But in the wake of the faltering global economy, Macau is not such a sure bet anymore. The problem is that some of those giants embarked on overzealous building sprees — since 2004, the number of casinos in Macau has more than doubled to 31 — and now the global credit crisis is threatening to topple at least one of them. Adelson's company, Las Vegas Sands, has undertaken an aggressive expansion plan over the past few years, winning the bid to build the $4.6 billion Marina Bay Sands casino-resort in Singapore and developing a $743 million casino-resort in Pennsylvania, among other projects. The credit crisis has left the overextended company in danger of defaulting on $5.2 billion of loans secured by its Las Vegas operations. Last week, the company said it would work towards completing the Marina Bay site, but Singapore's government is making backup plans to enact if the Sands fails to raise the necessary funds to complete construction. Then, on Nov. 13, the cash-strapped company announced that it would layoff up to 11,000 construction workers in Macau, after its decision to suspend work on part of the Cotai Strip — a $12 billion undertaking. On Thursday, Las Vegas Sands' share price closed at $5.58, down 95% from its peak last December.

Dark Days Ahead for Asia’s Las Vegas? – TIME.

If you factor out the visa restrictions and other extrinsic factors, it’s hard to argue against Macau’s growth in the long term. Of course, all those extrinsic factors are what makes Macau…Macau.

I just wish that we could get stories weren’t so extreme. It’s always “this is the best every” or “things can’t get any worse.” Usually, though, things can get better, and of course things can always get worse.

But I doubt you’ll see a story whose gist is: Macau is a promising market but it’s currently got challenges that only smart operators will be able to overcome. It’s too nuanced, and it probably requires too many value judgments.

Hunter S. Thompson would have found much to fear and loathe in Macau, the former Portuguese colony rebranding itself as a gambling paradise. The good doctor (rest his soul) would have been vexed to discover that Macau, surrounded by water and crowded immigration checkpoints, is best entered by ferry, not gas-guzzling Caddy. No doubt he’d have been dismayed to learn that since Macau’s 1999 return to Chinese rule, hallucinogenic substances aren’t easily procured. But then again, when you can gaze at the Grand Lisboa casino, the newly built neon orb that throbs and pulses at the edge of the Macau peninsula like the Technicolor egg of some gargantuan radioactive monster, who really needs peyote?

Indeed, Western gamblers looking for something more exotic than Reno or the Riviera are in for a bit of a shock when they arrive in this smog-shrouded enclave. In Macau’s city center, the pastel façades of Senado Square and the ruins of St. Paul’s cathedral evoke Macau’s four centuries under Portuguese rule. But the frenzy of development elsewhere lends this Old World city the feeling of a frontier boomtown (albeit a relatively sober one: Macau’s hard-core gamblers prefer tea to liquor).

While Macau is now the world’s gaming capital last year revenue surged 22%, to $7 billion, vaulting the city ahead of Vegas – there are just a few decent restaurants and not much in the way of shopping or shows to speak of (yet). Still, Macau is a fascinating place to watch some of the most intense gambling around, both at the baccarat tables and amid vast, dusty construction sites, where high-rolling developers are betting billions.

The island was closed to all foreign competitors till 2002, when Beijing stripped local tycoon Stanley Ho of his monopoly over the island’s gambling concession, which he had held for 40 years. Faced with new competition, Ho (who also controls the lottery, dog and horse racing, the ferry and helicopter terminals, and the city’s largest land bank) rushed to gussy up some aging properties and build new ones. On a recent visit to his newest, the Grand Lisboa, a troupe of Russian street players performed slapstick routines beneath crystal chandeliers in the front lobby, while on the gambling floor upstairs, a trio of cabaret dancers shimmied in front of a giant oval of orange jade.

Ho’s offspring have also benefited from the boom: His son Lawrence partnered with James Packer, Australia’s richest man, and in May they opened the $500 million Crown Macau on the island of Taipa. MGM Mirage, owner of Las Vegas’s Mirage and Bellagio casinos, has teamed with Ho’s daughter Pansy to build a 28-story, 600-room hotel and casino set to open later this year on the waterfront.

Vegas entrepreneur Sheldon Adelson, however, is making the biggest wager that visitors here will want to do more than just gamble. After recouping his $240 million investment in the Sands Macau in just eight months (the cavernous casino set the world record for the largest number of gaming tables under one roof), he’s getting ready to throw open the doors of another Vegas outpost, the $2.2 billion Venetian Macau, on Aug. 28. The Venetian is the first phase of a truly mammoth complex slated for completion next year, which will include 20,000 rooms operated by five luxury hotel chains such as Four Seasons and Raffles. This so-called Cotai Strip (named for a bit of reclaimed land between the islands of Coloane and Taipa) will feature hundreds of yet-to-be-named restaurants and boutiques; a labyrinth of exhibit halls, performance stages, and conference rooms; and three Venetian-style canals plied by authentic Italian gondolas. The whole shebang will be sheathed in an air-conditioned biodome.

Around the perimeter of Adelson’s complex, Packer and Lawrence Ho have begun construction of City of Dreams, a giant casino and underwater theme park. Nearby, another group is building Macau Studio City, a casino-cum-multimedia-center that will include a boutique hotel designed by Shanghai Tang founder David Tang.

Macau now – July 9, 2007

It’s interesting to see how the idea that Macau is the leading gaming destination in the world is slowly filtering into the mainstream. I wonder if 10 years from now anyone will even have to say it.

MACAU says it has overtaken the Las Vegas Strip as the world’s biggest casino draw, raking in more than US$7 billion ($8.58 billion) in 2006.

The tiny southern Chinese enclave’s 22 casinos generated 16.7 billion patacas in the final quarter, taking the year’s total gross gaming revenues to 56.2 billion patacas ($8.83 billion).

By comparison, the 40-odd casinos on Las Vegas’ famous main strip – including the plush Venetian and MGM resorts – generated $US6.6 billion ($8.09 billion).

Macau’s renaissance from a crime-ridden territory with an ailing gaming sector was led by the Las Vegas Sands company, which opened the Macau Sands in 2004.

Other big American names to have taken advantage of the relaxed regulatory environment are Steve Wynn’s resorts and MGM.

Australia’s Crown casinos and Hong Kong’s Galaxy have also opened gaming centres.

Analysts tipped in October that the city had overtaken Las Vegas, based on earnings projections.

But today’s GDP figures are the first time that city officials have confirmed the historic development.

Gambling earnings have boomed in Macau since 2001 when the Government ended tycoon Stanley Ho’s 40 year monopoly on casinos in the city and allowed foreign operators to move in.

Macau punts Las Vegas in casino stakes | NEWS.com.au

There’s one thing I found very interesting: that in Australia, the Venetian and MGM are considered the major Strip casinos.

Another is that I wouldn’t describe Macau’s pre-2002 gaming sector as “ailing.” I’m going to quote from Roll the Bones here:

Rising from around 30% of the public revenue to nearly two-thirds of it, STDM’s gaming taxes kept Macau’s administration afloat throughout the 1980s and 1990, when Stanley Ho’s enterprises contributed around 80% of Macau’s tax revenue.

I don’t have the absolute revenue numbers at my fingertips right now, but that sounds to me like Uncle Stanley wasn’t losing any money on his casinos.

And congratulations to Hunter at Two Way Hard Three, who has the top Google result for “macau gaming revenues.” I can boast the top result for “casino carpet.”

Thousands of gamblers on Sunday jammed into a new casino owned by a local billionaire who is trying to fend off an invasion by Las Vegas tycoons who have been gobbling up market share in the booming Chinese territory of Macau.

Many of the punters who crowded into the Grand Lisboa _ shaped like a huge lotus flower covered in blinking lights _ were big-betting mainland Chinese who helped push Macau past the Las Vegas Strip last year as the world’s gaming center.

The five-floor casino is owned by Hong Kong billionaire Stanley Ho, who held a monopoly on gaming in Macau for four decades until 2002. The former Portuguese enclave _ two islands and a peninsula off China’s southeastern coast _ is the only place in China where casinos are legal.

In the past four years, some of the biggest names from Las Vegas _ Las Vegas Sands Corp.’s Sheldon Adelson, Wynn Resorts Ltd.’s Stephen Wynn and MGM Mirage Inc. _ have been aggressively building casinos, luxury hotels and mega resorts in Macau.

Before he opened the 3 billion Hong Kong dollar ($384 million) Grand Lisboa on Sunday, the 85-year-old Ho acknowledged that his market share slipped to 63 percent last year, and analysts widely agree that it will erode further. But Ho, who has 17 casinos in Macau, said his new flagship Grand Lisboa would compete well with the Las Vegas-style casinos because of his long experience in the market.

“We are the leaders, not the followers,” he said. “We know the city well.”

Ho is battling a common perception that his casinos are stodgy, smoky and plagued with surly service.

His new five-floor casino was decorated with plush red carpet and silver light fixtures with strands of crystal beads. The gaming floors have 240 tables and 484 slot machines.

The 52-story building _ with a 430-room hotel that opens later this year _ has a round base that looks like a giant Faberge egg covered in lights the flash red, green and gold. The design of its tower was inspired by the long plumes of a Brazilian showgirl’s headdress. The lobby is decorated with 580,000 Swarovski crystals, gold plated leaves and crystal balls.

Tycoon Stanley Ho Opens Casino in Macau – washingtonpost.com

Later in the article, the reporter claims that the Venetian Macau will be the world’s largest hotel-casino. At 3000 rooms, it’d be squarely in the middle of the pack on the Strip, so this must be a reference to the number of gaming tables. I should probably keep a page on the UNLV website with the top ten casino resorts in the world by room count, gaming positions, square footage, gross revenue, and whatever other metrics they use. But, time being limited, I don’t…yet. If I were to keep a list, I’d have to make distinctions that the casino operators–or the PR people–might not like. For example, will Venetian/Palazzo be considered a single “integrated complex?” If so, it would be the world’s biggest by room count, but, by that logic, should Mirage/TI or, for that matter, Excalibur/Luxor/Mandalay Bay be considered “integrated complexes?” I don’t know, but I’d have to decide if I wanted to make the list authorative.

Also interesting that, even as Dr. Ho’s market share is slipping (“only” 63%), the pie is getting bigger, and since real estate is booming and he owns much of Macau, he’s got to be getting richer.

As far as the casino itself goes, it’s got about 3 times the tables of your typical Strip joint but one-fifth the slots, if you need a reference point.

From The Standard:

Macau’s four main casino operators – Las Vegas Sands, SJM and Wynn Resorts, in addition to Galaxy – all have VIP rooms. The VIP rooms are often operated by other entities, such as Heritage International and Century Legend, which pass on most of the profits to casino owners.

For example, Heritage says operators of VIP rooms in SJM casinos typically must hand over 70 percent of their after-tax profits. Heritage also collects a commission on the amount of gaming chips its customers buy, typically around 0.7 percent.

Macau VIP rooms generated 28.9 billion patacas (HK$29.77 billion) of revenue in 2004, which was 72 percent of all casino revenue in the city that year and a 34 percent increase over 2003.

Galaxy, a consortium of Hong Kong and Macau investors led by Hong Kong-listed K Wah Construction Materials chairman Lui Che-woo, originally hoped to have 14 VIP rooms and no public gaming area in its Waldo casino, but Macau authorities restricted the number to eight.

Bets made in VIP rooms are usually much higher than those made on the floor. The minimum bet is HK$1,000, and wagers of up to HK$1 million are not uncommon.

High-flying gamblers are usually asked to join members in the special rooms.

Casino operators and VIP room owners also employ agents in Hong Kong, Beijing, Shanghai and overseas to identify wealthy individuals with a yen for gambling.

The Standard – Investor eyes $2b jackpot in casino VIP room offer – Business Section

I wondered exactly what the deal was with these rooms, and now I know…I think.

“We are Chinese and we will not be disgraced. We will not lose to the intruders.”
–Stanley Ho

This was in an interesting story (with an opening historical misstatement) called Macau may trump Vegas (28-03-2005).

Xinhua online, the official Chinese news agency, ran an interesting interview with Macau casino tycoon Stanley Ho:

In the first half year, Macao received 7.73 million visitor arrivals, which exceeded the total number of the whole year’s counting in 1999. In the first 10 months of this year, the number amounted to 13 million, which was 1.8 million more than that recorded for the whole of last year.

The gaming-tourist industry has been the foremost sector benefiting from the tourist influx. Ho’s flagship company SJM now runs 13 casinos. The other two casinos in operation were opened this year by his two rivals, namely, the Sands, a casino operator from Las Vegas, America and Galaxy from Hong Kong.

“Despite the competition, SJM’s gaming tax will grow by the end of this year based on that of the previous year. SJM has its bets of continuously holding the lion’s share on the market,” said Ho.

SJM contributed over 35 percent of its gross revenue to the government’s tax coffer as well as culture, education and social welfare causes.

Ho said that in the building of SJM’s new investment projects, the company has sustained its traditional concept of elevating the city’s overall cultural taste.

Among SJM’s biggest construction projects is the flagship GrandLisboa with an investment of 3 billion Hong Kong dollars (384 million US dollars). Designed with an egg-shape base, the building will have an elongated lotus-like shaft, which symbolizes Macao’s image as a “lotus city,” said Ho.

Macao Fisherman’s Wharf and the Ponte 16 (or No. 16 Harbor) theme parks, which will open to the public by July next year and the end of 2006, respectively, were meant to diversify the cultural elements in the small city.

“May gaming industry bolster Macao’s economic growth”: casino tycoon
Read the full story here: http://news.xinhuanet.com/english/2004-12/09/content_2314539.htm

American casino genius Steve Wynn was no less enthusiastic about the prospects. From the LV Sun:

Less than five months before he’s slated to open his $2.7 billion Wynn Las Vegas, and with structural steel pilings in the ground for his $704 million Wynn Macau, Wynn Resorts Chairman Steve Wynn says his company is poised to capitalize on the two most powerful gaming markets on Earth.

In Macau, Wynn has abandoned his intent to use his 20-year concession in the Chinese enclave to sign a joint-venture partner to build additional properties.

Even though prospective partners would have had to cough up all of the cash to build a property that would split revenue with Wynn Resorts, Wynn says the emerging power of the Macau market makes a joint venture unlikely.

“Why would you want to share?” Wynn said of his company’s Macau opportunity. “I’m going to exploit my opportunities in Macau.”

Instead of developing second and third Macau properties with other hotel owners, Wynn says the power of Macau is too valuable to sell, and that he’ll build at least one, and possibly two properties on the island.

“I don’t want to own the town,” Wynn said Tuesday. “I just want to own the best two or three places.”

Wynn said he had talked with a couple of high-profile casino operators about their desire to partner with his company but decided Wynn Resorts would do better to build on its own.

Read the full story: http://www.lasvegassun.com/sunbin/stories/gaming/2004/dec/09/517958057.html

Seeing things here, I can understand what all the excitement is about. At 3 in the afternoon on a weekday, I saw casinos that were as crowded as the Las Vegas Strip on New Year’s Eve. It’s absolutely unbelievable. As in Las Vegas, I think people are holding their breath in anticipation of the Wynn property opening. But already, things here are really wild.

I’ll probably post again when I’m back in the US in a few days. I’ll have a full rundown of the conference and my other travels.

From the Financial Times:

Macao’s gambling revenues will surpass those of Las Vegas next year, according to an industry executive, underlining the former Portuguese colony’s swift emergence as a global gaming hub.

Revenues in Macao’s 12 casinos were reported by local gaming houses to be $3.6bn last year and are rising quickly, jumping 38 per cent year-on-year in the first quarter, the Macao government says.

The Las Vegas Strip meanwhile took in about $4.8bn in gambling revenues in 2003, according to the Nevada gaming control board.

Grant Bowie, president and general manager of Wynn Resorts in Macao, said: “Macao will exceed Las Vegas Strip revenues next year.

“That’s despite the fact that Las Vegas is having a good year.”

Macao, which returned to mainland rule in 1999, is the only place in China where gambling is permitted. In 2001, the city ended the 40-year monopoly on gambling of Stanley Ho, a local tycoon and opened the licence to international tender.

A frenzy of investment followed, which looks set to transform a sleepy enclave of nearly 500,000 people into one of Asia’s leading gambling resorts.

Sheldon Adelson, head of the Las Vegas Sands group, opened its first casino in May, the $240m Sands Macau, and is planning another resort.

MGM Mirage will open a hotel and casino through a joint venture in 2006. Wynn Resorts is also building a resort.

Kerry Packer, Australia’s richest man, last month announced plans to invest $163m in a joint venture with Mr Ho’s Melco International.

Macao’s gambling revenues set to overtake Vegas

I’m expecting to learn a lot on this trip. I’m giving a paper on historical parallels between Monte Carlo, Las Vegas, Atlantic City, and Macau. Should be quite a hoot.

Macao’s casino racked in 500 million patacas (62 million US dollars) in gross revenue in the first three days of the National Day holiday which began on Oct. 1.

Tuesday’s Macao Daily News reported that the holiday market has boosted the gaming sector. The accumulated gross revenues and taxes yielded by the gaming sector in the first nine months this year have surpassed the total amounts of last year.

For the whole of last year, the government collected 10.17 billion patacas (1.27 billion US dollars) in gaming taxes.

The newspapers source said that the gaming revenue in September amounted to 3 billion patacas (375 million US dollars), which were some one billion patacas (125 million US dollars) lower than the monthly income in the previous two months.

The newspaper said that the Macao Gaming Co. Ltd. owned by tycoon Stanley Ho held 67 percent of the market share in September, during which Macao’s first American casino the Las Vegas Sands Macao opened in May grasped 13.5 percent, and the Hong Kong-invested Galaxy Waldo inaugurated in July obtained 19.5 percent.

Industry insiders forecast that based on the current situation,the gaming sector would contribute 13 billion patacas (1.2 billionUS dollars) to the government’s tax coffer this year.

Holiday economy boosts Macao casino revenue

Though September may have been a disappointment, it looks like the October 1 holiday really helped boost revenues, which suggests that Macau is maturing as a destination. With a Mona Lisa-themed casino, what else can you expect?

I expect to learn more about the Macau market during a research trip there in early December. If anyone from Macau has advice for me, please contact me.

In an exclusive interview with China Daily, Pansy Ho expounds the family’s strategy that involves a fundamental restructuring of its many gaming and tourism assets to focus more specifically on different segments of the market. Those assets, grouped under Hong Kong-listed Shun Tak and privately-held STDM, or Sociedade De Turismo e Diversoes De Macau, include several casinos, numerous hotels, the world’s largest ferry fleet, office and residential properties and interests in the Macao airport as well as Air Macao.

In the past, little effort was put into branding and marketing because “everybody who came to Macao knew about us”, Ho says. That’s hardly surprising as more than 80 per cent of the 10 million or so visitors to Macao each year were from Hong Kong where Ho senior and “Po King,” as his flagship casino – Lisboa – is called in Cantonese, have become household names.

But now this is all changing. The Closer Economic Participation Arrangement (CEPA) with the mainland has opened the door to Macao for a flood of tourists from the many cities and townships in neighbouring Guangdong Province. “We expect at least 6 million, or about half, of the 12 to 13 million visitors to Macao in 2005 will be from the mainland,” Ho says. “This large influx of mainland tourists is expected to fundamentally change the way business is being done in Macao,” she says.

Moreover, Ho says she expects the opening of the new US-operated casinos to attract many more visitors from the US, Europe and neighbouring countries in Asia, particularly Japan and South Korea. “Unlike the past, we are going to have tourists coming from a much greater variety of sources,” Ho says. “They also have vastly varied needs and requirements.”.

A much more aggressive marketing and branding strategy will be needed to attract the different groups of tourists coming to Macao, Ho says. STDM already owns a range of hotels from luxury resorts to budget inns and the company also has casinos that appeal specifically to big gamblers and those that cater to the casual player.

“But we believe that there is a need for us to market and brand our properties differently to tell our potential customers in various market segments of the full spectrum of our products and services,” Ho says. The opening up of the gambling industry in Macao has “created a bigger draw effect” which has helped greatly expand the business opportunities in the one-industry town, she says.

Gambling empire bets on rebranding

Macau is on pace to earn about $5 billion in gamign revenue this year, more than Atlantic City ($4.5 billion, give or take), and catching up to Las Vegas (over $6 billion). It is entirely plausible that within five years Macau will displace Las Vegas as the world’s leading casino destination, at least in terms of gross gaming revenue.
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I’m off to the city that is always turned on, Atlantic City, for a few days. I will make an effort to post, but if the blog is dark on Monday and Tuesday, that’s the reason. Hopefully the jitneys are still turned on at 3:30 AM, my estimated arrival time on Absecon Island, if SEPTA and NJ Transit cooperate.

In any event, I’ll be sure to enjoy a pizza at Tony’s Baltimore Grill for you. Later.