The dependence on UnionPay cards among mainland Chinese gamblers could prove problematic for the premium mass segment in Macau, with any further government restrictions likely to have a major impact on revenue growth.
That’s one of the key findings of a new AlphaWise survey of 1,000 players conducted by financial services firm Morgan Stanley, which sees rising penetration of the mass market, more risks in the premium mass segment in Macau and greater competition in the near future from regional gaming markets.
“The dependence on UnionPay cards (both debt and credit) relative to cash on hand as a source of gambling funds has increased compared to the last two years,” explained Morgan Stanley analysts of the survey results.
“As much as 70% of gambling funds are sourced through UnionPay cards for customers gambling higher sums, compared to 66% in 2016 and 60% in 2015. Gamblers with higher incomes and higher gambling budgets are bigger users of UnionPay cards than gamblers with lower incomes and lower gambling budgets – the same trend as in the last two years.
“For the higher income/gambling budget group, we notice less usage of credit cards, more than offset by the much higher usage of debit cards. We think the cash withdrawal limit of ¥100,000 per card per annum since 2016 and Know Your Customer (KYC) features for ATM machines in Macau will continue to reduce usage of cash and increase the usage of UnionPay cards in pawnshops. Any potential clampdown on the usage of debit/credit cards in future remains a risk to premium mass business.”
Notably, the gambling rate – the percentage of Chinese respondents who have gambled in Macau in the last 12 months – of those with a monthly income of ¥50,000 or more remains the highest at 80%, but hasn’t increased over the past 12 moths despite the opening of Wynn Palace and the Parisian in 3Q16.
“By contrast, the middle-income group (monthly income of ¥10,000 to ¥50,000) saw the highest increase from 36% in 2015 to 62% in 2016 and 70% in 2017, resulting in higher overall penetration,” Morgan Stanley said. “This suggests that grind mass is probably more robust and growing faster than premium mass.
“We also saw mass revenue growth slowing in 2Q17 at City of Dreams and MGM, two of the casinos that have the highest concentration of premium mass business in Macau.”
