Tuesday, August 16, 2022

A bridge too far?


One month on from the opening of the Hong Kong–Zhuhai–Macau Bridge (HZMB), Macau’s casino sector is weighing up its immediate impact and how it is likely to affect operations in the longer term.

The bridge, which has cost almost $20 billion and been beset by delays since construction began in 2009, was finally opened by Chinese President Xi Jinping on October 23.

But amid the fanfare was a sense that a project Beijing has been keen to stress will be transformative for the region may not substantially benefit Macau’s casino operators.

Indeed, even before the bridge opened, there has been confusion over whether casino shuttles would be permitted to use it, with a series of restrictions placed upon who is allowed to cross.  

Back in May, the Macau Transport Bureau said individual casino shuttles would not be allowed to use the bridge, but that it was open to the casinos providing a joint shuttle service to the Macau border.

These have already begun to operate, via a third-party charter service, dropping off customers to Macau’s ferry terminals. The Transport Bureau cited alleviating traffic as a reason for pooling customers of the six casino concession holders in one bus service.

“I would imagine that eventually there will be more casino traffic allowed as things smooth out and an even flow begins to settle in,” Richard P Loughlin, director of operations at the Asia Pacific Consultancy (Macau) Ltd., told AGB.

“The opening was actually sprung on everyone and nobody was quite prepared, so at the moment there is a fair amount of knee-jerk reaction and tail chasing, and it will be a while before this settles down.”

Loughlin said that it is too early to draw conclusions on the bridge’s impact, a view shared by the Macau Government Tourism Office (MGTO), with director Maria Helena de Senna Fernandes noting earlier this month that it would take “more time” to properly evaluate its impact.

Nonetheless, others are more bullish. Melco Resorts and Entertainment chief government affairs officer Maggie Ma noted at the MGS Entertainment Show conference in the middle of November that both City of Dreams and Studio City have been witnessing increasing traffic, which she accredited to a mix of the improved connectivity the bridge provides as well as events in Macau.

Regardless of the numbers, an important consideration for operators is the profile of those additional visitors arriving via the bridge.

“I think the profile of visitors coming across the bridge will be low end mass, if even that,” said Loughlin, who has used the bridge to travel from Macau to Hong Kong and back.

“From a Hong Kong person’s perspective, they first need to get to the departure area. Once that's done they arrive in the Peninsula and then have to make their way back to Cotai, which pending traffic, would be a good 30 minutes or more.

“Honestly, the novelty of driving on the bridge is a factor, plus it is cheaper, but if your intentions as a player is to get from HK Central to Cotai ASAP, then the bus is not the way to go.”

So far, there has been little to suggest that additional visitors arriving via the bridge will convert into table drop.

There have even been some reports that the bridge has seen a noticeable increase in those arriving in Macau as part of unlicensed tour groups, something de Senna Fernandes at the MGTO has said she is “highly concerned” about.

Another issue is it if could negatively impact the length of time visitors stay in Macau.

“What I am unsure about is whether the bridge might hurt overnight occupancy rates in Macau,” David Green, former gaming practice director with PricewaterhouseCoopers in Macau and founder of gaming consultancy Newpage Consulting, told AGB.

“If people can get to Macau early in the day, and go back to HK later that day, then hotel and F&B revenue will be lost. The issue is whether the bridge will change average length of stay for the worse,” Green said.

One area where Macau’s casinos might see a more immediate uptick is international traffic.

“Hong Kong gets a huge number of international travelers every year and with the novelty of crossing the longest sea bridge in the world along with avoiding ferries, Macau may be able to tap into more of this market,” Loughlin said.

Before the bridge opened, the consensus among analysts was that it was unlikely to have a material GGR benefit for casino operators in the short term. Early indications appear to support the view.

While the MGTO forecasts the bridge will contribute to a 7 percent year-on-year increase in visitor numbers to Macau in 2018, the profile of these visitors will not overly excite operators.

“The possibility for this to be a positive to Macau is there for sure, but it may not be the casinos who solely reap the rewards,” said Loughlin.

Operators may have to instead console themselves with the fact that any contribution the bridge makes to boosting Macau’s wider tourist segment should have a positive trickle down effect in the long term.

 

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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