Well-established companies from Las Vegas turned Macau into the world’s most popular and glamorous gambling hub.
For decades, anyone who visited Macau knew the cylinder-shaped hotel tower of the Casino Lisboa to be the symbol of the former Portuguese colony. But today, Macau is the most luxurious, most visited and certainly most profitable gambling destination in the world.
Located on the shore of the South China Sea, the area used to lack the amenities and flashiness of Las Vegas. But over the past decade, things have turned around and Las Vegas is now living in Macau’s shadow.
But all this could not have happened without a little help from Vegas’ largest casino investors, who – it turns out – made the smartest business move when they decided to open new venues in Asia.
How competition brought growth
The companies making the biggest profits in Macau are:
• Las Vegas Sands
• Melco Crown Entertainment
• Wynn Resorts
As a Special Administrative Regions of the People’s Republic of China, Macau is the only area where Chinese gambling laws have no power over local authorities, who decided to allow casinos. This is great news for investors who decided to build hotels and gambling venues here, because this is where all Asian high-rollers come to spend their money.
Steve Wynn built his Wynn Macau across the street from Casino Lisboa and then MGM Grand Macau popped up nearby. As Stanley Ho, who owned Lisboa, saw the increasing competition from his Las Vegas rivals, he decided to respond by building a 58-story lotus-shaped tower, which is now the tallest building in Macau.
Since 2004, when Sheldon Adelson brought the Sands brand to Asian territory, things have been following the same trend: Las Vegas companies build something big, and local competitors go for something even bigger.
At this pace, it comes as no surprise that Macau soon started generating more profit than Sin City. At that time, analysts were saying it was only a matter of time before the former Portuguese province would become the world’s largest destination for gamblers. And that’s exactly what happened.
Analysts got that one thing right, but even they couldn’t predict the huge success Macau would end up having. Experts underestimated just how big the growth would be. For Europe, it’s all about online and mobile casinos, but Asia is making its billions of dollars from good-old land-based casino gambling. And the figures are simply jaw-dropping.
For the year 2013, Macau’s total gambling revenue rose 19% and reached $45.2 billion. There has been constant growth over the past few years and revenue increase has slowed down a bit during this year’s first quarter, but the number keep going up. Meanwhile, Las Vegas casinos reported a total revenue of just $23.9 billion.
At the end of 2014, gambling news reported that players visiting the Asian resort spend as much in just one day as gamblers do over an entire week on the Las Vegas Strip.
Financial forecast: sunny
The future looks bright for the Chinese territory, which continues to expand. Due to the growing numbers of tourists and gamblers from mainland China, Macau is now the world’s fourth-richest territory, overtaking Switzerland with gross domestic product per capita at GBP 53,000. Luxembourg, Norway and Qatar are still in the lead.
In June, total casino revenue generated in the former Portuguese colony saw a drop. But analysts have predicted this and authorities, as well as resort owners, expected this to happen. Soon after the reports came in, however, casino stocks jumped again, showing that investors are optimistic about the future of Macau and believe the worst part of the slowdown is over.
According to the local Gaming Inspection and Coordination Bureau, gross gaming revenue in June was $3.41 billion, falling 3.7% compared to last year’s income. Even so, this was the first year-to-year decline reported for a single month, over the last five years. Financial experts explained said the drop was caused by the 2014 FIFA World Cup, which drew tourists away.
All financial forecasts point at one certain fact: the gambling hub is doing better than authorities and some financial experts predicted, which could be a sign that the best is yet to come.