This small Asian enclave is on the verge of supplanting mighty Las Vegas as the top gambling market in the world
The entire Macau peninsula, two islands and a reclaimed river delta, covers about 16.9 square miles compared with Las Vegas' 84.3 square miles. But pound for pound, gamblers in Macau are far more aggressive than those visiting Southern Nevada.
When Macau was turned over to the Chinese government in 1999 -- the same year Hong Kong made a similar but more newsworthy transition -- one of the first moves by the new administration was to open the gaming market to competitors, ending a 40-year monopoly.
The resulting injection of competition has made the market explode, with analysts expecting gaming revenue to surpass Las Vegas levels this year or next.
The Macau government reported gaming revenue of $5 billion in 2004, about $3.5 billion ahead of 2003's total and slightly ahead of the $4.9 billion generated last year on the Las Vegas Strip.
With 15 casinos operating in Macau with about 1,000 table games, the per-table win in Macau is nearly 10 times the per-table win in Las Vegas. Experts say Macau's gaming market could grow from $9 billion to $12 billion in the next five years as the Chinese tourism market expands and more resorts are built.
Now, a familiar shape -- familiar, at least, to Las Vegas residents -- is joining the skyline of this island resort city that shares a fascinating blend of Chinese and Portuguese cultures.
Wynn Macau, the 600-room hotel due to open in the third quarter of next year, will look a lot like its American big brother, Wynn Las Vegas, which opened on the Strip in April.
To people familiar with the Las Vegas version, Wynn Macau won't hold many surprises. But to Macanese who are watching the building take shape, the resort will be a dramatic departure from anything in the market today.
But that's what makes Macau the world's most intriguing gambling center and why most experts expect it to surpass Las Vegas as the world's dominant casino market.
"We've heard Macau referred to as the Las Vegas of Asia," said Grant Bowie, who as president and general manager of Wynn Macau is Steve Wynn's top man in Asia. "But there's only one Las Vegas in this world. Our objective here is not to be seduced by another market as the way (Macau) is going to evolve."
Las Vegas companies are clearly leading the change that is taking place in Macau, which is on the tip of China's southern seacoast and is a one-hour boat ride from Hong Kong.
There are varying theories as to how the evolution of Macau is going to occur. But most agree that the transformation will involve turning it from what is predominantly a day-trip market to a resort destination where tourists stay longer. Operators also hope to bump up hotel occupancy rates.
L.C. Koo, head of the performance improvement department for Sociedade de Jogos de Macau, the dominant casino operator in Macau owned by Stanley Ho, said in 2004 that visitors from China stayed an average of 1.1 days at the company's 15 casino properties and visitors from Hong Kong stayed a day.
Since 1999, the occupancy rate of Macau's 9,600 hotel rooms has gradually increased to 75 percent from about 50 percent.
William Weidner, president and chief operating officer of Las Vegas Sands Inc., believes the demographics of the population that lives a few hours of Macau will lead the city to surpass Las Vegas become the dominant gambling market in the world.
Experts say there are more than 100 million people within a three-hour drive of Macau and more than 1 billion people within a three-hour flight. As the Chinese economy expands and travel and visa policies are relaxed, more and more people are expected to make the trek to Macau.
"The opportunity is just terrific," Weidner said at a recent gaming conference in Singapore. "The developments planned will change Macau forever."
The Sands Macau has been open for more than a year, and executives are happy with the early results. But the company's big push in Macau will occur with its development of the Cotai strip, on what once was a river delta on the island of Taipa, connected by bridge to Macau.
"Since the opening of China, things have changed dramatically," Weidner said. "Given the growth of the Chinese economy overall, there is just a huge opportunity for Macau to develop into something much, much greater than Las Vegas."
Gaming analysts say the Las Vegas companies are well positioned in Macau and that existing casinos will have a hard time keeping up with the Americans.
"Outside of Sands Macau, the existing properties are nowhere near the quality of the next-generation projects coming on line," said Marc Falcone, a gaming analyst with Deutsche Bank, after a June trip to Macau. "As such, we do not anticipate that the older supply will be able to compete, and that attrition from these facilities will offset some of the new supply."
But Bowie and others think the Macau market expansion will play out much the way that it has in the United States with the proliferation of tribal casinos: The entire market will grow as a result of the increased competition.
"We're going to be a player in the high-roller market and we're going to be a player in the premium mass market," Bowie said. "We'll have a bigger piece of the pie, but we also expect the pie to grow."
