Macau’s May tourism numbers, as released on Friday, hint at a partial misreading by the investment community of the reasons why the growth rate of Macau casino gross gaming revenue (GGR) more than halved in May compared to April. So said a Friday memo from Morgan Stanley Asia Ltd.
Friday’s information from the city’s Statistics and Census Service indicated that Macau visitor arrivals totalled just over 2.7 million in May, up by 5.2 percent year-on-year, with the largest-single component of arrivals – mainland Chinese – up 9.3 percent year-on-year.
Both of those May indicators were an improvement on May 2017’s 3.7-percent year-on-year expansion of all tourism arrivals and the 4.4-percent growth in the number of mainland visitors.
But May 2018 arrivals judged sequentially showed a decline, said Morgan Stanley.
The institution noted in its memo that consensus suggested the key reason why Macau’s May GGR moderated to 12.1 percent expansion year-on-year, from 27.6 percent year-on-year in April, was “a lower VIP win rate” in the city’s casinos.
But the bank offered an alternative reading, citing data from a business information service. “According to Bloomberg, May mass revenue only grew “at 8.3 percent year-on-year, (compared to 19 percent in first quarter 2018 and 28 percent in April),” stated Morgan Stanley.
A sequential May moderation in mass-segment GGR performance was in likelihood “driven by” slower “May growth in Chinese visitation at 9.3 percent year-on-year (compared to first quarter 2018’s 13 percent and April’s 17 percent),” wrote Morgan Stanley analysts Praveen Choudhary and Jeremy An. Such estimates on May market GGR split are based on industry unofficial returns.
Other investment analysts 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 has indicated that high-stakes play by a relatively small number of visitors is still an important component of the market.
The official market split between GGR for the mass segment and that for VIP play is only released by the Macau regulator on a quarterly basis, typically some days after the end of the reporting quarter.
Morgan Stanley suggested the weaker year-on-year growth in May mass revenue indicated by Bloomberg data could additionally also be attributable to factors including one fewer weekend in the month than a year earlier, and “part of May Golden Week falling in April”. That was a reference to a holiday period in China around the Labour Day holiday on May 1 each year.
The banking group did note however that May growth rates of visitors from so-called lower-tier Chinese provinces and cities were stronger than for tier-one cities or provinces such as Beijing, Shanghai and Guangdong.
The tier classification system for Chinese cities is a way for economists and other professionals to rank places by factors including economic development, local gross domestic product, advanced transportation systems and infrastructure, as well as for historical and cultural significance.
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”Many investors cite Golden Week as a catalyst to significant, sustainable visitation increases and a showcase for profitability for many casinos [in Macau]... However… we are concerned recovery estimates may again be pushed back”
Analyst at Roth Capital Partners