Macau’s strong retail set-up and focus on non-gaming tourism will help the city face long term risks, said Bernstein in a note on Friday.
As Macau’s gaming market continues to shift towards a mass-focused market, non-gaming components of casino operators’ businesses are becoming more important, says the brokerage, adding that mass market revenues have already exceeded 50 percent of gross gaming revenues in Macau.
“We believe this shift in the market will continue over the coming years, driven by incremental capacity expansion (new hotels, new casinos, new retail, new entertainment), transportation infrastructure improvements in Macau and the “roads leading to Macau” with increasing visitation and greater penetration of China.”
Bernstein says Macau’s luxury retail market will be a key performer in the long term, which will be further propped up by new integrated resort openings creating a critical mass on Cotai.
The risk of retail cannibalization is also low, as “visitors are somewhat “captive” to their hotels given the short length of stay in Macau and the increasing sophistication of loyalty programs,” said Bernstein.
The brokerage says the key will lie in whether Macau can successfully broaden its tourism offerings, transform into a regional tourism hub and sustain the pipeline of new developments for the next two years.