Inside Asian Gaming

February 2010 | INSIDE ASIAN GAMING Understanding the visa restriction situation Somemightsaythatsuchapolicygoesagainstthevisarestrictions thatwereput inplaceby themainlandChinesegovernment. However, we have a different read on the visa restrictions. The restriction never prevented people from going to Macau, rather it only limited the number of times the same customer could go to Macau. As a result, we believe the mainland Chinese government was encouraging Macau to diversify its customer base in order to ensure that social issues did not arise in China (as a result of the same people going to Macau over and over again). It seems the market has taken this point and started to push Macau’s products into more provinces. This will be further strengthened as more infrastructure opens up. Our view is that since the visa restrictions were put in place (October 2008), they have never been relaxed. We also believe they are unlikely to be relaxed given the growth the market is seeing and the alteration that operators have made to their marketing plans. Promoting MICE events A second focus for Macau is to stimulate business travel via growth of MICE activities. The desire to grow the MICE segment also fits into China’s overall goal to integrate Macau into part of the Pearl River Delta economic development zone. In 2009, Macau hosted 42 exhibitions. This is expected to increase by 10% to 45–50 in 2010 with the size and scale of each event also growing. Recently Macau signed a cooperative agreement with the Yangtze River Delta Exhibition Association to facilitate learning and information exchange. Going forward, the ability to cooperate and partner with Chinese business bodies will be the critical success factor for Macau’s MICE industry. Industry representatives have voiced that Macau needs to utilise its CEPA (Closer Economic Partnership Agreement) with China to maximise MICE revenue. Suggestions include offering package deals, multiple stop passes in Guangdong/Hong Kong and Macau for business travellers and increasing the flight frequency and destination. Further, the government has also put its support behind the cause, pledging subsidies on various expenses such as marketing, accommodation and F&B since May 2009 to boost industry growth. Like the tourism program, this subsidy program has been extended until March 2010, with a total investment estimated at around MOP55 million. Macau Policy Watch Since May 2009, the government has also invested heavily to support the local tourism industry, including waiving entry fees and providing free guided tours around some of the city’s heritage listed sites. The program has now been extended until March 2010 with a total estimated cost of MOP150 million. The chart below shows that since 2Q09, Macau’s visitor numbers have been steadily on the rise. This positive trend is expected to continue into 1H2010, especially given the recent issuance of residential permits to 30 million temporary workers in Guangzhou and the opening of the Wuhan-to-Guangzhou high-speed train, which reduces travel time from 8 hours to just 3 hours. Higher tourist numbers should have positive flow-on effects in industries such as gaming, retail and hotels. Popularity of Cotai increasing with every new property opening Source: Company data, Macquarie Research, January 2010 2007/12 15.0% 17.0% 19.0% 21.0% 23.0% 25.0% 27.0% Mrkt Shr (%) Four Seasons opens City of Dreams opens 2008/2 2008/4 2008/6 2008/8 2008/10 2008/12 2009/2 2009/4 2009/6 2009/8 2009/10 The Wuhan-to-Guangzhou high-speed train The border between Zhuhai in mainland China and Macau 4Q00 4Q01 4Q02 4Q03 China HK SE Asia Other DSEC restated series from 1Q08 onwards 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 8 7 6 5 4 3 2 1 0 Bulk of visitation frommainland China Source: CEIC, Macquarie Research, January 2010 33