Macau real GDP still contracting; 2017 growth to begin repair
A forecast published in London yesterday by the Economist Intelligence Unit (EIU) predicts that real Gross Domestic Product for Macau will continue to shrink this year, but at a much slower rate, while gains for 2017 will nearly offset this year’s shrinking GDP.
A report on Macau News today lays bare the numbers found in the report that indicate the recovery could have come stronger and faster had MICE (meetings, incentives, conferences and exhibitions) development been more robust. Many analysts believe that Macau can become a global hub for conventions and related business, but some don’t expect to see any rapid improvement in the sector until supporting infrastructure, such as light rail, and inter-island bridges are completed.
According to the report, not only did MICE not grow in the first quarter of 2016, it actually shrunk by 20 percent y-o-y with only 191 total events accounting for less than 125,000 attendees – down more than 50 percent.
Exhibitions fell precipitously from 10 in 2015Q1 to only 4 the first quarter of this year. “Such events will not replace gambling-oriented tourism expenditure in 2016-2017,” the report said. “The industry remains small, attracting a trickle of visitors and revenue.”
Sands China is the market leader in MICE with more than 1.6 million square feet (148,645 sqm) of MICE space available over three Cotai properties. Attendance for all of 2015 was up but Sands revenues for the metric were down more than 2 percent over 2014.
Macau gaming, which, “will remain the dominant sector for the foreseeable future,” according to the EIU, had a rough week according to Barrons. Some of the decline was blamed on a rise in VIP win rate from a theoretical average of 2.85% to last week’s 2.7% take by the house. Excluding slots, daily gaming revenues fell 22% from a week earlier.
“Jun-16 thus far has been much weaker than our original expectation,” cautioned Nomura Securities’ Richard Huang. His numbers point to a real potential of this month’s GGR bottoming at a 5-year low. “We continue to expect a slow-grind recovery in GGR, but the fact that Jun-16 GGR is heading to a 5-year low highlights the potential risk of demand disappointment,” according the Barrons report.
The EIU report set a backdrop for its growth forecast of 5.3% in 2017. There was a more than 20% contraction y-o-y in 2015, which has been stemmed to a predicted 5.9% shrinkage in real GDP this year.
The opening of several more properties beginning as early as late 2016 is expected to help stabilize and grow GDP.