Scientific Game

Macau visa restrictions now lifted?

China does things in her own way and in her own time

Monday, 16 March 2009 00:00
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Have China's famous visa restrictions on visits to Macau been lifted?

The answer is 'maybe'. If ever there was an argument for foreign investors giving attention to China's internal politics and looking out for subtle signals of policy change then it's over this significant matter.

In December, in an announcement that went almost unnoticed in the English-language media, China's premier Wen Jiabao said that residents of Shenzhen, the former fishing village on the border of Hong Kong that mushroomed into a city of 12 million people (and counting) in less than 30 years, would be allowed multiple entry permits for visits to Macau and Hong Kong.

How the policy will work in practice is, as ever in China, the key issue. It would be a brave commentator who stated categorically that the restrictions imposed incrementally last year on the travel permit system known as the Individual Visit Scheme are now definitively lifted.

Nonetheless, the smoke signals are encouraging. In response to premier Wen's statement, officials from Macau, Hong Kong, and Guangdong recently proposed multiple-entry permits for Guangdong residents who live outside Shenzhen. As around 60% of Macau's visitors have been from Mainland China in recent years and 80% of them were folk from Guangdong making repeat visits (half of that cohort using the IVS system), the 'new' policy would in effect be for many Chinese visitors a return to how things were before the visa restrictions, but with 'go faster' stripes.

It seems unlikely the three Pearl River Delta jurisdictions would stick their necks out on the visa issue without being pretty sure that Beijing is receptive to the proposal. One media report suggested up to 40 million Guangdong residents may have the disposable income and the inclination to take advantage of a new-look IVS scheme.

Home Sweet Home

Domesticity in fashion

One of the side effects of an economic slow down in Greater China could be an increase in domestic tourism as even well heeled Chinese spurn fancy foreign trips in favour of excitements closer to home.

What impact if any that would have on the Macau tourism industry isn't yet clear. But any rise in the number of middle class, middle-income Chinese visitors to Macau might go some way to make up for the expected reduction during 2009 in the VIP table play sector. In 2008 VIP baccarat made up 67.8% of gross revenues on all games of fortune in Macau.

Another structural issue with the Macau tourism market in 2008 was that for several quarters in a row, 26% of the visitors were technically 'economically inactive' (i.e., students, the unemployed or the old). The figure is based on the government's own visitor surveys. None of these demographic groups tend to be at the top of the list when five-star hotels go looking for customers.

Middle-income, middle-aged Chinese are a much easier target, because there are more of them—especially in a country of 1.3 billion people. They are the senior executives in Chinese factories rather than the factory owners; the regional bosses of joint venture companies rather than the shareholders. They're not rich rich, but by China's standards they're doing pretty well. The margin on mass table play (20% is not uncommon) is also a lot better than on VIP play, as there are no middle men to pay for player recruitment and provision of credit services. And mass-market players are just as passionate about gambling as their VIP compatriots.

There's certainly some anecdotal evidence that domestic tourism is on the rise in Greater China. In January, which this year played host to the Lunar New Year holiday, Beijing for example experienced a 39% year-on-year rise in visitors from Hong Kong, Macau and Taiwan.

There are at least three problems though with extrapolating too much from this one fact. The first and most obvious is that Beijing isn't Macau. The second is that in 2008 the Lunar New Year fell in February. Until we see Beijing's visitor figures for February 2009, we won't know if the January rise in domestic visitors is a true trend rather than a one-off tendency linked to the lunar holiday. The third problem is that Beijing's arrival figures quoted by the Chinese news agency Xinhua don't break down the proportion of visitors from Taiwan. Last July, for the first time in 60 years, Mainland China agreed to accept direct flights from Taiwan, prompting a flurry of Sino fraternisation that at the time significantly inflated the year-on-year cross border visitor numbers. The chief loser was Macau International Airport, which used to act as an important transit point for flights to and from Taiwan.

Staying home

More worrying for Macau, given its much publicised hunt for fresh customers from abroad, is some evidence, in Beijing at least, that the number of overseas visitors to China is going down.

Beijing experienced a 27.5% drop in the number of tourists from outside Greater China in January, compared with the corresponding month of last year, according to figures from a joint survey team formed by the National Bureau of Statistics and Beijing Municipal Bureau of Statistics.

Inbound tourist arrivals to Beijing fell year on year to 212,000 in January, while those from Hong Kong, Macau and Taiwan rose to 44,000. The number of travellers from the United States, Japan and the Republic of Korea, three major tourist sources for Beijing, fell 6.2%, 45.3% and 49.9%, respectively.

Arrivals to Beijing from Asia fell 36.6% and those from Europe slid 23.7%. It was the second year on year fall in overseas visitors to the Chinese capital.

An executive from China International Travel Service Limited, the country's leading travel agency, attributed Beijing's January 2009 performance to the global economic downturn and depreciation of foreign currencies, including the euro. He added the fact foreigners had to apply in advance for expensive visas wasn't helping.

So let's look on the bright side. China may still be rationing visits to Macau, but at least most overseas visitors to the casino jurisdiction find their arrival a relatively pain-free, visa-less process.

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