Are Macau’s Retail Glory Days Returning?
Macau's retail market is bouncing back after a two year dip following the Chinese government's 2014 anti-corruption campaign. The high-rollers have returned but it's not just VIPs that are contributing to this recovery.
Macau's retail market is bouncing back. After a two year dip following the Chinese government's 2014 anti-corruption campaign, the high-rollers have returned and gaming revenue is up. Hand-in-hand with that, retail sales are tracking upwards too, growing 12.6% year-on-year in the final quarter of 2017. Luxury retail is the big winner, benefitting from a 26.7% uptick in VIP visitors.
"Beyond ties to gaming revenue, multiple factors are driving the resurgence of retail in Macau, and that broader-based growth is a positive sign for the SAR's prospects," says Oliver Tong, Head of Retail at JLL Macau. "Visitor arrivals to Macau rose 5.4% in 2017 to 32.6 million, but it's not just the number of visitors that is significant—it's the type."
Between 2015 and 2017, overnight visitor growth outpaced day-trippers. Overnighters now account for more than 50% of Macau's total visitors, and they spend 2.6 times more on shopping and 5.7 times more on F&B than their day-tripping counterparts.
Plenty of new luxury projects are in the pipeline between now and 2020, with the completion of Galaxy Macau Phases 3 & 4, Grand Lisboa Palace, and the Londoner expected to drive more retail activity.
Macau's gaming revenue reached MOP 266 billion in 2017, up more than 19% year-on-year, and made up 93% of the SAR's total revenue for the year. The return of visitors to the city's casinos has directly boosted retail sales but China's government says that Macau's non-gaming income must make up at least 9% of its total revenue by 2020.
This has led to the SAR's rising stature as a MICE (Meetings Incentives Conferences and Events) destination. Macau now has 10% more capacity for these large-scale events than Hong Kong. The Macau government is also investing in nightlife and entertainment experiences such as the Macao Light Festival across more than eight locations around the city.
"Brands and retailers are taking advantage of this emphasis on family-friendly recreation to embrace lifestyle concepts," says Tong. "We're seeing a lot of pop-up stores appearing in a market that previously just had high street and mall retail."
Luxury brands like Tesla and Nakamura Tokichi are among those that have made a splash with pop-up stores recently. A "Prada Spirit" pop-up at the city's Galaxy Mall offered an exclusive product selection of leather goods in a retail space designed to resemble a luxurious traditional Italian café, while a pop-up tearoom from Tokichi encouraged visitors to take a break from Macau's hectic pace by embracing the authentic, health-conscious traditions of Japanese tea ceremonies.
Future growth is expected to be driven by the Hong Kong-Zhuhai-Macau Bridge that will open in the second quarter of 2018, which crosses the Pearl River from a point close to Hong Kong's Chek Lap Kok airport—the arrival point for 13.7 million visitors annually.
Tong has some advice for retailers looking to participate in Macau’s next retail upcycle.
"The rules and the way of working are different in Macau and Hong Kong. You need to understand the local scene and study the market," he says. "A partner like JLL can help secure you space in the right location to capture your target customers, and get your store up and running smoothly. We can offer advice on every aspect of your starting up your retail operations in Macau, from permits, to fit outs, to employing staff."
"The next two years will be extremely exciting," he adds. "If you're hesitating, and still think investing in Macau is a gamble, my advice is to get your chips ready. Explore all the available options, before it's too late."