Recent moves to diversify Macau’s economy with the development of integrated resorts such as the Venetian Macao and MGM Grand are luring eager visitors and spurring growth.

But while the cash and chips flow fast and furious on Macau’s gambling tables, the story is different on the road. Traffic congestion, hour-long taxi queues, and huge crowds at border gates – all that is getting worse as the city lights glow brighter.

Macau’s infrastructure has been hit hard as arrivals reached 22 million last year, only slightly behind Hong Kong’s 25 million and representing a compound annual growth rate of 17 per cent between 2003 and 2006 and a year-on-year growth of 21 per cent in the first half.

Without rapid connectivity improvements, the mounting jams could tarnish the city’s image and reduce economic and property market potential.

Dissatisfaction, meanwhile, is intensifying along with the traffic. During the last golden week, mainland visitor flow forced a temporary shutdown of the Gongbei border gate. Current capacity, insufficient at 300,000 travellers per day, has meant disgruntled travellers in long immigration queues.

Hailing a taxi is no easy feat. Only half of the visitors polled in surveys are satisfied with the transportation system, according to government statistics. Sentiment is likely to worsen, given the aggregate demand-supply ratio for taxis is already high at 712:1 compared to 395:1 in Hong Kong.

Last year, 16 per cent of visitors agreed that public transportation needs improvement compared to 6 per cent in 2004.

Thankfully, the government has felt the sting and several major infrastructure projects are now in the pipeline. However, these must be pursued much faster to keep pace with the economy.

By far the best long-term solution for internal connectivity will be the launch of the proposed light rail transit system. The first phase of the system, carrying 8,000 passengers per hour, will be completed in 2011 serving ultimately 12 stops in the peninsula and 11 on the Cotai Strip. A public consultation was completed in August and construction will commence next year.

Externally, the focus should fall on improving border capacity as over 60 per cent of visitors arrive in Macau by land, typically from the Pearl River Delta. Expansion plans for Gongbei to handle 500,000 arrivals per day by 2009, in addition to the capacity of 80,000 at the Lotus Bridge checkpoint, will help alleviate some immigration traffic, but not enough and not soon enough.

For mainland visitors outside the Pearl River Delta, existing travel options are unattractive. Only 13 cities in the mainland have direct flights into Macau International Airport. The alternative is to fly to Guangzhou and then take a three-hour coach ride to Macau.

Several infrastructure projects aim to facilitate visitor flow from the mainland. The Guangzhou-Zhuhai intercity Rapid Link system, which will cut travel time to 40 minutes from three hours by 2009, is one.

The Guangzhou-Zhuhai West Expressway also will enhance connectivity in three years to put Macau within a 30-minute drive from Hong Kong along the 35km Hong Kong-Zhuhai-Macau Bridge.

However, problems remain in the air for serious business travellers, particularly as Macau’s integrated resorts try to tap markets within a five-hour flight, including Tokyo, Seoul, Kuala Lumpur and Singapore. As MICE (meetings, incentives, conventions and exhibitions) facilities have expanded by more than 540 per cent with the opening of the Venetian Macao, more than one million business travellers are expected to attend exhibitions and trade shows each year.

Macau’s planned airport expansion to handle eight million flights per year by 2011 (from six million last year) will bring some relief.

Improved connectivity will shape the world’s best performing gaming city into a more livable one to offer stronger support for retail and residential property prices.

Expatriates are expected to absorb all the new supply of luxury residential units of around 17,500 between now and 2010. Rising demand for high-end properties could easily drive up rents and capital values by 10 per cent per year over the next two to three years.

And while initial yields may be low, investors can look forward to increases. If connectivity and border situations improve, investment demand is likely to rise with more mainlanders buying second homes in Macau.

Still in its infancy, Macau’s retail market will see an addition of close to nine million sqft of retail space in the next two to three years. The Venetian Macao alone injected one million sqft of retail space in August. Retail business opportunities are plenty but with ample supply and keen competition for tenants, rental growth potential will be mild.

If transport systems are smooth, retail facilities will benefit from shoppers dallying longer in the city.

To reach its full economic potential, much will depend on whether Macau successfully transforms the typical profile of a visitor from one who enters, gambles and exits, to one who spends inside the city.

The roll-out of integrated resorts should lengthen visitors’ stays to at least two days from the average of 1.1 compared to 3.5 days in Hong Kong and Las Vegas.

So while it may have surpassed Las Vegas in gaming revenues, Asia’s rising star will need to speed up infrastructure development. The road to stardom involves more roads (and border gates) ahead.

Source: South China Morning Post

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