First time visitors to Macau are astonished by the widespread building works. Even frequent visitors can’t help marvel at building on an epic scale. I first went to Macau in 1996 when it was a sleepy Portuguese colony. Then the primary industries were tourism, fishing and shipping. The nation consisted of the peninsula of Macau and two islands – Taipa and Coloane. There were bullfights and firework shows. The Lisboa Casino hadn’t been updated since it featured in James Bond film “The Man with the Golden Gun“. The Bella Vista Hotel had a renowned restaurant and a few suites for hire. Having been under Portuguese administration for over 400 years, Macau was a tranquil retreat.
Look at the map today – Coloane and Taipa have been merged into a super-island with a new section called Cotai jammed in-between. This reclaimed land is home to Las Vegas-inspired hotels like The Venetian, The Sands, Galaxy, City of Dreams and more under construction. The Macau Peninsula has a brand-new Lisboa (along with the Roger Moore retro original) as well as an MGM, Wynns, Sands and more. Last year Macau recorded seven times the gaming revenue of Las Vegas. And they’ve not finished construction.
Macau’s Wynn Casino II Under Construction
Yet there’s trouble in Macau. Gone are the seven-times Las Vegas multiple. Gamblers are spending less and the VIPs are rare to find. It’s hurting revenue, according to analyst reports:
As the first quarter of 2015 trading came to a close, on a trailing 12-month basis, the average performance of Macau gaming stocks was down 45% year over year. Macau gaming’s February 2015 revenue was still 2.7 times that of the state of Nevada, yet, unlike Las Vegas, Macau profits depend predominately on gaming revenue.
Where have all the gamblers gone?
China’s anti-corruption crack-down is the primary cause, according to The Wall Street Journal:
In addition to bringing down many top mainland officials, the campaign has scared off highrollers and decimated the city’s junket system, they say. Junket operators are middlemen who use underground banking networks to facilitate high-stakes gambling. Even though people are still coming to Macau, the majority of that growth in visitation is coming from low-spending tour groups, said Wells Fargo analyst Cameron McKnight in a report last week.
Another factor is a new law that bans smoking in casinos.
As Mark Twain famously said, “The reports of my death have been greatly exaggerated.” The same holds true for Macau. Analysts point to a cultural love of gaming in China, along with new family style resorts being built for middle-class travelers. And while VIPs may fly to Australia and Korea for now to avoid the scrutiny of gaming in China, their eventual return will propel Macau’s growth. In “Think Advisor” Edmund Harriss, investment director at Guinness Atkinson Funds in London speaks of the attractiveness of Macau:
“In China, games of chance are deeply embedded in the culture,” he said. “Go through any park on a Sunday, or walk through the alleyways of a city during the week, and you’ll see people playing Mahjong for money. In the Macau casinos, the approach is different than it is in Las Vegas—gambling isn’t about entertainment and people take it very seriously.”
For every prediction of doom, there are others willing to bet on the future of Macau. My recent visit showed an empty casino one night, and another jam-packed the following afternoon. Cranes and building projects choke Cotai, and splendid malls and restaurants are packed with spenders. If anything, the drop-off in gaming in Macau is a temporary aberration. In Macau it’s smart to bet on the house.
Bet on the House in Macau