Weekly Reports | Aug 12 2022
Weekly broker wrap: China economy stalls, travel industry recovery, gambling shakeup, meal delivery heats up
-China economy faces difficulties as zero-covid policy continues
-Travel industry recovery continues, with Australia benefitting from reopening of key markets
-Mandatory precommitments to be issued across electronic gaming machines in Victorian casinos
-More consumers using meal delivery services post-lockdowns
By Danielle Austin
A weak quarter for China drives full year downgrades
Oxford Economics has described the second quarter as dismal for the Chinese market, noting the nation’s zero-covid policy appears set to hinder private sector growth as long as it in place. Results from the quarter have seen Oxford Economics decrease its 2022 growth forecast for China to 3.2% from a previous 4.0%.
The economists believe stable economic recovery in the region is dependent on the removal of the zero-covid policy, noting China failed to announce any additional stimulus funding in July, although does continue to attempt to reduce supply-side disruptions.
Oxford continues to expect an increase in quarter-on-growth in the second half, noting the cut to the full year growth forecast reflects the weaker second quarter while forecasts for the third and fourth quarters are largely retained.
Consumers prioritise travel spend amid ongoing industry recovery
Recovery continues in both the domestic and international travel industries, with JP Morgan finding consumer demand remains strong despite mitigating macroeconomic factors. Australia Pacific continues to lag other regions, but the broker highlighted meaningful improvement since the reopening of key domestic markets Japan and China.
Australian domestic passenger volumes as reported in June are now just -2.9% below pre-pandemic levels, up from a -5.9% pre-pandemic lag in May, while globally passenger volumes have recovered 70.8% of pre-pandemic levels and domestic flights are 81.4% of pre-pandemic levels.
Notably, the broker highlighted read-throughs from the US second quarter reporting season suggest consumers are continuing to prioritise travel spend and forward bookings are optimistic.
Gambling precommitments shake up industry
With the Victorian Government announcing its intentions to proceed with a further twelve recommendations submitted in the Victorian Casino enquiry, the analysts at Barrenjoey note new laws will see patrons set limits on their spend through mandatory precommitments.
The recommendation, which will see mandatory precommitments on all electronic gaming machines, will be implemented at Crown casino before the end of the year, and Barrenjoey expects this increases the likelihood of mandatory precommitments being adopted nation-wide. With mandatory precomittments being discussed for the last decade, Barrenjoey expects successful adoption in Victoria could encourage other states to follow suit.
Following implementation, vendors will be required to place a maximum limit on how much they intend to spend on machines. As a result in the inquiry punters will also be capped to a $1000 cash spend at the casino in any 24 hours and be required to use casino issued cards, which Barrenjoey notes was an expected step in the move towards cashless gaming.
Further, disciplinary action penalties for vendors have increased at least tenfold, with a new maximum fine of $100m.
Meal delivery services boom in covid shutdowns
Meal delivery services have emerged as a beneficiary of the pandemic lockdowns, with data from Roy Morgan demonstrating a lift in consumers accessing delivery services including UberEats, Menulog, DoorDash, HelloFresh and Deliveroo.
Roy Morgan analysts found the number of Australians using meal delivery services have almost doubled since early 2020 to over 7m from a previous 3.6m. The data highlighted UberEats as the clear market share leader, now used by 3.5m Australian consumers compared to 2.3m in early 2020.Segmentally, the research found those aged 31-46 were most likely to be using meal delivery services, with 45.8% using a meal delivery service in an average three months, followed by consumers aged 14-31 where 43% of consumers were accessing the platforms. Geographically, consumers closer to capital cities are more likely to utilise these services, while New South Wales and Victoria, the states who suffered the longest lockdowns, had the highest number of users.
Segmentally, the research found those aged 31-46 were most likely to be using meal delivery services, with 45.8% using a meal delivery service in an average three months, followed by consumers aged 14-31 where 43% of consumers were accessing the platforms. Geographically, consumers closer to capital cities are more likely to utilise these services, while New South Wales and Victoria, the states who suffered the longest lockdowns, had the highest number of users.
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