Viva Macau: What does the future hold for China's gambling capital?

Once a sleepy Portuguese colony, China’s gambling capital is now playing for high stakes, taking five times the gaming revenues of its American rival. But mega-moguls are jostling for dominance and triad violence has resurfaced.

Clifford Coonan
Friday 21 September 2012 18:55

Chinese gamblers stand at a bus stop outside the Sands casino in Macau, once a somnolent Portuguese colony, now a glitzy playground that every year generates five times more in gross gaming revenues than the casinos on the Las Vegas Strip.

The streets are thronged. Some of those waiting for the shuttle are groups of laughing tourists, but many are single visitors, sullen or indifferent as they stand beneath a sign saying "To border gate". They are heading back to mainland China via Zhuhai, or through Hong Kong. Maybe they lost at the tables. The pavements beneath their feet are littered with pictures of girls, with phone numbers to call should anyone be looking for the services of a local prostitute. In the windows of the ubiquitous pawn shops, Rolex watches and diamond rings are on display, hocked by their former owners to raise the stake for the next flutter, a reminder that the green baize strips people of fortunes more readily than it hands them out.

The reason that everyone is here is that Macau, where gambling has been legal for more than 150 years, is the only place on Chinese soil where table gaming is permitted. Last year, casino revenues were £21bn and Macau boasted 28 million visitors, a number expected to rise to 50 million in the next few years. But the slowing economy in nearby China means things are tighter than they have been in a long time.

A recent spate of violence, with hammer attacks and triad murders, reminded people of the bad old days of the late 1990s, when Macau was a gangsters' paradise with bombings, shoot-outs and chopper assaults.

But it's at times like this that Macau gets busy reinventing itself, and there's no shortage of interested parties. Local and international casino operators are spending billions on resorts that combine casinos with shopping centres and entertainment venues to try to woo China's growing middle class. The Chinese government is repositioning Macau as an international leisure destination, and included it in the Five Year Plan last year, the country's blueprint for future economic development.

The key to Macau's recent boom has been the junket operators who find and offer credit to VIP high-rollers from the mainland. High-spending Chinese gamblers make up 70 per cent of revenues; these high-rollers can drop hundreds of thousands of pounds at a table without the ash on their cigarettes trembling. But the VIP side of the business has been hurting; that slow down in China is starting to hit the profits. The junket operators traditionally give the high-rollers credit based on the value of their property portfolios, but the end of the real-estate boom has seen this kind of credit fall off.

Also, there has been much tighter control on corruption in public life in China, which means fewer bent officials spending public funds in Macau. The territory's fortunes tend to rise and fall depending on how many visas for mainlanders are being issued.

Earlier this year Yang Kun, a senior executive at one of the mainland's big four state-controlled banks, Agricultural Bank of China, was detained amid a widening investigation into allegations of illegal gambling in Macau and the misappropriation of clients' money.

However, where the high-rollers are falling off, the number of middle-class Chinese is on the rise. The baccarat tables are packed with moneyed mainlanders.

Macau's return to Chinese rule came in 1999, two years after Hong Kong's handover. Soon afterwards, in 2001, the government tendered three new gaming licences (which later rose to six). The big US operators Las Vegas Sands and Wynn Resorts were granted two of them and Macau's latest transformation began.

"At this point more than 90 per cent of revenues are from gaming, while in Vegas 60 to 70 per cent is non- gaming," says Niall Sean Murray, a consultant to the gaming and hospitality industries. "There will be a move in Macau, but it will be over time. There are still a lot of first-time visitors whose intention here is to have a game."

Until the new licences were issued, a monopoly had been held by Sociedade de Jogos de Macau (SJM), the biggest casino company in Macau, which is owned by Stanley Ho, who has been dubbed " Mr Macau" and "the King of Gambling".

Ho is an almost mythical figure in the former colony. He made his fortune smuggling goods between China and Macau during the Second World War, and his past is the stuff of legend. Sometimes separating the myth from the man is difficult. He is alleged to have once worked on a boat that was attacked by pirates; while other crew members were killed, Ho managed to fight the pirates off and retain the vessel and its cargo.

His family is large and complicated; one of 13 siblings, he has 16 children himself (another son predeceased him). A recent feud over who would inherit his wealth (his wine collection alone is reckoned to be worth at least $1bn) became public and Ho accused two of the four women he calls his "wives" – his one legal wife, Clementina, died in 2004 – and some of his children of trying to seize control of his company. A truce was eventually reached.

One of the most potent symbols of change in Macau is SJM's flagship casino, the Grand Lisboa. This is a complete departure from the old Casino Lisboa, where scores of prostitutes circle the shops in the basement and the gaming rooms are smoky and dark.

By contrast, the lobby of the Grand Lisboa is dotted with large works of traditional Chinese art, some in solid gold, and carved statues. Raising the bar in Macau means bringing in high-end eateries, too. One such is the Don Alfonso 1890 restaurant in the Grand Lisboa, where lunch is brought to you by southern Italy's Michelin-starred chef Alfonso Iaccarino. Here, the "King of Pasta" offers specialities from his native Sant'Agata sui Due Golfi, which is on a ridge above the Bay of Naples. Over 70 per cent of the ingredients are flown in directly from his family's organic farm, and the fish is sourced in Japan's top fish markets. The wine list, presented by sommelier Roberto Gallotto, is so thick it needs its own stool to rest on.

Inside the casino, just like in Vegas, it is always nighttime. There are no windows and nothing to tell you what time of day it is, until you emerge blinking in the balmy heat of southern China.

Central to Macau's metamorphosis is a narrow piece of reclaimed land called the Cotai Strip, which, when fully developed, will be the Asian equivalent of the Las Vegas Strip. Sands chairman Sheldon Adelson and his arch-rival Steve Wynn, as well as MGM Resorts International, have spent billions of pounds on this piece of real estate.

In April, Adelson opened his latest £2.75bn casino on the Cotai Strip. He already has the Venetian here, a hotel and casino resort with 3,000 suites on 40 storeys. The casino has 800 tables and, if you want, just as in Vegas, you can take a ride with a Venetian gondolier.

Earlier this year the go-ahead was given for Steve Wynn to develop the Wynn Macau, a 51-acre plot on the Cotai Strip, which is slated to include a convention centre, a lake, 40 shops and a 1,750-seat theatre, all of which fits in with the government requirements that new resorts need to have a heavy non-gaming element. "We're looking to build something that will be irresistible to our guests," Wynn said. "That's an expensive assignment to take. We're looking to take it to another level and to make it delicious."

Both Adelson and Wynn already have casinos on the main Macau peninsula, along with SJM. Others operating the 30-plus casinos in Macau include MGM China, Galaxy Entertainment and Melco Crown.

This expanding army of visitors will need somewhere to stay. There are around 20,000 hotel rooms now, k compared to 150,000 hotel rooms in Vegas. And there is pressure on operators to do more than just provide gaming facilities. In the City of Dreams hotel and casino, directly opposite the Venetian, punters are lured with a new, permanent acrobatic show, The House of Dancing Water, designed by Cirque du Soleil's Franco Dragone. The pool is one of the largest commercial pools in the world, with a capacity of 14,000 cubic metres.

Entertainment is seen as crucial to getting Chinese punters to do something other than gamble, and there has been a surge in the bookings of Canto-pop stars (who sing in Cantonese), as well as Mandarin stars from Taiwan and even K-Pop, or Korean pop, stars, who are popular with Chinese fans.

Despite the new direction, there have been some shocking reminders of Macau's past in the past few months. In July, casino backer Ng Man-sun, known as Street Market Wai, was sitting in a restaurant in the New Century Hotel on Taipa island when six men ran in and attacked him and an unnamed female companion with hammers.

Street Market Wai is a backer of the Greek Mythology casino in the hotel. The attackers avoided hitting him on the head, focusing on his legs and arms, a classic triad warning. The targeted assault sparked memories of the dangerous days in Macau when Street Market Wai had a bitter rivalry with the legendary triad gang boss Wan Kuok-koi, widely known as Broken Tooth. In July 1997, Broken Tooth's people sprayed the New Century Hotel with machine-gun fire during the violent turf war between the triads over casino stakes. With Broken Tooth due for release after serving 15 years in prison in December, there are fears that there could be trouble ahead.

In August, the police launched Operation Thunderbolt, raiding casinos, karaoke rooms, brothels, massage parlours and hotels. They arrested 150 people, picking up illegal immigrants from the mainland working as prostitutes, and discovered ketamine and other drugs.

Because gambling is illegal on the mainland, gambling debts are not legally enforceable by courts in China, so the junket operators have their own ways to collect debts. In July, while Chinese gamblers were dropping millions of dollars on the gaming tables below, two men from Jiangsu province on the mainland were stabbed to death in the luxurious Grand Lapa Hotel.They had racked up big gambling debts and had frantically reached out for a friend to help them find a way out, but by the time their associate tracked them down on the eighth floor, all he found was two bodies. The police believe it was a professional hit.

Organised crime links are something that the Las Vegas companies are very keen to distance themselves from. Suggestions of improper connections in Macau could cause them headaches in the US and hit them in Nevada, in their home markets. The US Department of Justice and the Securities and Exchange Commission is currently investigating whether Wynn Resorts and Las Vegas Sands have violated the Foreign Corrupt Practices Act, and New Jersey regulators have previously said that MGM Mirage's business partner Pansy Ho – daughter of Stanley Ho – is an "unsuitable" partner.

Partly in response to this, Macau's regulators have introduced legislation to combat the organised-crime links. Junket operators must get a licence, disclose their financial affairs, and undergo background checks.

There are two Macaus, the sleepy Portuguese version that still exists around the old central Senado Square, with its pretty mosaic-patterned paving and pastel-coloured neo-colonial buildings, and the hectic, charged atmosphere around the casinos. Wandering the narrow streets off Senado Square, you can stop for a great cup of coffee and watch Portuguese residents shake hands and exchange pleasantries at a leisurely European pace. The façade of St Paul's cathedral, built by the Jesuits in the 16th century, looks even older than its 450 years when juxtaposed against the neon landscape of Macau's casinos. A strange kind of continuity, but Macau's capacity to reinvent itself means it is always worth taking a gamble on.

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