the key for Macau in the future, with 20.5 million mainland Chinese having visited in 2016. However, only around half that number were unique visitors with penetration into the addressable Chinese market at slightly above 3%.
This compares to penetration of around 25% in the US gaming market and 30% of the Hong Kong feeder market into Macau.
Future growth will therefore rely on improving both gaming and non-gaming spend via increased overnight visitation – a factor that should be aided by Macau’s growing hotel room inventory and better transportation in the coming years.
“Increasing average spend is achievable as longer stays improve total spend per visit (for both gaming and non-gaming),” Bernstein says. “Overnight visitors spending one night in Macau spend over 1.7x more on gaming and non-gaming than day-trippers, while those staying two nights spend 3.3x more.
“Macau’s hotel room inventory is increasing by nearly ~6,400 between 2016 and 2018 (9% CAGR, 28% cumulative increase). A further 3,500+ rooms may open in 2019 to 2020, depending on development openings.
“The new supply of hotel rooms and offerings should drive Macau’s long-term growth in Mass (Base Mass and low-tier Premium). With the growth of hotel room capacity in Macau, we examine the number of overnight visitors that can be supported in Macau. We estimate that the capacity of Macau hotel rooms will grow at a CAGR of 6% from 2016 to 2020, which can support an overnight visitation CAGR of 10% with hotel occupancy increasing to ~90%.”
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