Some consternation surrounding relatively weak visitation rates but GDP has mattered most.
Macau visitation grew 5.2% in February and only 1.4% in January. Yet, Mass revenue increased 19% and 36%, respectively. Should we even care about visitation? Probably, but not necessarily over the near term.
We’ve run the regressions and at first blush, it appears that visitation is highly correlated with Mass gaming revenues. Makes sense. However, when China GDP is thrown into the equation, visitation loses its significance. GDP and visitation are auto-correlated but GDP is by far the dominant variable. The R Square with just GDP is 0.71 versus only 0.50 with just visitation. With a multi-variable regression including both variables, the R Square rises to 0.77. Moreover, the visitation coefficient is only 0.29 so a 1% increase in visitation drives only a 0.29% increase in Mass revenues – barely worth mentioning.
We do question if this relationship will hold over the long term. It’s hard to imagine that spend per visitor can continue to grow at the current pace. We believe long-term Mass growth will be sizable but not at current levels. The long term pace we see is China GDP plus visitation: 7-10% GDP plus 5-10% visitation. That would alter the current equation considerably but seems reasonable since Macau has barely tapped the provinces outside of Guangdong. At some point, the fine people of Guangdong won’t be able to increase their gaming spend at a multiple of their wealth growth as they appear to be doing currently.
For now, however, Mass looks like it is on track for another 20% plus growth month in March, despite a 32% comparison last March. The GDP multiplier should hold over the near term.