Macau - Asia's Vegas?

by AFP/Mark McCord , Sep 4, 2004 | Destinations: Macau / China

A huge cheer breaks through the cacophony at Sands Macau Casino as the four million pataca (518,000 US dollar) blackjack jackpot is won. Lights flash, music plays and hordes of tourists, mostly from mainland China, gather around to congratulate the beaming winner.

Later, by the huge cocktail bar, two scantily clad Western girls gyrate on podiums to the muzak of a house band fronted by two equally skimpily attired female singers. Overhanging the slot machines and the baccarat, roulette and card tables, a gigantic video screen the size of a tennis court flashes pop videos and ads for other casino attractions, including the upstairs buffet in a restaurant as big as two football pitches.

Gambling Macau-style has changed dramatically since Sands, a subsidiary of the Venetian company that owns its namesake hotel-casino complex in Las Vegas, opened in May. It has brought Vegas pizzazz to the largely autonomous Chinese territory in an industry that had been dominated by dingy, smoke-filled dens since gambling was legalised by the Portuguese colonial government a century ago.

With the emphasis on entertainment above gambling, it is the first in a 25-billion-pataca wave of new casino openings that are already revolutionising an industry which just five years ago had gone into reverse. At least another 30 similar American-style casino-resorts are planned, which by 2009 are expected to pull in more than five billion US dollars annually -- outstripping takings even on Las Vegas Strip.

"The numbers are scary," said economist Albano Martins. "And by all projections, they are just going to get bigger and bigger."

When China resumed control of the territory in December 1999 gaming, long the pillar of the local economy, was on the wane as the economic slump in Hong Kong, a 45-minute ferry ride away, deterred its traditional source of punters. That year casinos took only 13 billion patacas. Since then the picture has been transformed: according to government figures, gaming receipts had reached 22.5 billion by June this year, almost equal to the 28 billion taken in all of 2003. Martins expects the year-end figure to be 42 billion patacas.

The Macau that political leader Edmund Ho was re-elected to run on Sunday is much changed from the territory he inherited five years ago. "Another way of looking at it is this: the gaming industry pays 39 percent of takings in tax. That means that by July, from gaming tax income alone, the government has already paid its budget for 2005," Martins says.

Driving this sudden boom is a huge surge in mainland Chinese visitors. Since Beijing last year eased restrictions on travel outside the country, Chinese tourism here has mushroomed: from a trickle in 1999, Chinese arrivals soared to six million in 2003 and by June 2004 had already accounted for five million of the city's 7.7 million visitors.

"The mainland is Macau's golden goose," says Sanjay Nadkarni, a researcher at Macau's Institute for Tourism Studies. Growth is expected to rocket further. "To fund its expansion plans, the gaming industry has banked on a 50-percent annual growth rate in mainland visitors for the foreseeable future," said Martins. "The figures so far show they will reach that easily."

But for all its glitz and glamour, Sands is small-fry here: in June, its first full month, it took 320 million patacas, according to government figures, just two percent of the almost four billion patacas spent by gamblers that month. Even Galaxy, the Hong Kong-owned company that entered the market at the same time, raked in 400 million with far fewer tables. It has led some to doubt the American model in Macau.

"The Chinese operators understand the local market better because they have been here longer," said Martins. "The Americans say they will bring in the holiday gamblers but the Chinese casinos are making money from VIP tables, which Sands so far doesn't have." The high rollers of the VIP rooms provided an estimated 80 percent of the 3.3 billion patacas taken in June by the largest and oldest casino operator: Stanley Ho's SJM.

Ho held the monopoly on gambling here for four decades until this year when the government of Beijing-backed chief executive Edmund Ho (no relation) introduced new legislation allowing foreign competition. Through his huge conglomerate STDM, Stanley Ho controls much of the economic activity of Macau. Apart from his 12 casinos he owns the ferry company and port, he has a large share in the airport and he controls some of the most prestigious hotels and tourist attractions.

Viewed here as a benevolent uncle, few know why the government decided to break Ho's grip on the city. "Stanley controls so many rugs he could easily have pulled from under the economy, I think the government wanted to spread the risk," suggests Nadkarni.

"I think Stanley was seen as too powerful," says local legislator Antonio Ng Kuok Cheong, who opposes the casino expansion plans. "But I think it also made sense because there was a genuine desire to inject new life into the local market."

Sands Macau is just a taste of things to come. On a 100,000 square metre reclamation between two islands called the Cotai strip it is leading a development that will by 2009 house at least 25 American-style resorts and casinos, including the billion US dollar Venetian Macau. As well, Ho plans two theme parks and the 40-storey Grand Lisboa casino hotel.

Nearby, Galaxy has begun building what will be a 13-storey gambling haven; across the road Las Vegas tycoon Steve Wynn will open a 600-room, 200-table complex; and there has even been talk of MGM, which pioneered the family casinos in Vegas, opening a property with Ho's daughter Pansy. When it is complete by 2009, the Cotai strip will provide some 30,000 hotel rooms -- 4,500 at the Venetian alone -- about 1,000 gaming tables and at least 100,000 square feet of convention space.

The strip is expected employ some 150,000 staff. Many distrust relying on one industry but with no nearby competition and China -- though morally and politically opposed to gambling -- committed to maintaining Macau as the nation's only casino haven, problems, for now, look far away. "No one can see an end to the gambling jackpot," says Martins.

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