How Vegas Got Blackjacked At its Own Game

Posted by: on Apr 18, 2012 | One Comment

You may not believe it, but it’s actually true! Macau has long overtaken Vegas as the premier gambling destination of the world. And the lead it enjoys over its American sister is not thin. According to Macau’s Gaming Inspection and Coordination Bureau, the gaming revenues generated by Macau casinos were a staggering $33.5 billion in 2011; that’s Vegas’ revenues rolled five times over! Gambling was always associated with Nevada. Macau wasn’t even in the scene till the turn of this millennium. How did Macau do it then?

I have a real simple logical explanation to the above question. America, with its population of 300 million, has more than 700 casinos. China, under whose jurisdiction Macau falls, has a population in excess of 1.3 billion. And since Macau is the only legitimate gambling destination in the vicinity, with still a relatively miniscule 33 casinos, the daily footfall in “The Vegas of the Orient” is more than 30 million. You can do the rest of the math now!

The journey of Macau to be the top gambling destination of the world is as vivid as the city itself. Being a Portuguese colony, gambling was legalized in Macau as early as 1847. However, it was only in 1937 that casino licenses were given. The gambling industry in the city got the real breakthrough when an association of businessmen from Macau and Hong Kong, led by Chinese businessman Stanley Ho, was granted a monopoly of setup and operation. Stanley Ho is to Macau what Steve Wynn, Kirk Kerkorian and Sheldon Adelson, all combined, are to Vegas.  The monopoly was extended in 1986 for 15 more years till 2001. This is when Macau struck gold. The government opened the city to outside players and invited bids from American casino moguls like Wynn, Adelson and Kerkorian. With the advent of big players, the whole industry saw a major turnaround as the three went on to open their own casinos; Wynn Macau by Steve Wynn, The Venetian Macau by Sheldon Adelson and the MGM Macau by Kirk Kerkorian. However, Stanley Ho’s Sociedade de Jogos de Macau, enjoying a head-start, today owns 16 out of Macau’s 33 casinos.

There are three major developments that defined Macau’s landscape and attributed to the phenomenon it is today. The first is the expansion of Casino Lisboa, Stanley Ho’s flagship 1000-room tower shaped in the form of a lotus. The second is the launch of Wynn Macau, the 600-room toned down version of the bronze Wynn Resort in Vegas. The third and the last was the opening of the MGM Grand Macau, with 583 rooms and an architecture that would make its Nevada sibling look modest. By the latter part of the first decade of the second millennium, Macau looked just like Vegas did in its prime in the late 1990s.

Casino moguls such as Wynn and Kerkorian play down the difference between Las Vegas and Macau. Grant Bowie, Wynn Macau President says, “The notion that Macau becomes Las Vegas seriously undermines the value of both destinations. Vegas is very American. Macau can become a must-see destination in Asia, but with its own unique identity.”

A fact that cannot be ignored is that Vegas has a lot to do with Macau’s meteoric rise. A little more than ten years ago, Macau was still not ready to take center-stage as the biggest gambling destination of the world. Las Vegas companies, today, run more than 5,000 suites and 7,000 slot machines in Macau. The Wynn Macau, according to Steve Wynn, is “A Chinese company with the Las Vegas flair”. What’s interesting is that, taking inspiration from their American counterparts, almost all Macau hotels have started catering to a wider market by providing avenues for corporate meetings, entertainment and shopping, a move that has expanded their revenue streams. Besides the revenues generated from the gaming area, the incomes from hotel tariffs, spas, local tourist attractions, food and beverages have made an equal, if not a great, contribution to the overall profitability of these hotels. The idea is to provide a complete holiday experience to one and all. What works out for hotels in Macau is the lower cost of operation when compared to the same for Las Vegas hotels. This has invariably led to greater affordability of rooms, food and drinks and other relevant amenities. It is not without reason that Bill Eadington, an economics professor and director of the Institute for the Study of Gambling and Commercial Gaming at UNR, says, “It’s going to be harder and harder to persuade customers to come to Las Vegas as we see similar investments elsewhere,” he said. “At some point players are just going to opt not to travel so far to gamble.”

So as long as Macau keeps it cost effective; Vegas will keep losing out on a major chunk of gambling revenues in times to come.

What are the lessons for us here in India? Let us also encourage above word and legal gaming. At this time, gaming in India particularly on sports especially cricket is huge but almost all of it happens illegally. Legitimize it.

Casinos are legal in Sri Lanka, Nepal, Singapore and Mauritius besides Macau. All these destinations are just a direct non-stop flight away from India. Is it not time for India to benefit from legal gaming instead of all our neighbor benefitting?


1 Comment

  1. ananda
    April 19, 2012

    a clear cut perspective. keep it up the good work.


Leave a Reply