Macau is set to become one of the major beneficiaries of the rise of China’s lower-tier cities, which contributed more than half of the 20 million Chinese visitors to Asia’s gaming hub in 2017, according to a new research report by Morgan Stanley.
Examining consumption trends of China’s non-Tier 1 and Tier 2 cities, Morgan Stanley analysts believe these lower-tier cities will become a core source of Macau’s growing mass market customer base, estimating mass revenue CAGR of 12% over the next three years – up from a previous estimate of 10%.
The report also revises Macau’s gaming stocks market cap over the same period upwards from US$230 billion to US$260 billion with GGR in 2022 now tipped to come in at US$60 million as opposed to an earlier estimate of US$53 million.
“China’s lower-tier cities are becoming wealthier and their residents are more eager to travel and spend on consumables, as they spend less on housing compared to residents of Tier 1/2 cities,” Morgan Stanley said.
“We estimate that more than half of the 20 million Chinese visitor arrivals in Macau in 2016 came from lower-tier cities. This should be further supported by improving transportation infrastructure, increasing hotel room supply in Macau and growing outbound tourism from China.”
The report notes that visitation to Macau from lower-tier cities grew by 13% in the first 11 months of 2017 but by only 3% from Tier 1 cities.
That trend will be aided in the coming months by the addition of new hotel rooms at MGM Cotai and Morpheus and the opening of the Hong Kong-Zhuhai-Macau Bridge in 2Q18.
A survey of mainland residents in Tier 3 cities revealed that 26% wanted to travel abroad in 2018, with new casino openings and attractions, easier visa processing and better infrastructure the key factors behind their decisions.
