Gambling is illegal in mainland China. So why is Asia the world's fastest-growing gambling market?
A major reason for Asia's accelerating success in the international gaming industry is Macau, a world-class tourist destination where gambling is legal. Now part of China, this former Portuguese colony has been transformed by foreign developers into a gambling mecca known as the "Las Vegas of the East." Minus player winnings, revenues for Macau casinos rose to some US$6 billion in 2005, outpacing Las Vegas strip's profits of about $5.3 billion. Experts see Macau's total rising to $10 billion by 2010, and further accelerating to $15 billion by 2012.
A small cluster of islands and a peninsula that extends off China's southern coast into the South China Sea, Macau occupies a compact 25 square kilometres and is just 65 kilometres away from Hong Kong. Yet as the gateway to mainland China, Macau is well-positioned to benefit from the robust growth of the world's most heavily populated country.. More specifically, the emerging cohort of wealthy baby boomers in China are expected to fuel an annual increase in revenues of almost 25% over the next five years. More than 100 million people live within a three-hour drive of Macau and more than one billion can fly to the gambling resort destination in three hours or less.
Industry experts note that Asian gamblers tend to wager much more than North American players, which is one reason why table games in Macau casinos generate about six times more revenues than those in Las Vegas. Others observe that Asians tend to prefer face-to-face transactions when gambling, which in addition to stricter Internet regulation may be partly why online betting has been eclipsed by traditional casinos in attracting Asian players so far.
And The Winners Are...
Winning a gaming licence in the Far East is a highly competitive process contested by extremely large international casino corporations. Only a select few gain the coveted gambling concessions in Asia's lucrative markets, notably Macau and more recently Singapore.
In 2002 Macau granted only three of these licences, two of which went to foreign corporations discussed below. No further licences will be available at least until 2009.
In May 2004, Las Vegas Sands Corp. (LVS on NYSE) became the first North American casino company to open in Macau when it launched a destination casino that covers one million square feet. Sands is set to open a second project, the $1.8 billion Venetian Macao in 2007. Building on its success in the Far East gambling industry, Sands has just won its bid to construct a new gaming resort in Singapore's Marina Bay.
Wynn Resorts (WYNN on Nasdaq) plans to deploy nearly 5,000 employees when the American company launches its 600-room Wynn Resorts in Macau by early September. Wynn has sold its second licence to build a resort in Macau to the Australian company Publishing and Broadcasting for a hefty $900 million.
Key to the gaming industry's success in Asia are integrated destination resorts with meeting, convention and retail shopping spaces in addition to luxurious hotel accommodations. Casinos also bring in high-profile directors like James Cameron to design gaming attractions based on hit movies such as Titanic and Aliens. At least half of the gambling industry's revenues come from food, entertainment and accommodation sales that supplement wagering revenues.
For nervous investors who fear that Asian casinos will take business away from Las Vegas, bear in mind that foreign casinos in the Far East offer player bonuses and other incentives that motivate well-heeled oriental gamblers to also visit related luxury destination casino brands in Las Vegas and Atlantic City. In addition, big bettors from Macau are likely to visit Las Vegas for its 6.75% gaming tax rate, which contrasts favourably with Macau's tax rate of almost 40%.
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