IAG FEBRUARY 2016 - page 7

Cover Story
“Ultimately, the rise of themiddle class is what drives growth in
Macau andAsia,”MelcoCrownCo-chairman andCEO LawrenceHo
declared at the Studio City opening. He says Studio City’s location,
virtually adjacent to the Lotus Bridge border crossing, destined
it to be a mass market property even before Macau’s VIP market
collapsed. Last yearhigh roller revenue fell 39.9%,whilemassmarket
gamingwas off 26.3%. It was just over a year ago, after VIP gaming
revenue fell 10.9% in 2014 while mass win rose 13.8%, that Mr Ho
wondered“howmanymorebillionairesaregoing todropout of trees
in thenext ten years” inChina, underscoring thepivot tomiddleclass
Evenwith themainland’s economic growth falling below 7%, its
lowest rate in25years,China’smiddleclasswill expand toasmanyas
half abillionpeoplewithinadecade, and that group thatwill account
for the bulk of the projected 200millionChinese outbound travelers
expected annually by 2020. The question that’smost relevant is how
manyof thosemiddleclass travelers, notonly fromChinabut the rest
of Asia, will drop intoMacau andwhether they canmake up for the
shortfall inhigh end visitors.
Citing various sources, Institute for Tourism Studies (IFT)
Assistant Professor IpKin Anthony Wong estimates the Chinese
middle class numbers between 109millionpeoplewithnet worth of
US$50,000 toUS$500,000 and 340million individuals with annual
earnings from US$6,000 to US$25,000. China Market Research
Group Principal Ben Cavender describes China’s middle class as
earning US$9,000 to US$35,000 and conservatively estimates that
groupnumbers 10%ofChina’s 1.3billionpeople.Multipleobservers,
including Global Market Advisors Partner Andrew Klebanow, note
that official reports likely understate actualmainland income.
Depending on which numbers you prefer, Macau is capturing
between6%and30%of themainlandmiddleclassmarket, assuming
that all mainland travelers to Macau are drawn from that pool. In
reality, Macau visitors span the mainland economic spectrum, so
there’s substantial room to increase itsmiddle class penetration.
Some question whether there’s enough spending power in that
middle class to replaceMacau’smissinghigh endplayers.MrWong
estimates Chinese visitor spending at MOP$5,000 (US$625) per
capita.Macau’s Statistical andCensus Service’s third quarter Visitor
Expenditure Survey puts per capita mainland visitor spending,
exclusive of gaming, at MOP$1,776. The most recent IFT Visitor
Profile Survey, conducted during last year’s second quarter, finds
50% of mainland visitors spent more than MOP$2,000, excluding
gambling. It also found that 75% of the 1,000 people surveyed
said they didn’t gamble at all (a statistic IAG has previously raised
questions about), and among those that tried their luck, 57% spent
MOP$2,000or less.
Those spending levels indicateMacauwould need a substantial
increase invisitornumbers tomakeup for lastyear’sMOP$120billion
“Ultimately, theriseof the
middle class iswhatdrivesgrowth
, at theopeningof StudioCity
1,2,3,4,5,6 8,9,10,11,12,13,14,15,16,17,...48
Powered by FlippingBook