Those of you familiar with the plot of the 1957 World War II epic and Academy Award film, The Bridge on the River Kwai, will be aware of the extreme challenges faced in the construction of a railway bridge in the Burmese jungle. Against all odds, a group of British prisoners of war working in horrendously harsh conditions, under the instruction of their Japanese captors, achieved impressive results.
There’s little parallel of course with this bridge and the one being built today from Hong Kong to Zhuhai and Macau but I can’t but help think of the film every time I pass by or under it on a ferry ride. 15 years in the making, this incredible feat of engineering, costing a mind boggling total investment of HKD117 Billion or USD15 Billion, certainly has its own set of challenges.
And as its about to be completed, many minds are on what its economic benefits are likely to be, what will the financial payback be?
The actual Hong Kong-Zhuhai-Macau bridge (HZMB) and related artificial islands construction costs are, in 2015 figures, HKD44.3 Billion (USD5.7 Billion). 59% of this comes from bank loans and 41% is from contributions from the 3 governments, of which 50% was paid for by Hong Kong, 35% by Zhuhai and 15% from Macau.
Prohibitively expensive to include a railway, the HZMB will only be a road. Will it be a glorified cargo crossing as some cynics suggest? Or will it genuinely benefit the tourism and hotel industry in Macau and Hong Kong, and if so, how?
Mr. Chun-Kong Lau, International Director and Head of Valuation Advisory Services for Jones Lang LaSalle in Hong Kong visited Macau recently to address a business luncheon. His talk, on how the various upcoming infrastructure developments in the Pearl River Delta (PRD) West Region are to benefit the tourism and hotel market in Macau and Hong Kong was full of interesting statistics.
In 2008 (yes, the figures are a little dated) the number of arrivals and departures by boat between Macau and Hong Kong was 19.2 million. By helicopter these were 110,000. A total of 19.3 million trips. Come 2020 when the HZMB is hoped to open, the prediction is that ferry trip numbers will go down by 61% to 7.5million, and the helicopter trips down by 72% to around 30,000. Expected trips using the bridge will be about 17.8 million, so overall traffic between Macau and Hong Kong will go from just over 19 million to 25.3 million trips.
The argument around the success of the HZMB is a) time saved and b) cost saved. Its important to note here that the comparison of these two elements is measured from the Hong Kong International Airport (HKIA)/Hong Kong Boundary Crossing Facilities to Zhuhai / Macau border; today 1-1.5 hours by ferry, 15 minutes by helicopter and 45 minutes anticipated for a trip by car. For those travelling to and from Central/Kowloon and Macau – the current ferry system will remain by far the quicker option. Its for the hoped-for millions who will fly in to HKIA that the bridge will really benefit – hop off the plane and on to a coach, and be in Macau within the hour, instead of the rather prolonged and hit and miss timings of airport connections to Macau as we have today.
On costs, a round trip on the ferry between HKIA and Macau is around HKD750 today. By comparison a round trip by helicopter costs HKD8,600. For the bridge, the cost will apparently be HKD210 for a return trip. A substantially attractive cost saving for the tourists and thus, according to data released by the Hong Kong government, the number of passengers travelling on the HZMB will account for approximately 70% of total passengers from HK to Macau.
So far, this is pretty good news for the tourism industry here. But how well are we prepared to welcome all the additional visitors coming to our shores? Well, when it comes to premium/5 star hotels, 20,600 or 65% of Macau’s total 31,600 rooms fit in this category rooms. By comparison, Hong Kong has only 18,000 rooms or 24% of their total of 74,600 rooms. So Macau seems well placed and more competitive in terms of supply and pricing, especially with more quality rooms coming on the market over the next three years with the likes of the new Wynn Palace (1,700 rooms), Parisian (3,000 rooms), MGM (1,500 rooms), Lisboa Palace (2,000 rooms).
In terms of hotel revenue the gap between Hong Kong and Macau is getting narrower; in 2008, Macau’s revenue was less than 50% that of Hong Kong’s. In 2014, Macau’s hotel revenue reached about 70% of Hong Kong’s.
Interestingly the average new build hotel room size in Hong Kong is less than 200 square feet net for mid-range to budget hotels, and 400 square feet for 5 star hotels. Macau’s hotels are double these figures.
When it comes to the meetings, incentives, conferences and exhibitions (MICE) business, Macau has 10 venues offering ~ 245,000 m2 of space, Hong Kong has three venues of ~ 214,000 m2 and Zhuhai has 3 venues with ~ 119,000 m2 indoor and ~ 410,000 m2 outdoor space.
In summing up his presentation Mr. Lau said that Macau has a number of comparative advantages over Hong Kong that will entice tourists to us; there’s more premium hotel supply and a greater variety of facilities. “Hotel rooms, convention and conference facilities are all very important for the growth of tourism. There’s a lot of good hardware to attract visitors to spend time in Macau”. It seems that far from being the white elephant that skeptics say it may be, the HZMB will play a crucial role to support this.
