GGRAsia – Macau non-gaming spend by Chinese to double: research

Macau non-gaming spend by Chinese to double: research

Sep 14, 2017 Newsdesk Latest News, Macau, Top of the deck

Average non-gaming spend by mainland Chinese visitors to Macau is likely to double in the 10 years to 2025, suggests new research from brokerage Sanford C. Bernstein and Co LLC.

But such improved non-gaming spending would still be only about one-sixth of the average US$3,500 that mainly well-heeled Chinese travellers venturing beyond Hong and Macau are currently spending per trip, said the institution.

Estimated total spending by Chinese outbound travellers is projected to expand by 11 percent on a compound annual basis over the next 10 years, suggested the brokerage; but driven by the volume of new outbound travellers, rather than existing travellers spending more.

“[Mainlander] spending per visit outside of Hong Kong and Macau is likely to barely move. It is the sheer scale of incremental visitors and their aggregate spending power that will distort markets,” stated the report authors.

Sanford Bernstein noted in its study that approximately 63 million of the 135 million outbound Chinese travellers in 2016 went to Hong Kong and Macau, “largely as low-value day trippers”.

The analysts suggested that in Macau, the growth of hotel, gaming table and transportation capacity would “effectively convert day-tripper traffic from [neighbouring] Guangdong [province] into weekend and midweek traffic from across China”.

Annual mainland Chinese visitor volume to Macau was likely to grow from 20 million to 34 million between 2016 and 2025, representing 6 percent compound annual growth, a one percentage point improvement on the 5 percent compound annual growth in the tally of such visitors in the five years to 2016, said the authors. They added that “non-gaming spending per visit will increase from US$277 to US$571 [by 2025]”.

“Gaming globally” would be among the discretionary consumer spending categories likely to benefit from the trend of more Chinese travelling outside their country, said the institution.

A July report from brokerage CLSA Ltd on outbound Chinese travel said Singapore, Indonesia, Malaysia, the Philippines and Australia were “growing in popularity, with room for future growth”. All those destinations – except Indonesia – have at least one large-scale casino resort.

Customer value

“We expect that the majority of incremental [new] travellers (83 percent of circa 100 million) will go somewhere other than Macau or Hong Kong,” said Sanford Bernstein’s latest published research on the topic.

“The 135 million travellers who went out of China in 2016 (and certainly the circa 70 million who went somewhere outside of Hong Kong or Macau) are predominantly from the highest 10 percent or even 5 percent of the population by income level,” said the authors.

Judge worldwide, Sanford Bernstein estimated spending by mainland Chinese travellers would increase “by approximately US$411 billion between now and 2025 (up approximately 160 percent),” based on an estimated incremental 125 million trips.

But Sanford Bernstein said that as the volume of Chinese travelling beyond Hong Kong and Macau grows, the structure of that market is likely to shift from being dominated by super-rich urban elites to more middle class voyagers, which might have a dilutive effect on average spend per head.

The incremental 100 million-plus outbound Chinese travellers between now and 2025 travelling further afield than Macau or Hong Kong were likely to generate “a modest appreciation in spending per trip (+1 percent annually) to US$3,600 by 2025 as the mix shift incorporates a greater share of high net worth individuals and the spending power of the current ultra-high net worth traveller is diluted,” said Sanford Bernstein.

By contrast, “Hong Kong and Macau spending per trip (ex-gaming) currently, is in the range of US$200 to US$300,” stated the authors, suggesting that was partly a function of the number of low-spending day-trippers, especially in the Macau market.

Since those two destinations combined represented circa 65 million of the 135 million trips by mainlanders in 2016, the implication was that the 70 million trips made beyond Hong Kong and Macau were taken by individuals spending “circa US$3,500 per trip,” the authors added.