Macau: Mecca for gamblers and investors alike

Tom Aspell Correspondent • Profile

MACAU — In the swashbuckling tradition of the China coast, where intrepid foreigners have for centuries made fabulous fortunes trading with the most populous nation on earth, American casino operators have begun tapping into a potential market of nearly a billion gambling-mad Chinese.

Gambling is illegal in China, where the government says people save more than 20 percent of their earnings.

That is the "leisure fund" foreign casino operators now flocking to Macau, on the southwest side of the Pearl River Delta southwest of Hong Kong, hope to convert into hard core profits.

In the past year, Sands of Las Vegas has regained a $300 million investment in the former Portuguese colony and is now poised to spend a further $2 billion to open more hotels and casinos by 2007. During 2004 Macau earned $5 billion from gambling, up 30 percent from the previous year.

Tourism authorities say about 19 million Chinese visited Macau last year. In 2005 they predict the total will be more than 22 million, and more than 90 percent of them will be coming to gamble.

The Chinese government takes up to 40 percent of the revenue in tax.

Shift away from seedy scene
Macau was a Portuguese colony until 1999 when control of the small seaport reverted to Beijing.

While the Portuguese were in control, gambling was permitted under a monopoly run by Stanley Ho, a local billionaire with 13 casinos serving mainly Hong Kong Chinese for nearly 40 years. 

Macau had a seedy reputation with organized crime gangs, known as Triads, particularly active in loan sharking to players who favored the private gambling rooms at Ho's casinos where fortunes were won and lost at cards and roulette.

The Chinese government allowed the gambling to continue, but cracked down hard on the Triads, ending gang wars in which rivals for the lucrative spoils of the gambling tables often fought street battles in broad daylight. 

In 2002 the government opened the market to foreign investors and Sands of Las Vegas was among the first to arrive.

Las Vegas moguls stepping in
Today, gambling moguls like American Steve Wynn and Australia's Kerry Packer are in negotiations to expand the market even further.

Financial analysts in Hong Kong say that if gambling revenue continues to rise at the current rate, Macau will soon surpass Las Vegas to become the biggest casino market in the world. 

Deutsche Bank has forecast that gambling income in Macau will increase by an average of 18 percent a year to reach $10 billion by 2008.

And the market can only get bigger, according to Sands' point man in Macau, Frank McFadden.

"There are days when the Chinese gamble because it's considered lucky whether you win or lose," says McFadden.

And how many lucky days are there?

"Unfortunately, not enough," laughs McFadden.

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