Macau’s Big Gamble

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.

MEMBERS ONLY: A view of the bar area of the Paiza Club, an exclusive preserve within the Sands Macao casino

If you were a financial analyst, as many, many of the people I’ve interviewed on this subject are, you would be interested mainly in comparing the six companies’ market strategies. For instance: Galaxy wants to be seen as the most authentically Chinese and is emphasizing the profitable if inelegant “grind” market.

(A note here on three terms: gaming, win, and grind. You can spot people who work in the gambling industry, because they always call their business “gaming.” They use gambling only in pejorative contexts, as in “problem gambling.” Win is the industry’s term for casino profit. Financial reports from the big casino companies list “win per table,” which means the house’s daily take from a baccarat or roulette table. Grind is a business term for low-stakes, high-volume customers—in American terms, busloads of quarter-slot players headed to Atlantic City. I am looking at a report from a major U.S. bank with a section headed: “The Grind Market: Brighter Prospects.”)

Galaxy’s new StarWorld is set slightly askew to the main boulevard that runs in front of it. This is one signal that it’s through-and-through Chinese. “Westerners look at it and say, ‘It’s crooked!’” Peter Caveny, head of investor relations for Galaxy, told me. “The instant Chinese look at it they think, ‘Feng shui.’” The casino has an apparently limitless supply of 6-foot-tall female Chinese models who stand just inside the front door. “People come in, they see the girls, they take a picture—and go upstairs and gamble,” Caveny said. “The noise, the excitement—it’s all just right.”

The Wynn properties take the opposite approach: classiness, modern Vegas variety. “Every one of the songs was chosen personally by Mr. Wynn,” a Wynn official named Reddy Leong told me as we watched “Performance Lake” outside the hotel, which sends off fireballs and jets of water in time with music ranging from “Luck Be a Lady” to “Thus Spoke Zarathustra.” The suites have high-thread-count linens, granite-appointed bathrooms bigger than my apartment in Shanghai, massage rooms with professional massage tables.

Stanley Ho’s SJM is opening the most new casinos and attractions—one that looks like a temple of Babylon, one like a Tang-era Chinese fortress, one like a volcano blended with a Tibetan palace, one like a Roman amphitheater. Its biggest casino, the Grand Lisboa, is so garish I do not know where a description would begin. (Perhaps with the casino dome itself, sort of like a billion-karat faceted diamond in pink and gold, surrounded by dozens of gold-colored St. Louis–style arches?) The company will also soon open a “Prague Harbour View” hotel, presumably inspired by Prague’s famous harbour.

The other competitors have varying strategies. Financial analysts are basically high on all six of the licensed casino companies.

If you were a gaming-industry insider, you would be interested in Macau mainly as the latest arena for the primeval struggle between Sheldon Adelson and Steve Wynn. In Las Vegas, the two are seen as opposite in all ways. Adelson, in his mid-70s, is still brash and impolite, a relative newcomer to the business (he first made money with trade shows) who transformed the Las Vegas economy through his “MICE” strategy (Adelson’s term for bringing customers to Las Vegas not just for gambling but for “Meetings, Incentive, Convention, and Exhibition”). Thanks largely to him, Las Vegas has changed from a weekend destination to one where hotels are busy all week long. “I can tell you that when Sheldon Adelson decided to build the [enormous] Las Vegas Venetian and cater to conventioneers, many people thought he was crazy,” Andrew Zarnett, a managing director at Deutsche Bank, said at G2E-Asia, the Global Gaming Expo, held this summer in Macau. “But he was daring, he had a view, and he was right.”

Unlike Adelson, who shaped Las Vegas through mass marketing, Steve Wynn, now in his mid-60s, shaped it through high-end innovations. At industry meetings, I listened to financiers and casino veterans contrast Wynn’s suaveness and perfectionism with Adelson’s bluntness and commoditization. I came away thinking that Wynn’s demeanor could have been the model for Wayne Newton’s performance in National Lampoon’s Vegas Vacation. “Steve Wynn was equally daring in going upscale, offering luxury and high-end restaurants, in the faith that the customer will pay,” said Zarnett.

The broadening of Las Vegas’s economic base is why Macau has in no sense overtaken it. Casino earnings make up nearly all of Macau’s tourist-related revenue, while they’re barely 40 percent of the Las Vegas Strip. The rest comes from conventions, shows, high-end dining, and fancy malls. Because of all these attractions, the average visitor to Las Vegas stays for nearly four days. The norm in Macau is still the casino-centric day trip. That’s one reason Las Vegas has 130,000 hotel rooms, versus 13,000 for Macau. In size, glitziness, and overall excitement, Macau feels much more like Atlantic City—really, like an especially large concentration of Indian casinos in California—than Las Vegas. The current growth surge in Macau is meant to correct these weaknesses.

Adelson’s Sands Macao is the town’s biggest casino, and his 3,000-room Venetian Macao, scheduled to open by this month, will be the city’s biggest hotel (plus casino and convention center). On my first visit to the Sands, in January, I looked from an inner balcony onto a gambling floor that, I was told, contained 20,000 customers, virtually all of whom appeared to be Chinese. The Wynn Macau looks different from anything around it: The city is aglare in blinking neon, but the only ornamentation on his hotel is a large cursive signature of his last name. The casino itself is understated, along the lines of a gentlemen’s club. Hotel rooms at the Wynn are more expensive than at any major competitor, but the hotel has an 85 percent occupancy rate, versus 70 percent for Macau as a whole. In the battle for Macau, both men have won.

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James Fallows is an Atlantic national correspondent. More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

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