Macau in Figures – A year into the recession

2015_08_Monthly Gross Revenue

One could say that the above graph shows all there is to say about the current state of Gambling in Macau, yet we will come to that as we are deep diving into the current situation. First of all, the month of August has ended and figures for August will be released sometime later in September by DICJ. Until then we can work with what we see above. And what do we see?

  1. The peak gaming revenue was in February 2014
  2. The first sign of a low was in June 2014
  3. The downwards trend has continued (with smaller peaks in between) until July 2015
  4. Lowest point in the downward trend had been June 2014 so far with 17 billion MOP revenue, the same as experienced in November 2010 for the last time.
  5. July 2015, the last month on record logged 18.6 billion MOP, the same as experienced in January 2011 for the last time.
  6. Comparing the low in June 2015 with the peak in February 2014, Macau revenue has dropped by 55% in less than a year.

The following graphs capture  the same set of data in slightly different views:

2015_08 - Comparison of Monthly Growth Rates

The above graph compares total revenue figures (in million MOP) month to previous years’ month. Also here the sudden drop in June 2014 is visible and there had been no month that was able to peak higher than the corresponding season the year before. That includes every month in 2015. That gap was highest in February 2015 as visualized below:

2015_08 - Gap to last year

Whereas one might think that a stabilized graph, as seen between March to July 2015 is a good thing, in reality it is a sign of negative growth as it represents the gap towards the last years revenue figure and if continuing over a year resembles a downward trend.

2015_08 - Monthly Gross Revenue compared to last years month

The above graph, with data from January 2010 all the way to July 2015 shows the growth rate of revenues compared on a month-to-last-years month basis in percentage. Once again, the downward trend is more than visible.

2015_08 - Growth Month to Month and Average

This graph is focussed on comparing growth rates between consecutive months, i.e. January 2015 to December 2014 and gives an indication on the general trend. The more peaks are below the 0% line, the more of a downward trend it is, whereas when there are more peaks above the 0% line, revenues are growing. The red line resembles the average for each half year of each month’s growth/decline percentage. Once again, the downward trend starting in 2014 is visible.

Whereas the above are great representations of probably the most talked about issue in Macau, they are all based upon one single set of data:

  • Revenue of Games of Fortune in Macau

The above alone cannot be representable for the state of Macau is the following is not taken into account:

  • Visitor figures
  • Openings of hotels and casinos
  • Unemployment figures
  • External factors

Let’s have a look at the visitor figures as published for Macau. DSEC has released figures up to Q2 2015 (and the month of July, which is being excluded in our comparison below).

2015_08 - Visitor Figures

Immediatelly visible is a drop in visitors from mainland China. This is also visible when one makes the overall graph for comprehensible:

2015_08 - China vs Rest

Before going into further discussions on any of the implications, let’s review this a little bit further.

  • Peak visitors overall to Macau had been in Q3 2014 (surprisingly in the quarter in which the drop of revenues occurred). The same quarter had also seen the highest amount of visitors from mainland China.
  • Q2 of 2015 is the lowest quarter in the recent downward trend and is the lowest quarter since Q2 of 2013 (i.e. two years)
  • The peak in visitors had actually not just been one quarter, but two quarters, with Q4 of 2014 having had the second highest number of mainland Chinese tourists (and the second highest overall visitor figure as well)
  • Rest of World is pretty stable and Hongkong has not escaped it longterm downward trend.

Let’s have a look at the gambling revenue broken down into visitors (per-head-analysis):

2015 - Revenue Down

Since Q2 2014, revenue per head (i.e. per visitor) is down compared to the previous quarters. No remember that Q3 and Q4 of 2014 had been extremely strong visitor months hereas revenue as sinking, so let’s have a look at an overlap of the figures:

2015 - Visitors and Revenue

What can be seen above is a very dangerous trend: Not only are the overall visitor figures decreasing, but at the same time, the spending per head is decreasing as well. The current spending rate of about 7740 MOP per visitor in gambling revenues is the lowest figure since Q3 2010.

This leads us to our next verification: which major casinos or hotels opened during the recession? Often it is talked about that Macau is adding it’s Cotai 2.0 projects to the market. Galaxy Macau Phase 2 was the first of several large resorts to open. It opened on May 27th 2015. So let’s have a closer look at the months that followed the opening. In particular we are looking at visitor figures to see if an additional casino would attract more visitors:

2015 - Visitors after Galaxy Opened

It is important to note that we want to compare Total Visitor figures on a monthly basis agains the same period the year before and the year before that. We do NOT want to compare consecutive months as that might be a one-time trend, whereas comparing a similar time in the year the year before will give one a clue if there had been an impact or not.

As can be seen above, June 2014 and July 2014 had seen much higher visitor figures than 2015 or 2013. That is in line with previous indications about a peak in 2014. As such whatever stimulus the opening of Galaxy Macau Phase 2 had, it was not enough to get visitor figures back up to 2014 levels. They are however higher than 2013.

Above we have looked at revenue figures and total visitors. We have not yet looked at individual casino’s performances (which would require a little bit of deep research for which I do not have time at hand right now). We can however have a look at the unemployment rates of Macau:

2015_Unemployment Rate

Over the years unemployment dropped significantly and even throughout most of the recession, unemployment was at a record low of 1.7%. Only in the second quarter of 2015 unemployment slightly increased to 1,8%. As such it can be concluded that the recession had no impacts on the employment situation of the Macau workforce.

What are the external factors that caused the above?

Macau – Galaxy Phase 2 – Construction Progress January to July 2014

Construction of Galaxy Phase 2

Galaxy Macau Phase 2 has developed speedily since last year. Progress at site is best captured by the rapidness that the facade was being installed. Above photo was taken end of July 2014 with below photos taken across the months until end of January 2014. See further photos of the new construction at Galaxy.

Galaxy Macau Phase 2
(June 18th 2014), three quarter of the facade is done

Galaxy Phase 2
(April 19th 2014), halfway up the tower

Galaxy Phase II - Facade is coming up
(February 23rd 2014), 5 to 10 further floors of facade installed

Galaxy Macau Phase 2
(January 25th 2014), facade has just started

Galaxy Macau Phase II – Update (Photo)

Galaxy Phase II Update

Since the last update over a month has passed by and construction at Galaxy Macau Phase II has continued, however as it seems from above photo, not as fast as before. In February, most of the facade cladding as shown in this photo had been installed within a few days and since then only a few more cladding tiles were installed. Also none of the facade on the podium structure seems to be ready, hence most progress must have been inside. That is, if there had been enough workers and materials. I don’t want to spectaculate, but it is common knowledge in Macau that there are just not enough workers around, especially with construction sites for Wynn Palace, The Parisian and Studio City picking up. Also any interior decorations without facade would not be very fruitful due to the extremely humid and rainy weather these days.

 

Macau: An overview of planned Casino projects at Cotai Strip (updated)

CotaiSands

The Cotai Strip in Macau is the new construction ground for a number of mega-Casino Resorts, scheduled to be open between 2015 and 2018. For those unfamiliar with Macau:

Cotai (Chinese: 路氹城) (Port.Zona do Aterro de Cotai) is a 5.2 square kilometres (2.0 sq mi) piece of newly reclaimed land between Taipa andColoane islands in Macau,[1] that has not yet been assigned to any of the freguesias. The Chinese and Portuguese names are a portmanteau of the two islands, Coloane and Taipa.

As such, a lot of very impressive buildings are going to be constructed on an area that was an impressive project of its own. In the following an overview of currently planned or under-construction mega resorts:

Project Name Total Invest (in billion USD) Owning Company Total # of rooms Total # of gaming tables *) Project Start Project Completion
Galaxy Phase 2 2.0 Galaxy Group 3600 500 2013 2015
Galaxy Phase 3 & 4  4.6 Galaxy Group 5500 tbc  2014 2018
Hollywood Roosevelt 0.350 Yoho Group 373 tbc tbc 2015
Lisboa Palace (SJM Cotai) 3.22 SJM 2000 tbc  tbc 2017
MGM Cotai  2.6 MGM China 1600 500 2012 2016
Sands Cotai Central – St Regis Tower 0.450 Sands 700 tbc 2013/4 2015
Studio City 2.0 Melco-Crown 2000 400 2012 2015
The Parisian 1.5 Sands 3000 tbc  2013 2015
Wynn Palace 4.0 Wynn Macau 2000 500 2012 2016
Wynn Diamond
(Cotai Phase II)
tbc Wynn Macau tbc tbc tbc tbc
Zaha Hadid Tower (City of Dreams) tbc Melco-Crown 780 2013 2017

*) estimated depending on final government license approval

With five of these projects scheduled for completion in the area between Mid 2015 to Mid 2016, labor market for construction works is expected to go haywire with daily wages exploding and a scramble for casino workers happening in parallel. According to various estimates, up to 50,000 workers are required to fill job positions for servers, waiters, dealers, housekeepers, managers, landscaping workers and others.

Add in to this mix that the current open casinos are already looking on a constant basis for staff, with numerous openings available, it will be a tough round with salaries potentially increasing across the board. Why? Taken the requirement for croupiers to be Macau residents (no foreigners allowed) and a lot of people believing that as dealers or croupiers salaries will be higher, more locals might push again into this vocation, leaving other lesser-paid jobs and creating vacancies in other industries. Without opening quota systems to allow for sufficient replacements, only higher salaries might lure people back into non-Gambling jobs (or other incentives, apart from salaries?).

Update July 28th 2014: (also above table is updated)

Graph showing Rooms Added each year and Total Rooms Available End of Year:

HotelsRooms

Galaxy Phase 2
Galaxy Macau Phase 2

Lisboa Palace
Lisboa Palace

Macau – The difficulty to find accurate employment figures for the Gaming Industry

Having had a look into both the general labor market situation (along its educational distribution) and a look into the numbers of visitors coming to Macau, this post is looking after a closer breakdown into the actual employed labor force of Macau.

The DSEC has released several helpful surveys on the employment situation including

  • A general employment survey undertaken monthly and summarized quarterly
  • Several specific surveys on individual industries (links see below)

However comparing both sets of data there are several striking discrepancies which would require to have the original data sets to verify:

  • Overall accounted employed workforce cannot be accumulated with individual surveys (e.g. Construction is not present)
  • Figures of seemingly same categories vary by over 30% (see Gaming below: 54k vs. 81k)
  • No definition is given (not even in the Annex) on who counts agains the general population (permanent residents, temporary residents, blue card holders, everyone with a visa, registered households only, etc.)

Below given table is being visualized in this Chart, showing the discrepancy in identified figures for either Q1 or Q2 of 2013:

Comparing individual surveys on employed persons in Macau

Comparing individual surveys on employed persons in Macau

It is appreciated that the DSEC is publishing all data in an user-accessible database from which output can be generated and saved. Critical data for an in-depth analysis however are not shown, e.g.

  • Educational levels per age group
  • Educational levels per industry
  • Educational levels per industry and per age group

For the next post, I would like to have a look at the rate of company incorporation vs. dissolved companies in Macau. If you click on the link, a database generated PDF will open that will give you a first idea on the accelerating rate of business inaugurations happening in Macau.

 

Tabel for above shown Chart:

As per Survey on Manpower Needs & Wages 1) 2) 4) 5) As per Employment Survey 3)
Industry Q1 / Q2 2013 in % Q1 2013 in %
Overall Labour Market    351.000,00 (assumed)         351.800,00
Gaming Sector       54.554,00 16%            81.100,00 23%
Hotels       44.664,00 13%            29.800,00 8%
Restaurants *)       19.970,00 6%            25.400,00 7%
Manufacturing       10.233,00 3%            10.400,00 3%
Electricity, gas & water supply         1.076,00 0,3%              1.400,00 0%
Child-care             803,00 0,2%
Elderly Care             591,00 0,2%
Insurance             464,00 0,1%
Financial Intermediation Activities             378,00 0,1%              8.400,00 2%
Banking         5.363,00 1,5%
Construction            30.200,00 9%
Whole-Sale Retail Trade       35.389,00 10,1%            45.800,00 13%
Transport, Storage & Communications         8.399,00 2,4%            15.100,00 4%
Real Estate & Business Activities            26.100,00 7%
Public Administration & Social Security            24.600,00 7%
Security activities         8.740,00 2,5%
Public sewage & refuse disposal activities       14.120,00 4,0%
Education            14.600,00 4%
Health & Social Welfare              8.500,00 2%
Other Activities (Recreational, Cultural, Gaming & Other
Services)
           10.200,00 3%
Domestic Work            19.500,00 6%
Others                  700,00 0%
Total Accounted For    204.744,00 58,3%         351.800,00 100%
*) including non-hotel/casino restaurants
1) http://www.dsec.gov.mo/Statistic.aspx?NodeGuid=6289ca07-25cc-450b-8499-4e34765c1769
2) http://www.dsec.gov.mo/Statistic.aspx?NodeGuid=b973199f-f3e1-42e3-bfd8-9e4498787954
3)  http://www.dsec.gov.mo/Statistic.aspx?NodeGuid=d4e4d153-73fb-4707-8b82-e20257ec87be
4) http://www.dsec.gov.mo/Statistic.aspx?NodeGuid=4d5cf7fe-a80c-41cc-a2e3-8efa0abfc5fa
5) http://www.dsec.gov.mo/Statistic.aspx?NodeGuid=afe72f97-c92e-40ea-b6b8-b38353444e6d

A factual analysis of visitors to Macau

In the last post I had written about the distribution of the labor force of Macau, relying mostly on official government data to visualize Macau’s current situation. In this post I once again base my charts and diagrams on the official statistics on Visitors to Macau (as released by DSEC).

Taking the figures of Q1 2010 to Q2 2013, i.e. the period of time after the financial crisis and as marked by the construction and openings of Galaxy Macau (Q2 2011) and Sands Cotai Central (Q2 2012), it is remarkable to notice the following trends:

  • An overall increase of  visitors from China (up from 3.3 million in Q1 2010 to 4.4 in Q1 2013)
  • An overall decrease of visitors from the rest of the world (2.78 million in Q1 2010 to 2.6 million in Q1 2013)
  • This leads to an overall increase of visitors to Macau (6.1 million in Q1 2010 to 7.07 in Q1 2013)
Distribution of visitors into three groups: Mainland China / Hong Kong and Rest of World

Distribution of visitors into three groups: Mainland China / Hong Kong and Rest of World

Having a closer look at the growth and decline percentages quarter to quarter (2011 to 2013) the following negative trends are visible:

Growth/Decline Rates of all three visitor groups

Growth/Decline Rates of all three visitor groups

This means that Hong Kong visitors are in decline since Q4 2011 (on a comparative quarter to quarter basis) and the rest of the world has decided to decline since Q2 2012 (once again on a quarter to quarter basis).

This is especially interesting as it suggests that despite opening of two major Casino resorts, Macau was not successful in establishing a steady growing visitor base apart from China. In contrary, as far as it looks, the dependency of Macau’s Casinos on Chinese customership has increased year by year, quarter to quarter. An interesting (yet disputable approach) is to overlay the Q/Q mainland Chinese visitor growth with the Q/Q GDP growth of mainland China:

Q/Q growth rate comparison of Chinese GDP and Mainland Chinese Visitors to Macau

Q/Q growth rate comparison of Chinese GDP and Mainland Chinese Visitors to Macau

What does the above mean? A few points:

  • Both China’s economy and the overall number of Chinese visitors to Macau grow from Quarter to Quarter and from Year to Year.
  • The increase of visitors to Macau from mainland China is stronger than the growth in GDP in mainland China at the same time
  • There are a lot of interfering factors that would have to be taken into account for a closer analysis, such as travel restrictions and the appearance of other travel destinations nearby (which are attractive to Chinese mainlanders)

Yet still, what can be said about the above situation is that Macau is more and more dependent on visitors from Chinese countries and whatever efforts have been taken in the last years to increase other customer groups, have failed. This is even more interesting when one has a look at the total hotel & casino industry key figures and their own increase during that time:

Comparison of total visitors with hotels increase in Macau

Comparison of total visitors with hotels increase in Macau, figures as found on DSEC: Hotel and Similar Establishment Survey

Going the next step one can analyse how many available rooms there are in Macau (as of the time of above estimation) against the total number of visitors:

Available Rooms vs. Total Numbers of Visitors per Year

Available Rooms vs. Total Numbers of Visitors per Year

This means that the potential for hotels in Macau is not yet reached, which is in line with current development plans at Cotai Strip, adding the following Casinos to the market:

Overview of New Casino Hotel Rooms and respective overall capacity

Overview of New Casino Hotel Rooms and respective overall capacity

In summary:

  • Macau is ramping up its efforts to enable more visitors to stay and gamble in Macau
  • Chinese visitors are the largest group among all visitors
  • Other visitors are in decline (yet still a conceivable force)

Macau – A factual analysis in the labor force structure of this gambling hub

Grand Lisboa of Macau, originally uploaded by Azchael.

With the help of the DSEC (Statistics and Census Service), which have collected the below represented information and summarized them for easier reading, I would like to dive into the current situation of labor force in Macau. As it is not a secret, Macau’s main source of income is Gaming and its related taxation. For the majority of citizens in Macau either a direct employment or an indirect service provision towards the gambling industry (construction, supply, logistics, etc.) are the main source of income.

Protectionism of the labor market

With plans for further expansion of the gaming industry in Cotai set up for 2016/2017, there are already arguments whether or whether not the core-gambling-related job (dealer) should be allowed to have foreign workers instead of purely Macanese citizens. Naturally it seems that the protection of local labor force is valued higher than the option to introduce foreign labors. But is that a good thing?

Protectionism of whatever kind has always restricted competition and with a lack of competition the incentive to improve/create/develop/educate oneself is considerably lower. Having a look at the current distribution of educational levels across the labor force one can see that less than a third of all available labors in Macau has a so called “tertiary degree”.

EducationalLevelsAccrossLaborForce

 

(Graphic taken from Employment Survey Q2 2013 – link goes to PDF)

This distribution is given for a total labor force of 351 thousand persons. Looking closer into this figure, 28.7% of these citizens are aged 25-34:

AgeDistribution

(Chart created based on figures found in Employment Survey Q2 2013 – link goes to PDF)

There are many conclusions that can be drawn from the above figures, such as:

  • Overall employable population seems to be stable and not going to change tremendously over the next 8-9 years (If one takes age group “16 to 24” (10.20%, figure not shown above) as “newcomers” to the market and age group “55 to 64” as “phase outs”).
  • The majority of employable residents is still aged 35 and above (35 to 65+ equals 61% of labor market), which means that over 60% of the labor force had (most likely) already completed their education prior to the handover of Macau to China in 1999 and prior to the boom of Casino industry

Unfortunately no split down is present in the Employment Survey about the age distribution of either industry profession or educational level, both interesting indicators on the current state of the business industry. Nevertheless a rough picture can be drawn on how the labor force is being built up.The current state of higher education

No going to have a closer look at those jobs that are usually being referred to as “professional” or “technical” jobs, i.e. classified as having to use a “tertiary degree”. In Macau the distribution of enrolled university students across all 10 institutes is shown as below:

DistributionofMajor

 

(Chart created using figures from Education Survey 2011/2012 – link goes to PDF)

  • As can be clearly seen most students are focussing on sciences that would enable them to perform a job function within the Gamin industry (Business / Tourism) whereas industrial jobs such as engineering or IT are underrepresented.
  • From the above 2011/2012 figures and in total 25212 students enrolled, a total of 6158 students graduated (with either degree) from university, hence would be potentially available for the job market. That means every year between 5000 to 6000 university students would be available to take a job.
  • With a total labor force population of 351 thousand persons, an figure of 6158 tertiary degree holders would represent 1.7% of the total population.

The above figures are speaking for the tertiary (university) education of Macau without qualifying this educational level. Speaking on a world comparison basis, one needs to have a look at the 10 institutes represented in above figures. Having a look at the “Ranking Web of Universities” for Macau, one can see that the best Macau university is ranked 1104th in the the world, with two institutes even well below that rank in the ten thousands.

MacauUniveristy

The dangers of a non-diverse industry

In summary looking at the above, i.e. the available labor force, their current state of education and the choices recent university students have made, along with the (subjective) quality level of institutes provided, the following conclusions can be drawn:

  • Macau is heaviliest focussed (as well known) on the Gaming Industry
  • Newcomers to the labor market are Gaming / Casino focussed with a minority branching out into other industries.
  • It needs to be analyzed what measures or activities are being introduced into the market to either stimulate the growth of a second industry or whether or whether the long term indicators for tourism are showing a rise or decline in visitors.

If within a very short period of time, Macau would suffer a decline in visitors to the Gaming industry the overall labor market would take a huge blow as there seem to be no viable short term option of employment outside the current industry network of Casinos, their suppliers and subsuppliers.

If time allows, I will continue to dive into the statistics as provided by Macau and analyze further. Please leave your comments below.