Macau Limits Stays for Mainland Tourists

Macau’s government has responded to widespread abuses of rules allowing Mainland Chinese tourists to visit Macau by shortening the number of days they can stay in the city while supposedly traveling to other countries. Analysts say they don’t expect the restrictions to hurt gaming revenues.

Macau is reducing the maximum number of days that Chinese passport holders with transit visas can stay in the city to five from seven, in an attempt to prevent them from abusing the law.

Transit visitors from China who don’t depart for another destination within the five days will be in violation of the new rules, effective July 1, and will be penalized upon their next visit, the city’s Public Security Police Force said. Repeat violations will result in denial of entry.

The change “aims to prevent Chinese passport holders from using transit as an excuse to stay in Macau, when they actually have not gone to their destination,” the government said in the statement.

The news came as the shares of the six operators have been battered in recent weeks by a string of negative headlines. Analysts, however, don’t expect it to have much tangible effect as most visitors stay only a day or two on average.

“We do not think this new policy will have a measurable impact on gaming revenue,” Grant Govertsen at investment bank Union Gaming Research Macau. “It is important to keep in mind that most high-value casino customers typically come to Macau about four times per year.”

Last year, a little over 2 million Mainland Chinese arriving in Macau using a transit visa didn’t go on to a third-party country, representing 11.2 percent of total Mainland Chinese visitors for the year. Mainland tourists account for two-thirds of total visitors to Macau.

Of greater concern is the fact the casinos are continuing to post weak VIP gross gaming revenue results.

Japanese brokerage Nomura estimates the VIP, which accounts for about two-thirds of the market’s total take, could be down between 11 and 13 percent year on year in June amid tightening credit growth and weakening macroeconomic conditions on the mainland. Unlike the mass market, VIP revenues have a high and positive correlation to credit and economic tides in China.

Brokers Sterne Agee say their June GGR outlook remains between a drop of 2 percent and growth of 3 percent from last year “with a bias toward the low-end of our range”.

The good news is that Nomura’s checks indicate mass headcount “remains strong,” the firm said, and analysts Louise Cheung and Harry Curtis said mass-market GGR could be up between 34 and 38 percent in June compared to June 2013.

The consensus for second quarter revenues is still high, with most analysts forecasting revenue growth of 7 percent, while Wells Fargo estimates a hike of between 1 and 5 percent this quarter.

“Sentiment is clearly more negative and short interest has increased,” the bank warns. “We see recent downgrades and cuts to market growth consensus as a sign that short-term valuations are bottoming out, but based on our valuation analysis, we don’t yet believe we’re at short-term bottom.”