Macau recently overtook Las Vegas as the number one gambling economy in the world according to gambling industry insiders. Since the laws changed in 2002 to allow foreign casinos to enter Macau, their market has boomed. It doesn't take a Freakonomics guru to figure out Macau's simple strategy: growth. Slot machines are driving much of that increase.
Macau's secret formula has been to allow concessions to gaming providers which are carefully supervised by the Gaming Inspection and Coordination Bureau. In addition, Macau has developed a foreigner-friendly gaming statute. Since the concessions have been released from the sole control of Stanley Ho, the industry has exploded.
Macau's casino operators face a fairly steep tax rate of up to 40% to operate the gaming houses, but the volume has been sufficient to prevent the tax from being a toll booth to fast track.
Mainland China still forbids gambling and most recently cracked down on internet gambling similar to the US. Their gaming legislation seems to be at conflict with a cultural heritage that made gambling a sort of nation pastime.
While gambling is not available in most of Mainland China, it is possible that Hong Kong may be granted Macau-like casino rights. More importantly, hotel owners need to begin to consider creating new gaming properties as they expand to new Asian destinations. In addition, there are no international standards for either land-based casinos or I-casinos. Hotel owners and casino developers should retain competent gaming counsel before risking too much capital in an Asian gaming venture.
Monday, June 11, 2007
Betting on the Middle Kingdom
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Even as foreign investors pour billions into ever-glitzier casinos, the tiny peninsula’s bid to become the Vegas of the Orient depends on China’s larger willingness to embrace transparency and the rule of law.
Last year Macau finally overtook Las Vegas in gambling revenues: Macau had about $7 billion, versus $6.5 billion for Las Vegas. As we will see, this statistical achievement is less significant than it sounds. But news outlets naturally presented it to Americans as more evidence of China’s incomprehensible scale and its unstoppable rise—plus, on the bright side, as another example of the riches open to Western companies (in this case, U.S. casino firms) that can figure out how to get part of the pot-o’-gold Chinese market.
Yes, what is happening in Macau should be of intense interest to casino operators everywhere, and to the financiers and suppliers who thrive off the world’s gambling industry, and to those compiling information on how Chinese people use their new wealth. But in repeated visits to Macau, I found it far more interesting than I would have guessed from most of the gambling-boom stories.
Cheers,
Richie
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