Half-finished casinos and dropping revenues have fueled fears that Macau’s staggering growth has faltered, but analysts insist the gaming haven remains a sure long-term bet.
The former Portuguese colony has transformed itself to a dazzling entertainment center in the last five years, with foreign and Chinese-owned casinos sprouting up across the territory.
The territory of just 550,000 now takes in more gaming revenue than Las Vegas and Atlantic City combined, thanks to the voracious gambling of Chinese visitors who have poured in from the mainland.
But worries over corruption, problem-gambling and foreign companies grabbing the spoils from China’s recent economic boom led Chinese authorities to stem the flow of visitors last summer.
The tougher visa restrictions caused a sharp drop in revenue growth, sparking a slew of negative stories, plummeting casino stocks and a hiatus in the territory’s construction boom.
But some analysts are adamant that fears about Macau’s demise are premature.
“Macau has been used to more than 40 percent growth — that cannot be sustainable and a slowdown is natural,” said Zeng Zhonglu (曾忠祿), a gaming economies professor at Macau Polytechnic Institute.
“My impression is that the economy generally is healthy,” he said.
Jonathan Galaviz, an analyst with the Las Vegas-based consultancy Globalysis, said any disruption to economic growth would be temporary, with Macau’s performance expected to fluctuate in the short term along with the Asian economy.
While gaming revenues fell sharply over the second half of last year, the territory still raked in US$13.5 billion for the year, a 31 percent increase year-on-year. Revenues rose 46 percent in 2007.
Meanwhile, employment held steady in the three months to January and retail sales rose 34 percent last year. Gaming is a central part of the economy.
During a recent visit, there were lengthy lines at the immigration counter and the territory center jewelry and watch stores were humming with shoppers.
The tables at the Grand Lisboa, the flagship casino of local tycoon Stanley Ho (何鴻燊), were three deep with heavy-smoking Chinese gamblers playing their favorite game of Baccarat.
But it is in the hidden world of the VIP gaming rooms where the territory has suffered.
VIP revenues have played a central role in the success of Macau’s economy, with top casinos tussling with each other to attract high-rollers.
But many of the heaviest gamblers were Chinese government officials and the heads of state-owned companies, whose frittering away of public cash in Macau’s private rooms has become a national scandal.
Unsurprisingly, official figures are not collated, but Zeng has combed through Chinese media reports to establish a clearer picture.
Of the 99 cases he uncovered, he said each official or businessman lost an average of 20 million yuan (US$2.9 million) on the tables.
One official lost 100 million yuan in one day in 2007, while another had to be carried out of a Macau casino as he was too weak to walk after six days and nights of constant gambling.
“The central government is highly concerned that so much money is disappearing in Macau,” Zeng said. “It leads to bribes and the theft of public funds, all of which greatly damages the government’s reputation.”
Glenn McCartney, a tourism academic at Macau University and a local businessman, said the territory had to change its business focus from VIPs to genuine mass-market entertainment, attracting visitors from across Asia.
“I am very confident about Macau. The market is not anywhere near maturity level yet,” he said.
“But Macau is not Las Vegas. If I was sitting in the marketing department of a casino firm, I would be asking what changes we have to make so we can attract more people from the mainland,” he said.
US firm Las Vegas Sands in particular is hoping China will allow more visitors in.
The most aggressive foreign investor in the territory, it opened the world’s biggest casino, The Venetian, last year.
But worsening credit markets have stalled its ventures across the world, and last November it was forced to sack 11,000 workers and halt work on a huge complex of new hotels opposite the gargantuan Venetian.
Four months later, the quiet building site remains the most potent symbol both of Macau’s risks for investors and its potential.
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