Casinos in Macau await the end of the "correction"
Posted by Sarah Banks on 28 Jul 2009 at 08:07
Just a period of correction for a genuinely worrying wobble? This is the question facing the Chinese gambling hub of Macau, which is now seeing some of its bigger international investors voice intent to restart building projects which they promptly dropped when revenue began falling.
The former Portuguese colony quickly developed a reputation bigger than that of Las Vegas as the decision by China to open the island up to international investment seemed to pay dividends initially.
The Independent's Clifford Coonan took a close look at the gaming destination he describes as "the world's biggest gambling den".
As early as last year business was booming for Macau, with its reputation growing and seemingly ever bigger and better hotel resorts cropping up all over the place. The goal was simple - having overtaken Las Vegas in terms of revenue, to turn Macau into a bigger world name and ultimately into a world tourist destination like no other.
In China Macau has something of a captive audience – it is is the only place in the country where gambling is legal. A punt is illegal and risky elsewhere, and as a result initially Chinese and later international tourists flocked to the enclave, which is home to more than half a million people on only 11 square miles of land.
It is now 10 years since the island's switch to Chinese rule and the arrival of international casino developers . According to the independent report, Macau pulled in £7 billion last year from table games alone.
The majority of players are still mainland Chinese, and many of them from Guangdong, just across the border. Recently the tide has shrunk thanks to restrictions put in place by the Chinese government which have meant Chinese nationals can only make one visit to Macau every three months. This has been seen as part of Macau's problem in recent times, and pressure is growing on the Chinese government to relax the visa restrictions.
While it's true that croupiers are always residents of Macau, the Independent noted that those other employees who can be found building the new developments, pouring drinks and carrying out other tasks are actually often from abroad, including the likes of India and the Philippines.
However many of these workers have been hit by the building slowdown which started on the Cotai Strip, a narrow piece of land seen as the answer to its Vegas rival. Here vast hotel and resort projects which once had foreign workers busy and are earning are now shut down, sending many of them back to Southern China and abroad. The result has been an impact on mainland China, where workers have flooded back into the jobs market.
Even the £1.5 billion project by Sheldon Adelson, the Venetian Macau, has been hit. It opened in 2007 and is based on the Venetian Las Vegas - as a result it has the same synthetic canals and mock historic Venice look. But according to the Independent, 500 jobs were cut from the casino by the Las Vegas Sands corporation in December, about two per cent of the number of workers. At the same time the company put a hold on construction at five other building projects in Macau.
The Independent also said Adelson is looking to try and get money together to resurrect building at the suspended projects, and will need £1.2 billion. Another problem for Adelson and the enclave as a whole is the growing interest in Singapore in building similarly grand casino projects.
Everyone will have a part to play in Macau's survival of the downturn including the old guard, chiefly Stanley Ho, who held a monopoly until the arrival of the international resort firms. His firm, SJM, runs Hotel Lisboa casino, which, the Independent says, is still holding its own thanks to popularity with more old-fashioned gamers.
Quoted by the Independent, Frank McFadden, president of joint ventures and business developments at SJM, said: "Macau has seen unprecedented growth in the recent past, surpassing even Las Vegas.
"That growth went beyond most people's expectations. What we are seeing now is just a natural adjustment. The fundamentals are still rock solid. In the long term, Macau will grow with China. Like China, Macau has one way to go – up."
As it climbs Macau will surely pass where it was before, such has been the pace of decline. But with the money and building work starting to flow again, who would bet against it?
