Apart from a slight hiccup over the Chinese New Year, when gaming revenue was marginally less than anticipated, the gambling boom in Macau seems to continue unabated. The partners in Macau’s Inner Harbour project, Ponte 16, are betting on industry growth, and are seeking to double the floor area of the development that will include hotel, casino and retail outlets. Major shareholder (51%) in the project is Sociedade de Jogos de Macau (SJM), and Stanley Ho should be able to read the Macau market better than anyone.

Melco PBL Entertainment’s joint venture on the island of Taipa, has secured a US$165 million loan to give its Crown Macau project flexibility for future expansion. The cost of the present project is around US$193 million and the casino, scheduled to open before the end of the year, will house over 1,000 slot machines and 200 gaming tables over six floors. The entire complex should be completed by June 2007.

The aim to turn Macau into the Las Vegas of the east came with the end to the Stanley Ho gaming monopoly in 2000. Just as Las Vegas improved its image from seedy and suspect to glitter and glamour, Macau is undertaking the same process. The giant US operators, such as Wynn Resorts and Las Vegas Sands, are part of the makeover – bringing more than gambling to the special administrative region.

Entertainment and shopping are now being incorporated into the tourist offering, but the main Macau market for visitors is from Mainland China. As yet there is nothing to say that the Chinese will want to be entertained away from the casino floor. There is also the question of whether the Chinese government, vehemently opposed to gambling anywhere other than Macau, will relax its travel restrictions for citizens in sufficient numbers to feed the burgeoning casino industry.

Of course Macau visitors do not only come from China, but competition from other casino resorts in Asia is increasing. There are also likely to be problems with the general infrastructure of Macau, which is already experiencing insufficiencies. A short fall in construction workers and casino employees has meant delays in some projects, and the influx of migrant workers will continue to stretch housing, water and waste disposal facilities. Other businesses are being faced with employee demands for wages on a par with those paid by the casinos, and the rise in rental costs is pushing accommodation beyond many locals.

So Macau may be not quite the sure bet it has seemed, and its fate could yet depend on the turn of a card, or the anticipated turn of millions. The gaming industry has seen a drop in table revenue as new casinos open, although profits and visitor numbers continue to rise. When the grandiose projects are up and running, and the Cotai Strip ready to rival the Las Vegas Strip, the world will be able to judge the success of Macau. Until then the investors are gambling on the returns being well worth the bet.
(E-02.15.06)

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