Macau's infrastructure is hindering the city’s ambitious transition from a major gambling hub to a world tourism center, but the situation is expected to change, Bernstein Research said in a report.
Despite in 2014 generating seven times the gaming revenue of Las Vegas, with a tenth of land mass and a fifth of hotel rooms, Macau’s limited infrastructure and hotel capacity were key factors in its dependence on VIPs in the past, and an impediment to the Macau government's agenda to diversify the economy, the report says.
“The under-developed infrastructure (as evidenced by congested immigration checkpoint at the border and lack of non-gaming entertainment offerings), coupled with a shortage of hotel rooms, has been a critical hindrance to the government's agenda to diversify Macau's economy and reduce dependence on pure gaming.”
The Macau gaming market grew to a 2013 peak of $45 billion, largely driven by VIPs, which accounted for two-thirds of GGR.
However, the report says that the HK-Zhuhai-Macau Bridge, to be completed by 2017, will see Macau become better connected to the largest regional airport in Hong Kong, with the traffic time from HK airport to Macau expected to be shortened to 30 minutes.
Similarly the Gongbei Gate is expected to expand its capacity by 40 percent next year, and within Macau, the Light Rail Transit, which is expected to be completed by 2018, can help improve the traffic flow while reducing social tension caused by increased visitation.
“China's highspeed railway system is reducing the time and cost to travel from provinces within 5-hour radius train ride to Macau. At the border, we expect the visitor arrivals at the Lotus Bridge checkpoint to increase over time, as it connects to the railway on Hengqin.”
The report expects the five large-scale integrated resorts that are set to open on Cotai through 2018, and which represent a total of $24 billion in investment, will provide a far more diversified nongaming experience.
“They collectively will add over 13,000 hotel rooms (+76%) to the market, which we view as a key catalyst to drive Mass demand.”
“We believe the increased supply will cross incremental demand, particularly the demand that was previously kept away by HKD1,000+ minimum table bets and HKD2,500+/night hotel room in Macau. The new integrated resorts will be the driving force behind Macau's Paradigm Shift towards Mass.”
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