JP Morgan Securities (Asia Pacific) Ltd says it expects the protests that have been taking place for several weeks in Hong Kong to have a minor negative impact on Macau’s casino gross gaming revenue (GGR). “Actual impact on [Macau’s] gaming demand should be smaller than on visitation”, said the brokerage on a Friday note.
According to the institution’s memo, visitors to Macau currently using the Hong Kong-Zhuhai-Macau Bridge “can simply avoid Hong Kong airport by traveling via Shenzhen airport … or Zhuhai airport; and Chinese visitors via Hong Kong ferry are typically package tourists or (very) low-end players anyway”.
“We thus guestimate the Hong Kong protests may hurt Macau GGR by about mid-single-digit (i.e., half of maximum visitation exposure), which should fade away gradually as people will find alternative ways to visit Macau,” wrote analysts DS Kim, Jeremy An and Christine Wang.
Hong Kong has seen months of anti-government protests that have sometimes led to violent clashes with police. Earlier this week, the protests led to the temporary closure of the Hong Kong International Airport after thousands of protesters occupied its arrivals and departures halls.
Tourists make up for the majority of gamblers in Macau. A number of them use the Hong Kong airport – one of the world’s busiest air hubs – to access Macau.
Investment analysts however have noted in previous commentary on Macau that there need not be a direct correlation between numbers of tourists to Macau and gaming spend in casinos. This is because research indicates that high-stakes play by a relatively small number of visitors is still an important component of the market.
In Friday’s note, JP Morgan said it wanted to “debunk any fears” given that the social unrest in Hong Kong was “the source of most investor questions recently”.
“About 60 percent of total visitors arrive Macau via [neighbouring] Zhuhai (e.g., Gongbei gate, Lotus bridge), while ferry travellers from Hong Kong and Shenzhen account for 17 percent, followed by those travelling via Hong Kong-Zhuhai-Macau Bridge (about 15 percent of visitors) and Macau airport (9 percent),” said the institution. “For mainlanders, visitor arrivals via Zhuhai border account for 75 percent of total,” stated the brokerage.
The JP Morgan team added: “Our on-the-ground checks suggest that there has not been a discernible slowdown in casino traffic yet (though this could be due to strong seasonality given the summer holiday), while actual GGR impact is difficult for us to check.”
Strong tourist numbers
The head of the Macao Government Tourism Office (MGTO), Maria Helena de Senna Fernandes, said that the protests in Hong Kong have not had a “large impact” so far on visitor arrivals to Macau.
Speaking to reporters on the sidelines of a public occasion, Ms Senna Fernandes said preliminary figures for July showed a “strong increase” of about 10 percent year-on-year in the number of visitor arrivals to the city.
“Based on this data, it is hard to say that we are suffering a large impact from the events in Hong Kong,” said MGTO’s director as quoted by the Portuguese-language channel of Radio Macau.
Visitor arrivals to Macau totalled nearly 20.3 million for the first half of this year, representing a year-on-year increase of 20.6 percent, according to the latest official data. The number of same-day visitors – which accounted for about half the arrivals – also saw a double-digit percentage increase in the period.
In comments to reporters on Friday, Ms Senna Fernandes acknowledged that the city’s tourism industry was susceptible to a number of risks, including from “political, social or economic” incidents. “For now, we have to monitor the situation [in Hong Kong],” she added.
The official however said that the city’s tourism industry could feel a larger impact this month from events in Hong Kong than in the prior period, due to the closure of the Hong Kong airport earlier this week.
“We’ve spoke with people in the industry, including from hotels, and we were told that there were some booking cancellations, but not in significant numbers,” said Ms Senna Fernandes as quoted by the public broadcaster.
“We are seeing that the growth [in visitor arrivals] is more modest than what we expected,” stated the head of MGTO. “Of course, I hope the effects [from the Hong Kong protests] are not going to be so prolonged, because it’s quite worrying for the tourism industry.”
A number of countries, including Australia and the United States, have issued travel warnings to Hong Kong due to the violent public protests that have rocked that city since mid-June, following a few, mostly pacific, protests earlier in the year. Ms Senna Fernandes said MGTO had been working with travel agencies abroad to promote tourism packages to Macau that do not include a stop in Hong Kong.
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”China has been strengthening the control over capital flow, and the impact of that has already been reflected [on Macau’s gaming revenue trend]. There should not be any bigger impact from the new… legislation [on the mainland] … on the gaming revenue trend here”
Wilfred Wong Ying Wai
President of Macau casino operator Sands China