Gambling boom awakens sleepy
Macau By Gary LaMoshi
MACAU - Contrary to what you may have
heard and read, Macau is not Las Vegas, at least
not yet. But it is enjoying an unprecedented boom
thanks to a US$12 billion wave of hotel and casino
construction spurred by Las Vegas high rollers.
The former Portuguese colony, a peninsula
and two islands about 60 kilometers (and at least
60 decibels) away from Hong Kong, first legalized
gambling in 1847. When Macau returned to Chinese
sovereignty in 1999, authorities immediately
cracked down on triads whose open warfare had
downgraded Macau's reputation from seedy to
unsafe. Things really began picking up in 2002
when the government ended the 40-year gambling
monopoly of Stanley Ho's Sociedade do Jogos de
Macau (SJM, or "Macau Gaming Society" in English).
The government granted two new gaming licenses,
and when the dust cleared (actually, things are
still pretty dusty these days
with 1.7 million square feet under construction at
more than 500 sites) Las Vegas high magnates Steve
Wynn, of the eponymous chain Wynn Resorts, and
Sheldon Adelson of the Las Vegas Sands empire had
come to Macau with bankrolls in the billions.
Adelson envisions an eastern version of
the Las Vegas Strip on landfill between Macau's
outer islands of Coloane and Taipa, anchored by
his $2 billion Venetian Macao. Ahead of the
Venetian's 2007 debut, the Sands opened a $240
million downtown casino in May 2004, giving Macau
its initial look at Las Vegas glitz. From the pure
gold glass exterior to shiny black 15,300 square
meter open plan interior with a 50 ton chandelier
and 20 meter high ceiling, the Sands antithesizes
the gambling dens of the Ho's flagship Hotel
Lisboa. It also antithesizes Las Vegas: this Sands
has no hotel (just 51 suites for invited high
rollers; don't call us, we'll call you) and no
retailing. These days, Vegas hotels get half their
revenue outside the casino, from restaurants,
retail, rooms and related attractions; in Macau,
the take beyond the tables represents just 3% of
the pie. Resorts on the drawing board,
particularly the Cotai strip, will feature new
ways to disgorge customers' wallets.
Gambling on China Today, most
people come to Macau for one reason: to gamble.
Rounding out the top five: romantic weekending
from Hong Kong; commercial sex, ranging from
Russian streetwalkers to massage parlors; eating
Macanese, the original fusion cuisine; and seeing
the legacies of Chinese culture and Portuguese
rule dating to 1557 that won Macau a place on the
United Nations World Heritage List in July.
Tourist numbers are skyrocketing, from 7.5
million in 1999 to 16.7 million last year,
expected to reach 20 million this year. Current
figures show 55.8% of visitors come from mainland
China, many taking advantage of liberalized rules
that allow travel to Macau by individuals, rather
than only as part of those flag-waving,
bus-riding, restaurant-jamming tour groups.
Another 30% come from Hong Kong, one hour away on
Ho's jetfoil ferries making 80 trips a day, and
8.3% from Taiwan.
House winnings at
Macau's 19 casinos are poised to exceed $6 billion
this year, overtaking Las Vegas and its more than
200 casinos as the world's top gambling earner.
Macau's average daily take per table is around
$18,000 (slot machines account for less than 2% of
Macau's gambling take), better than five times the
average for Las Vegas. Macau has a simple formula
for its big money action: higher stakes. In Vegas,
you'll find $1 tables, but in Macau the betting
starts at HK$100 (US$12.85; Macau's official
currency is the pataca with a fixed exchange rate
of eight to $1, but Hong Kong dollars are so
common that casino limits are denominated in them,
and they circulate on par with the slightly less
valuable pataca), and those tables are hard to
find.
The real action, however, isn't in
the HK$300 blackjack or the Chinese big-small dice
game, but VIP baccarat in plush, private rooms.
High rollers, known as whales, account for about
80% of Macau's gambling revenue. The government
takes a 35% tax on casino profits, comprising
three-quarters of its revenue.
Insane
growth As you'd expect, adding millions of
visitors and Las Vegas developers to Macau's
465,000 residents and 450-year East-meets-West
tradition has had a dramatic impact. GDP growth
last year ran 28%, including an insane 49.4% in
the second quarter, distorted by the impact of
Severe Acute Respiratory Syndrome (SARS), which
had misleadingly depressed the numbers for
previous years. But Macau's 2003 GDP growth was
14.2%, so SARS didn't bring things to a complete
halt. This year's growth will likely come in just
under 10%. Unemployment has fallen from 7.1% in
2002 to 4.1% today, and it's still dropping, as
construction continues and more hotels and casinos
come on line and start hiring.
There's
never been a time like this in Macau's modern
history, according to Paulo Azevedo, founder of
Macau Business magazine. "Except for a couple of
points hundreds of years ago - when it was the
main stop on the Portugal-Japan trade route -
Macau was a very laid back place," he says. The
boom "brings a lot of challenges. Let's see if
Macau is ready to cope," he adds.
"Quality of life is the first
thing to go in an economic boom," Azevedo says.
We're walking past one of several downtown sitting
areas that lend a flavor of Europe to Macau. But
this park is now closed due to construction on
neighboring plots, and some open space may be lost
for good. Azevedo applauds the government for
recently establishing a quality of life task force
"to step back and look at the big picture". He
also salutes efforts to preserve Macau's unique
legacy. The World Heritage List was a good first
step, but "you need to protect the surrounding
areas, not just the monuments". He's optimistic
because Beijing is on board. "They saw it's a good
idea to keep Macau different," says Azevedo, a
native of Portugal who came to Macau a dozen years
ago. "The Chinese are doing more for preservation
than the Portuguese did." Preservation is a challenge because space
is at a premium. Macau measured 17.7 square
kilometers in the 1980s and has added nearly 10
square kilometers since then. Reclamation is
nearing its practical limit, and there's even talk
of expanding to the mainland's Hangqin island if
demand for resort sites continues to grow.
Residential real estate prices have broken
out of a decade-long slump, rising nearly 50%
since 2003. But they still haven't reached the
heights of the last boom that peaked in 1993.
According to general manager Tony Yau of China
Overseas Property, a Hong Kong developer building
La Cite, a 1,000 unit project as its first Macau
venture, Macau incomes are about 57% of those in
Hong Kong, but property prices are roughly 27%.
Prices may be limited in part by the bubble's
legacy, a 30% vacancy rate at the luxury end of
the market. But developers are hoping for an
influx of expatriates as Cotai opens.
Skills gap Thousands of
expatriates will come because Macau's labor pool
doesn't have the skills needed for all the new
resorts. That's most evident in the dearth of
hotel and casino personnel comfortable with
English. A pit boss who explained Caribbean Stud
Poker to me turned out to be from Malaysia, a
veteran of the Genting gambling resort outside
Kuala Lumpur, lured to Macau on a lucrative
contract.
The skills gap extends to the
government. "In 1997, when [Hong Kong's British
governor] Chris Patten got on the boat, everybody
else in government stayed," Azevedo explains.
"Here, when the Portuguese left here in 1999, none
of the top secretaries were localized." As a
result, some managers sped through 15 years worth
of advancement in two or three years, and
decisions tend to get kicked up to the top.
There's also concern that the economy
remains largely in overseas hands. Casino tycoon
Ho is a Hong Kong resident and the other gambling
licensees are also from outside Macau. Hong Kong
firms dominate construction (and, increasingly,
property sales) with some specialists imported
from as far as Australia. Azevedo proposes taking
advantage of these international firms by
enlisting them in local training programs,
including mentoring by executives for government
and private sector and making their professional
development programs available to all locals - or
at least showing Macau the training models to
follow.
Another hope to fill the skills
gap is returnees. Christina Leong was educated in
the UK, then worked there, Singapore and Hong Kong
before returning to Macau at the start of the
boom. "Before, everybody left," she says. "There
were no good jobs here, but now things are
changing." Maggie Lee graduated from the
University of Nevada-Las Vegas last year and now
works at the Sands. "Macau people I met who've
been in the States for five years and longer are
coming back."
The place they're coming
back to retains its Old World charm, despite the
boom. The question for Macau is whether the charm
and the boom can live happily ever after.
Gary LaMoshi has worked as a
broadcast producer and print writer and editor in
the US and Asia. Longtime editor of investor
rights advocate eRaider.com, he's also a
contributor to Slate and Salon.com.
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