Hotel Online  Special Report

Hotel Performance in Macau Is On
its Way to Winning the Jackpot


April 2005 - Macau is located on the western bank of the Pearl River Delta in the Guangdong province of Southern China, intersecting Mainland China and the South China Sea. Over recent years, the casino-led city has experienced a tourism boom, fuelled by the liberalisation of the gaming industry in 2002. This has naturally had a knock-on impact on hotel performance which reached its highest levels to date last year. Results from the HotelBenchmark Survey by Deloitte show that Macau's revenue per available room (revPAR) increased by 35.4% to US$63 in 2004.

17m visitors and rising

According to the Statistics and Census Service of Macau, the total number of visitors to the city reached 17m in 2004, an increase of over 40% compared to 2003. Macau saw a surge in visitors from all corners of Asia during 2004. With over one billion people within a three hour radius of the city, this increase is not surprising.

Mainland China remains the Macau's largest source market - accounting for 60% of all visitors. The Chinese government continues to relax travel restrictions under the Individual Visitor Scheme (IVS) which currently account for 21.1% of total arrivals. The IVS started on 28 July 2003 and allows travellers from certain provinces and cities in Mainland China to visit Macau on an individual basis. The scheme is expected to expand to include more cities and provinces. As a result, Macau will look forward to increasing numbers of visitors from the Mainland.

Macau's second largest source market is its eastern neighbour Hong Kong, attracting over 5m visitors in 2004. Linked by more than 150 sea crossings each day, Macau is only an hour away for those tempted to gamble in the city's casinos.

The potential to take off

The number of passengers passing through Macau International Airport (MIA) also saw a rise in 2004, up 28% to 3.7m. With no direct routes to Macau from international destinations outside Asia, there is potential to push these figures up even further. Macau's close proximity to neighbouring airports such as Hong Kong and Shenzhen however provide stiff competition. Although MIA is trying to encourage more low cost airlines to add Macau to their routes, the cost of flying to the city is still higher than alternative airports. Therefore, many tourists, both domestic and international choose to fly to these airports and continue their trip to Macau using alternative land or sea routes.

The government places its bet

Visitor arrivals are set to increase again in 2005. The Macau Government Tourist Office (MGTO) continues to develop the city into a tourism hub focusing on gaming, MICE (Meetings, Incentives, Conferences and Exhibitions) and leisure markets.

A number of important events scheduled to be held in the city during 2005 will no doubt help increase visitor numbers further. Macau will host the 54th Pacific Asia Travel Association Annual Conference next week and a number of prestigious sporting events towards the end of the year. These include the 4th East Asian Games in October and the 52nd Macau Grand Prix in November.

2005 will also be an important year for cultural tourism, as the city hopes to add 12 cultural heritage sites to the United Nations Educational, Scientific and Cultural Organisation (UNESCO) World Heritage Listing. The sites include Macau's oldest church, Christian cemetery, lighthouse and Western theatre. The MGTO hopes this will add to its continuing efforts to make visitors aware of Macau's unique combination of Chinese and Portuguese cultures.

The MGTO is also working closely with tourism authorities in the surrounding Pearl River Delta area, including Guangdong and Hong Kong to complement and promote regional tourism. By sharing resources and joint promotions, the region will be able to enhance their competitive edge. Mainland China is also supporting several infrastructure improvements to bring more people into the region, including a 30km bridge linking three cities on the Pearl River Delta - Hong Kong, Macau and Zhuhai. The bridge is set to be completed in 2008, at a cost of US$531m and is expected to handle 20,000 vehicles every day.

Hotel performance on a roll

As the graph below illustrates, Macau saw a staggering increase in both visitor numbers and hotel performance in 2004. RevPAR increased by 35.4% to US$63. This was driven equally by improvements in occupancy and average room rate. Although performance has improved year-on-year since 2000, Macau's average room rate (US$78) is still almost US$60 behind its neighbour Hong Kong. However, with new hotels and casinos set to enter the city and with more than one billion prospective gamblers on its doorstep, there is plenty of potential for Macau to grow its average room rate further.

Macau revPAR performance and visitor arrivals 2000-2004

Source: HotelBenchmark Survey by Deloitte and Statistics and Census Service Macau

Las Vegas Strip arrives in Asia

When the casino market was opened up to foreign investors in 2002, ending tycoon Stanley Ho's 40 year gambling monopoly, many world renowned hotel companies put Macau in their sights. With an estimated revenue of over US$5 billion in Macau's casinos in 2004, combined with the ever increasing disposable income of the Asian middle class, no hotel company would want to miss out on this potential jackpot.

One of the main projects currently underway is the Cotai Strip development, modelled on the famous stretch of luxury hotels and casinos in Las Vegas. Spearheaded by the Las Vegas Sands Corporation, an estimated US$6 billion will be invested in the first phase of the development. This is scheduled for completion in 2007 and will have 10,000 hotel rooms, entertainment and business facilities plus an area for concerts and sporting events.

Hotel companies due to operate on the Cotai Strip include Four Seasons Hotels, Starwood Hotels & Resorts, Marriott International, Hilton Hotels, Regal Hotels, Dorsett Hotel Group, InterContinental Hotels and Las Vegas Sands. The Cotai Strip is well on its way to emerging as an international tourism destination. It took Las Vegas 75 years but the plan is to repeat this feat in Macau in less than three years.

Also under construction by Wynn Resorts Limited is the Wynn Macau. Due to open in 2006, the 600-room hotel-casino will be located on a 16 acre site near Macau's inner harbour. This is directly opposite the city's best known hotel-casino, Hotel Lisboa.

Winning streak?

It's a little early to predict what impact these new openings will have on hotel performance in Macau. However, with eased travel restrictions filtering through mainland China and improvements in infrastructure throughout the Pearl River Delta region, it is expected tourist arrivals will continue to grow. As the government continues to promote the city and more investment is pumped into new projects, the profile of Macau as an international tourism destination will improve. In turn, this will attract more visitors and investment helping to boost hotel performance figures even further.

Notes: All analysis in US$

The HotelBenchmark Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,500 hotels and 1.2 million rooms every month. 


Jessica Jahns
+44 (0) 20 7007 0967

Also See: First Phase of Macao's COTAI Strip Scheduled to Open in 2007 -- Includes Seven Resort Hotels Comprising of 10,000 Guest Rooms; The $1.8 billion Venetian Macao will Serve as the Anchor / March 2005
First American Operated Gaming Facility, The Sands Macao, Opens in The People's Republic of China's Special Administrative Region of Macao / May 2004

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