Friday, January 26, 2007

Macao surpassed the Las Vegas Strip to become the world's biggest gambling
center in 2006, measured by total gambling revenue, according to industry
analysts and government figures released today. In the eight years since
Macao, a former Portuguese colony on the coast near Hong Kong, was returned
to Chinese control in 1999, it has experienced a huge boom in casino
investment, and millions of mainland Chinese have been flooding into the
tiny island territory to gamble. As a result, gambling revenue soared by 22
percent in 2006, reaching $6.95 billion, according to figures released by
the local administration today. Las Vegas has not yet released its own
full-year revenue statistics. But its cumulative figures were trailing those
of Macao in the final months of last year, and analysts estimate that the
2006 total will come in around $6.5 billion. Where Macao was once derided
for its seedy gambling dens and endemic organized crime, it is now being
referred to as Asia's Las Vegas, and not just by the locals. Hoping to ride
the gold rush, some of the world's biggest casino operators, including Las
Vegas tycoons like Sheldon Adelson, Steve Wynn and Kirk Kerkorian, have
agreed to invest more than $20 billion to outfit Macao with new luxury
hotels, giant casinos and V.I.P. suites to cater to the apparently enormous
gambling appetite of the mainland Chinese. Macao is the only place in China
where gambling is legal, and it is only in recent years that many ordinary
Chinese people have been able to get permission to visit the city. Last
year, some 22 million visitors poured in, most of them from China. For
investors, one of the big lures is that, on average, the city's gambling
tables pull in about seven times more money than tables in Las Vegas. The
winnings are a testament to how serious the gamblers are in this part of the
world, despite the fact that income per person in Chinese averages just
$1,700 a year.
Other cities in the region are eyeing Macao's success and rethinking their
tourism strategies. For instance, Singapore is now planning to build its own
casino resort, and Hong Kong officials have talked about allowing casino
gambling. But few rivals will be able to try to match Macao, which already
has 24 casinos and over 2,700 tables in operation. To accommodate even more
visitors, the 10-square mile city of 470,000 residents is expanding its
airport and reclaiming broad tracts of land from the sea. The city's
transformation began in 2002, with the expiration of the Macao billionaire
Stanley Ho's colonial-era 40-year monopoly on gambling in the territory. New
licenses were issued to a handful of competing operators as well as Mr. Ho,
and a construction boom began.

The city now has two giant Las Vegas style casino-hotels, the Sands Macao
and the $1.2 billion Wynn Macau, which opened late last year with 600 guest
rooms and about 200 gambling tables.

Mr. Ho's family of casinos and entertainment palaces are also expanding,
betting that the casino and entertainment pie will keep his profits growing
rapidly enough to further enrich his empire even though it is now shared it
with competitors.

But perhaps no one in Macao has quite the ambitions of Mr. Adelson, who
operates Las Vegas Sands Corporation. Mr. Adelson says he plans to spend $4
billion to build whole Vegas-style strip, including a a 10.5
million-square-foot hotel, casino, shopping mall and entertainment complex
that would include the world's largest casino.

Part of the plan among investors is to transform Macao into more of a
destination for conventions, entertainment and leisure, rather than simply
an arena for hard-core gamblers, many of whom drive across the border from
China and sleep in their cars rather than rent a hotel room.

Some analysts say Macao, ruled by Portugal for 450 years, is an ideal spot
for such a destination because about 2.2 billion people live within five
hours' flying time of the city.

And Macao's growth since 2000 has been spectacular, largely because China
has liberalized its travel policies and allowed more of its citizens to
visit Macao and other parts of the world.

In 2001, for instance, Macao reported about $2 billion in gambling revenues.
Industry analysts expect four times as much in 2007.

Though Macao appears to have overtaken the Las Vegas Strip in 2006, it still
lags far behind the state of Nevada as a whole, which reported close to $12
billion in gambling revenue in 2005.

Still, the Chinese government is not wholeheartedly supportive of the Macao
gambling boom, because the city seems to attract the corrupt as well as the
merely sporting.

Some of Macao's highest rollers have been caught gambling with government
money or with cash siphoned off from state-owned companies rather than their
own funds. In 2005, for instance, Beijing said that more than 8,700 "party
members and cadres" were punished for gambling.

In one publicized case, a married couple embezzled more than $50 million
from the state-run Bank of China to pay off gambling debts in Macao.

Some analysts have also warned about overinvestment and about overly rosy
forecasts of gambling revenue growth. But most analysts and investors have
dismissed such talk and instead have watched the flood of gamblers into
Macao.

In an interview, Mr. Adelson once said that turning Macau into the next Las
Vegas was not rocket science.

"This is a no-brainer," he said. "If you build it, will they come? In my
mind, not only will they come, but they'll come in droves."