How Macau is Beating Las Vegas

♠ Posted by Emmanuel in , at 7/05/2007 02:50:00 AM
Some bozo who posted comment spam (since deleted) for gaming sites jogged my memory regarding a post I'd been planning to make on Macau's ascendancy into the world's top gambling destination. Last year, Macau topped Las Vegas in gaming revenues, again indicating how much action is heading east. Let's begin with this earlier BusinessWeek article on Macau's comparative advantages over Las Vegas--its proximity to the humongous China market and its larger proportion of high stakes gamblers. Meanwhile, the next article describes how the man who previously held Macau's gaming concession in sole possession, Stanley Ho, is becoming more accustomed to dealing with foreign entrants keen on staking out a piece of the action. Competition improves the breed, yadda yadda. (The clip above is PR flack about the opening of his impressive-looking flagship Grand Lisboa casino, by the way):

Macau could usurp Las Vegas as the world's biggest gambling city in terms of gaming revenues in 2006 [that’s done—see next article]. And growth looks absolutely spectacular going forward, given the proximity of Macau -- a one-hour ferry ride from Hong Kong -- to the growing ranks of affluent mainland Chinese living in major coastal Chinese cities. As a result, big global gaming companies think they could make a real killing building glittering new casino and resort complexes here...

For casino operators, Macau is already proving to be a far more lucrative place to do business than Las Vegas. The average daily take per gaming table is between $8,000 and $9,000 a day, compared with about $3,200 in Las Vegas. Dealers are a bargain. They earn about $800 to $1,000 a month before tips and are in good supply. Las Vegas dealers earn a minimum wage, but can pocket up to $70,000 per year with tips.

And with mainland China on its doorstep, Macau can look forward to cashing in on the growing number of affluent mainlanders traveling abroad in the years ahead.

Macau also attracts a big-spending clientele. Unlike Las Vegas casinos, which earn most of their gaming revenues from small-time punters feeding coins into slot machines or $10 bets at the blackjack tables, Macau has traditionally been a market dominated by high rollers. They gather in smoky VIP rooms where single-hand bets of $35,000 aren't uncommon.

Last year VIP gamblers accounted for 65% of gaming revenue, while mass market table gamblers contributed 25%, and slot machines just 5%. In Las Vegas, slot machines contributed to 75% of revenues and VIPs just 5%, according to Credit Suisse (CIK) gaming analyst Gabriel Chan.

Global gaming companies have been flocking to Macau since 2002, when the Beijing government finally busted up the decades-long casino monopoly controlled by Hong Kong gambling kingpin Stanley Ho. (His company still controls 70% of Macau's gaming revenues.) The government handed out three licenses. Each licensee could sell off one sub-concession (effectively the right to operate casinos) to another company. In practice, Beijing allowed five new casino developers in addition to Ho to come to Macau.

CNN Money provides more color on the current state of Macau gaming. However, the story notes that should Macau falter, Singapore is eager to take up more gaming business slack as the city-state tries to reinvent itself as a "happening" place:

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 (Charts, Fortune 500), 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...

Should the government crack down, soon foreigners will have another Asian Vegas to visit: Singapore's government has scrapped its long-standing ban on gambling and has struck deals for two multibillion-dollar hotel/casino developments, one with Adelson near the financial district and another with Malaysia's Genting International on Sentosa Island, a beach resort just off the coast. Singapore is hoping to differentiate itself from Macau by promising to maintain a clean image, and to that end it recently forced Genting to sever ties with Stanley Ho, with whom the group had planned to partner.