Macau: The Ultimate Gamble
By Lena Katz
“A few years ago, the explosive growth of Macau’s gaming industry appeared unstoppable—until a series of setbacks brought its ambitions back to earth. Now, Asia’s legendary gaming destination is on a roll once again”
It’s 8am at the Hong Kong/Macau Ferry Terminal, and the crush in the departures hall is like nothing you’ve ever seen in the Western world. It’s not a mob, exactly. It is a mass of people crushed shoulder-to-shoulder and back-to-belly, straining forward with 100% of their combined strength—jovial, yet single-minded enough to crawl over you if you let them.
The object of their focus is a half-dozen customs booths, each containing a single officer who stamps passports with blasé professional detachment. In spite of the unholy bottleneck this creates, hundreds of people per hour are squeezed through the turnstiles with no physical harm, and then shepherded onto giant ferries which depart every 15 minutes for Macau.
It’s Chinese crowd control at its finest…totally claustrophobia-inducing, and a fantastic first peek at the Asian gambling passion that made Macau into a New Millennium boomtown.
Everyone who likes to gamble has gotten the memo sometime in the past few years: “Macau—it’s the Vegas of the East.” For the record, the Macanese hate that comparison. While gaming has long been the lifeblood that fuels the local economy, there’s much more to the culture than casinos and racetracks. There’s a heritage that stretches back hundreds of years. There’s a historic downtown with monuments and parks, and a “green island” called Coloan that’s almost entirely protected from development, and a fading Portuguese footprint that still influences everything from food to art to street names.
When Western developers like Sheldon Adelson jumped to claim huge chunks of Macau immediately after the 1999 handover, it was not because they wanted to build Vegas casinos on a blank landscape. It’s because they saw potential to create a Vegas-caliber destination within a unique, pre-existing framework—totally different from any US gambling destination, but with similar non-gaming attractions, and with even more massive financial returns.
For decades, Macau has been the preferred destination for Chinese gamblers—as well as those from other Asian countries. (Although that may change this year; see the sidebar on Singapore). As the early-morning ferry rush hour proves, this peninsula province has a niche, and an extremely lucrative one at that. Hence the Vegas and Aussie tycoons’ hurry to buy parcels of land on the peninsula and the formerly government-controlled Cotai area…and then, the hasty, loudly heralded arrival of every major hotel brand from Four Seasons to Shangri-La. In the mid-2000s, optimists including Casino Player exultantly declared, “The sky’s the limit!”
Then the Recession happened. And on top of that, the Olympics—which further harmed the casinos’ bottom lines, though you might have expected otherwise. (More on that later.) For awhile, it seemed like developers in Macau—just like developers all over the world—might have set their sights too high when gauging the destination’s potential. Projects stalled, with no word when they might pick back up again. Profits disappeared. People muttered about “overexposure” while casino/hotel owners struggled to stand, financially.
But as of Q1 2010, things are looking way up. The Jornal Tribuna de Macau reported that according to Statistics and Census Service findings, visitor arrivals were up 9.7% this January in comparison to last January. Average occupancy rate in hotels for January was up to 82.4% according to the same reports. English language publication Macau Business published even more encouraging findings: according to a report in their March 2010 Gaming section, gross gaming revenue for the months of January and February 2010 added up to US $3.412 billion.
This figure, according to Macau Business research, already exceeds the gross casino revenue at the halfway point of 2009. With the City of Dreams complex fully open and Steve Wynn’s Encore open as of April 21st, Macau is on a winning streak once again.
To understand why the momentum ever faltered, one must note the double-jeopardy imposed by the Recession and the Olympics. Or rather, the visa restrictions China imposed on Chinese nationals around the time of the Olympics. Though Macau is under Chinese leadership, it is a “Special Administrative Region” of its own, meaning it is run on a separate system from mainland China, and citizens of one place can’t go to the other without a visa. (The same goes for Hong Kong.) Thus, China’s efforts to curtail its people’s movements from one region to another also curtailed the flow of local tourism into Macau—and the flow of revenue into casino coffers.
According to tourism authorities, that was the reason many Macau construction projects had to temporarily halt: In addition to a worldwide lending crisis, the owner/developers were suffering from a cash crunch on the home front. However, with the visa restrictions lifted, revenue is flooding back into the casinos once again.
The first big opening of 2010 was Steve Wynn’s Encore property, an “all-suite boutique” luxury highrise located adjacent to the original Wynn property on the Macau Peninsula. Both sleek, curved highrises have a lot in common with their US counterparts, both in terms of their architecture and interior design (rich, glossy and sophisticated, with jewel-toned accents). However, the 412-room Encore Macau is less than a quarter the size of Encore Las Vegas. The restaurants and entertainment are quite different—but as with Encore Las Vegas, the spa in Encore Macau is a major highlight.
Interestingly, though the official opening announcement stated that Encore would bring “additional gaming space” to the existing 205,000 square foot casino at the Wynn, it didn’t say how much.
However, just to indulge a little hopeful Stateside speculation, this may play into Wynn’s ambitions for the near future. The company seems to be trying to popularize certain gaming trends that helped to make gambling in America more mainstream—the most notable being poker. In March, the massive neon marquee out front of the existing Wynn hotel/casino advertised Texas Hold ‘Em in the new “Las Vegas-style” poker room. This 11-table room is less than half the size of the one at Wynn Las Vegas, but it’s a major statement in Macau, where the game of choice has always been baccarat. If it catches on, it would most likely encourage the multi-day room stays and media-friendly events that made tournament poker such a boon for North American casinos.
Continuing its pattern of aggressive expansion, Wynn is making movements—first noted by Macau insiders and then confirmed in Smart Money on March 24th—to lease a 52-acre parcel of land in Cotai. Though the official word is still noncommittal, locals expect that this could lead to a third Wynn-owned casino/hotel going up in Macau within the next few years.
Though 2010 has been busy for Wynn, last year’s big opening was the City of Dreams. As the home of the Hard Rock Hotel, it’s as switched-on and rock-star splashy as Macau can be. Which is to say, you see a few hipsters posing with the pop memorabilia in the lobby, and there’s a big outdoor pool area with a swim-up bar and occasional parties at Flame Bar in the casino area. But overall, City of Dreams has ambience that balances between family friendly and upscale business-y. The Grand Hyatt hotel that just opened here has the kind of low-key, elegant lobby bar where execs hailing from all corners of the world sit nursing their Scotches and contemplating the business at hand. The rooms are handsome, functional and comfortable in classic Hyatt style—a haven for corporate road warriors who like their nightly digs to look and feel the same, no matter what the locale.
The Crown Towers may be the least-recognizable hotel brand for Americans, but it’s actually the anchor property of the complex—Australian company Melco Crown Entertainment Limited developed the entire City of Dreams (in partnership with Lawrence Ho, whose magnate father Stanley is created with “creating” modern-day Macau).
The casino layout in City of Dreams is convenient and central: it sweeps down the center of the City in one contiguous swathe, except for a few “private gaming salons” and a special themed Hard Rock area. Spanning 420,000 square feet, it currently offers 520 gaming tables and 1,350 “gaming machines” (not only slots, because that’s another American craze—albeit one that Chinese gamblers are learning to love). The main casino floor looks comparable to Vegas but sounds quite different—or at least, that’s what some people point out. Asians are quieter gamers than the whooping, hollering stereotypes you find in mass market North American casinos.
MGM Grand Macau looks and feels different from its Las Vegas counterpart, not only in the casino but the minute you walk into the foyer. This is because it’s a joint venture between MGM MIRAGE and Pansy Ho (daughter of Stanley, sister of Lawrence), who apparently took a hands-on approach to the property’s design aesthetic. Some features evoke the MGM or Bellagio in Vegas, like the vast “Grande Praca” atrium hall with arced, 80-foot high glass-and-steel ceilings, water features, and fake birds/flowers adding little splashes of color and fun everywhere. If a period-costumed singing group were to stroll through singing arias, it wouldn’t be a huge surprise. However, other design elements of this property are undeniably exotic—for example, the genuine Dali sculpture placed front-and-center in the lobby, at the behest of Pansy Ho.
The MGM’s existing casino floor is 67,650 square feet with 385 gaming tables and 888 slots. A planned expansion will add up to 14,400 additional square feet. The casino wraps around the central “Grande Praca” space on two floors, instead of occupying the center as a Vegas casino would. Lion’s Bar in the center of the casino is a popular destination for locals and international tourists, particularly late at night, when it showcases Macau’s best and funkiest cover bands.
As impressive as these developments are, at least half of the hotel/casinos in Macau are completely foreign in nature, with exotic flair and brands you’ve never heard of. Americans giggle at the Grand Waldo because of its name, but this locally-owned brand was one of the first Cotai Strip hotels to open, and it has already hosted PokerStars tourneys and other big-name events. Then there’s the stunning Altira (formerly Crown Towers and still owned by Crown) on the island of Taipa. This Feng Shui’d highrise features a drop-dead chic lounge, a minimalist museum of a lobby, and a fine dining restaurant so lavish, you can easily imagine tycoons in each of the private rooms, counting giant stacks of money and sealing the fate of nations with a handshake. The landmark Grand Lisboa Casino isn’t fancy but it’s functional, with a vibe most comparable to downtown Vegas or Reno. It will be hosting the PokerStars Asia Pacific Poker Tour when it returns to Macau May 18-23.
As for what’s next on the horizon for Macau in 2011, it’s looking like a triumphant return for Sheldon Adelson and Las Vegas Sands Corporation to “top dog” status. Adelson was the first American businessman to open a casino in Macau (Sands Macau, 2004). He followed up with the Venetian, and then with the massive Cotai land acquisition he trademarked “The Cotai Strip.” When Sands Corp suspended construction on two large Cotai Strip lots in November of 2008, it caused worldwide speculation that Adelson, whose fortune (according to the Forbes list) plummeted from $40 billion in 2007 to $9 billion in mid-2009, had vastly overextended himself and driven his company to the brink of bankruptcy.
But the Las Vegas tycoon is back on an upswing. According to official word from VP of corporate communications Ron Reese, the company completed an IPO on the Hong Kong Stock Exchange in November of 2009, creating subsidiary Sands China Limited and raising just over $3 billion through the public sale of 30% of Las Vegas Sands assets. This, together with $1.75 billion in project financing commitments secured early in 2010, has allowed construction to resume on “Lots 5 and 6” (as everyone in Macau calls the project).
Already 65% complete when construction was halted, the project is optimistically slated to complete its next phase in June of 2011—at which point a Sheraton, a Shangri-La and Traders hotel towers will join the Grand Waldo, Four Seasons and Venetian in the Cotai area. Though there will be three distinct hotel brands, the casino and retail areas will be shared contiguous space, spanning the first and second levels of the complex.
“The company’s trying to build a critical mass of non-gaming attractions and amenities that will create an integrated resort model encouraging multi-day stays in Macau,” says Reese. (Interestingly, though it’s been rough in the short-term, the move toward non-gaming revenue is right in line with what the Chinese government and proud Macau nationals claim to want.)
There are still various hurdles for Macau to overcome before it settles into its own identity. For starters, there’s pressure from mainland China and from within to diversify its industries beyond gaming. There’s also the ongoing struggle to regulate the gaming industry. This is obviously an issue anywhere that casinos exist. However, the official regulations in Macau are long overdue for a promised overhaul, and in February the Macau Gaming Commission got a surprise when Macau chief executive Fernando Chui Sai On ousted key member Jorge Oliveira. Meanwhile, Wynn Resorts just made headlines by taking a major Macau high roller to court in Hong Kong in order to force him to pay his gambling debts. (Wynn won. Las Vegas Sands was first to applaud them.)
As a glance around the city from a skyscraper vantage point shows, Macau is still a work in progress. The resort areas are not as seamlessly self-contained as those on the Strip—you can’t float casually from one to the other all night. And the old city is so foreign and exotic, it can be unsettling to go back and forth from its jostling streets and street food stalls to the filtered air of the casinos.
However, one thing Macau already seems to have perfected—whether by a cap on gaming permits, its contrasting cultural styles, or that common desire to be about more than just casinos—is that the gambling scene here is ubiquitous but non-intrusive. Yes, gaming is at the heart of every major development, but it’s not the same sort of clanging, frenzied maze of slot machines and table games that swallows you up the minute you step into many Las Vegas hotels.
Here, you can walk past the casino or walk into it, depending on your mood. It’s calmer, more low-key, less pressure…until you get up to a table and see that both your neighbors have bankrolls so huge, they had to use mailbags to transport them. And they’ll stake thousands of Hong Kong dollars on one roll of the dice. This is the fearless spirit that Macau’s casino industry was founded upon—and the stakes, it seems, are only getting higher.