Betting on the Middle Kingdom

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.