The Asian Vegas
Macau, once a seedy and corrupt outpost, is blossoming into a gambling mecca
From the Print Edition:
Dennis Haysbert, Nov/Dec 2006
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The newly opened Wynn Macau is a scaled-down version of Wynn Las Vegas. Macau's casino row may soon rival the Las Vegas Strip.
It is a rainy weekend in Asia. So rainy, in fact, that there is talk of a possible monsoon. But foul weather does nothing to slow the Sunday afternoon flow of traffic to the two-and-a-half-year-old Sands Macau. The glitzed-out casino—situated on its namesake peninsula, between Hong Kong and China—is packed with mainlanders savoring their taste of twenty-first-century action. Arriving by car and bus, dressing up or down, carrying pockets full of cash or working with junket operators who offer credit, they filter in and barely speak as they drop chips upon felt and try their luck.
Owned by Sheldon Adelson and his publicly traded company that is responsible for Vegas's plush Venetian Resort and Casino, the Sands is a gargantuan, shimmering sprawl of chance. Dominated by blackjack and baccarat tables, the casino is dressed up with blatantly high-tech design, soaring vistas and a live band blasting Top-40 covers in English.
An enormous curvilinear high- definition TV flashes casino hype overhead and, just across the ceiling, a 100,000-pound glass-and-light installation (a chandelier of sorts) communicates a sense of over-the-top luxury.
On the gaming floor, the action is hot and heavy. Tense-looking couples bet together at the pai gow tables, grandmothers obsessively punch at Asian-themed slot machines once dismissed as "tigers that eat you and don't even spit out the bones" (they have been successfully reconfigured for the Chinese market with artwork based around jade princesses and white-bearded sages), and the lowest-stakes blackjack tables (about $30 per bet) pack 'em in three deep.
Down in one of the baccarat pits, players with long and pointy fingernails slowly peel up their cards, slam them down and, more often than not, softly curse their luck. Gambling on uniquely Asian games— including a simple, seemingly even-odds dice wager in which you pay the casino a cripplingly steep 5 percent commission on each win—players sip sweet-and-milky tea, pony up more chips and, unwittingly, rank among the global gaming industry's newest cash cows.
But can it last? "I absolutely think that China's growth will last," says Adelson. "We know from Las Vegas that the Chinese love gambling. Why would they stop playing? For the Chinese, gambling is an intense form of entertainment." And they can afford it. "China may not have as many millionaires as the U.S. [right now], but I believe that it will soon have more."
Upstairs in the Paiza Club, a private enclave for high rollers who put $100,000 or more at risk, the vibe is restrained and refined, at least as restrained and refined as you can expect it to be in a macho expanse of wood, marble and leather. Players gamble in spacious private dens, with their doors kept open a crack to allow the entrance of luck, and lodge in 5,000-square-foot suites that measure up to their Vegas counterparts, complete with private saunas and karaoke rooms. High-limit customers generate 30 percent of the casino's handle, and the Sands goes out of its way to keep them happy with butlers, private gourmet dining and bottles of 18-year-old single malt. "This is bigger and better than Vegas," declares the Sands' director of gambling. "We really got it right here."
Inarguably, Macau is booming; it is expected that gambling profits there will soon eclipse those of Las Vegas, aided considerably by the newly opened Wynn Macau and the under-construction MGM Grand Macau. "Ten years from now stories will be written about what is going on here," predicts Steve Wynn, sitting behind a big wooden desk in his downtown Macau headquarters. "This is a fascinating place in the grips of rapid escalation. Changes are happening here with a speed and intensity that is almost mind-boggling."
Joining the Macau casino boom, which, within just a few years, will result in thousands of new hotel rooms, miles of gambling space, many billions of dollars in revenue and an anticipated 5,000 table games, are a handful of other casino entrepreneurs. They include gaming progeny James Packer (son of Aussie tycoon Kerry) and his partner Lawrence Ho (until recently, his father, Stanley, had a monopoly on gambling in Macau), who are collaborating on a $1.5 billion gambler's paradise called City of Dreams. Several new and/or improved outlets will be in the hands of the elder Ho; most notably, his own take on high-end Vegas with the Grand Lisboa. Budgeted at $250 million, the cost of this casino would have once seemed astronomical for Macau; but now, alongside the city's billion-dollar-plus undertakings, it comes off as chintzy. Plus, Wynn plans to open a second casino here (an anticipated partnership with Ferrari, it'll be themed around the classic Italian sports car) and a Macau version of the Venetian is nearing completion, and MGM Mirage recently broke ground.
Although the Sands, with loads of gaming and not much else, is successful, it represents phase one for Sheldon Adelson and company. Their Venetian—heavy on luxe amenities and convention space—is more indicative of Macau's proposed future. "We're changing the face of Macau by making it into a classic destination resort that happens to have gambling," says Bill Weidner, president of Las Vegas Sands Corp., which owns the Venetian. "We will put $9 billion into Macau's Venetian and it will take up 35 million square feet. In Las Vegas, you just don't have the room to do what we're doing in Macau." To support that heft, there is a much larger pool of players for casinos to woo: "Within the five-hour market of Las Vegas, you have 450 million people. Draw the same circle around Macau and it is something like 3 billion."
While J. Terrence Lanni, chairman and chief executive officer of MGM Mirage, has a point when he describes the Sands Macau as the equivalent of "a basic locals casino in Vegas," the difference between Adelson's quickly constructed outpost (it took 14 months and has just 40 hotel rooms, all reserved for high rollers) and what preceded it in Macau is stunning. Just an hour's hydrofoil ride away from Hong Kong, and the only nearby place for legal table games, Macau was, until recently, loaded with nothing but claustrophobic, smoke-filled joints, all under the sole control of Stanley Ho. Despite the fact that Macau is a charming city with terrific Portuguese architecture and excellent restaurants, it has had a long-standing, and well-earned, reputation as a sleazy and corrupt place where prostitutes and the Chinese mafia are de rigueur. It remains the kind of destination that members of Hong Kong's polite society rarely brag about visiting (sort of like the old Vegas).
In 1999, however, governance of Macau reverted from Portugal to China, and things began to clean up. Three years later, Ho's contractual stranglehold on gaming expired. The Chinese government could have renewed exclusively with Ho, but it decided to de-monopolize the peninsula's casino business and, in the process, ratchet it up to Vegas standards. The hope was that by improving gaming, Macau itself would improve and the dive-like casinos that all but defined the place (and fed into the local crime scene) would be forced to evolve or die.
Twenty-three international gaming companies submitted proposals that they hoped would lead to casino licenses. Initially, three licensees were chosen: Ho, Adelson and Wynn. MGM's initial exclusion left Lanni feeling pretty bad and a little concerned for a segment of his business. "Not being in Macau is dangerous [for a major American gaming company]," says Lanni. "If the local Chinese people get used to going to a place close to home, and they like it, that is the place they will want to patronize when they come to Las Vegas."
The chosen few were already happily versed in the power of the Asian gambling dollar—it is believed that Asian players account for an important chunk of Nevada's high-limit play—and they jumped at the opportunity to get involved and vowed to upgrade Macau to Las Vegas Strip quality. And now that it's being done at lightning speed, the only logical worry would seem to be a potential for overbuilding. But that concern has failed to land on the radar. "It's not a question of how much capacity is added; it's what type of capacity," says Wynn, whose Wynn Macau is a scaled-down (but still super-upscale) version of Wynn Las Vegas. "If the properties are value-added and fanciful, great. If you are talking about a bunch of office buildings converted to baccarat rooms, oops, look out. But don't worry. That is not what we're doing here."
Sheldon Adelson and his crew from the Venetian were the first to cut the cards in Macau. Fifteen thousand people waited behind police barriers for the doors to part on opening day at the Sands. They poured in and crowded so tightly on an inclining escalator that the moving staircase ground to a standstill. Patrons were excited, and for good reason: even if they'd been to Macau before, they had never seen a gambling enterprise as plush as the Sands. "The old casinos in Macau were designed as if gambling was the wrong thing to do," says Weidner, referring to the warrens of small low-ceilinged rooms that are a hallmark of Stanley Ho's operations. "Las Vegas casinos [and the Sands in Macau] have open architecture that celebrates playing in the casino. It conveys the fact that gaming is a part of life and that it is OK to enjoy it. Macau casinos always felt more like opium dens."
For a while, it seemed as if MGM Mirage, arguably the top casino company in the world, would not be involved in the beautification process of Macau. Lanni believes that MGM originally was rejected due to the amount of tax it offered to pay. (The company came in slightly lower than Wynn, Ho and Adelson.) But he and MGM received a do-over after the original licensees were given opportunities to sell so-called co-concessions, which amounted to full-blown licenses for a second group of casino operators.
Stanley Ho sold his co-concession rights to MGM, which is now partnered with Ho's daughter Pansy on the MGM Grand Macau. (The name is perfect, as MGM movies rank among the few Western imports that have consistently gone into China over the last 80 years—never mind that, these days, the relationship between the casino and film studio is in name only.) While the situation may not be entirely perfect—"We'd like to have 100 percent and I'm sure that Pansy would like to have 100 percent, but there just isn't enough to go around," says Lanni—Lanni's attitude is that he'd rather be there than not be there. "We'll have 600 rooms and suites, but we're leaving a lot of areas unfinished so we can decide what we want to do," he says. "We'll have a significant spa and will be addressing it to the Far Eastern culture." Lanni considers this for a beat. Then he rhetorically asks, "But is that what the people really want? We don't know."
One thing that seems beyond question is the money that American operators stand to make in Macau. According to Weidner, the Sands is doing 40 percent better than he had anticipated. "We expected that it would pay for itself in a year," he adds. "[Within that time frame] it had already more than paid for itself." None of this is too surprising when you consider that tables in the Sands Macau scoop an average of $6,100 per day (50 percent more than they do at the Venetian) and contribute to the casino's daily take of $3.1 million.
That mathematical reality underscores that it typically takes around three years to recoup hotel expenses in Las Vegas. "Sands was built for speed and succeeded at doing what it was designed to do: make money," says Wynn. "A great deal of profitability has been taken out of that building. It's given [Adelson and his company] tremendous opportunity."
And, no doubt, that windfall—and the potential to earn even more—stokes Adelson's enthusiasm for Macau's biggest undertaking of all: a long street lined with Vegas-style hotels that will be known as the Cotai Strip and mimic the famous Las Vegas Strip. It is here that Steve Wynn's proposed Ferrari Hotel and Casino is slated to be parked. Anchoring the Strip will be the Venetian. Even Terry Lanni, who believes "the high action will be downtown, where Wynn and MGM are; Cotai Strip will be for families, business and conventions," might build over there.
The biggest commitment to Cotai comes from the Venetian. (Las Vegas Sands Corp. founder Sheldon Adelson is worth a reported $16.1 billion and is ranked by Forbes as the 14th richest person in the world.) Rather than simply building a bigger and better knockoff of his Vegas place, Adelson will serve as partner and primary investor on much of the Strip. But that was not the initial plan.
Originally, his less ambitious goal was to do a Sino version of the Vegas Strip with the involvement of hoteliers such as Steve Wynn. "We talked to Mr. Wynn about being on the Strip, and he declined to join us," says Weidner. "Now he has decided to be involved and has approached the government about developing his own property near where we are. We can care less. We have moved on." (Wynn says he was too involved in the construction of Wynn Las Vegas to jump on board when the Cotai invitation was first offered.)
Employing an innovative approach, the Venetian has aligned itself with hoteliers such as St. Regis, Sheraton, Hilton and Four Seasons to manage the Cotai hotels, while the Venetian will handle the casino action and construction of the properties. These alliances create the illusion of many individual hotel-casinos, but they're all under the umbrella of the Venetian. "You'll look down this strip in Macau and it will be like the Vegas Strip, with branded hotels that are full-fledged casino developments," predicts Weidner. "These properties will be developed with air-conditioned walkways [connecting them], and we will drive midweek activity with the convention business."
Ask Wynn if he feels bad about opting out of Adelson's Cotai and he doesn't look the slightest bit remorseful. He says Cotai is where he'll build three or four properties. But that's for tomorrow. At the moment, he's focused on the Wynn and looking to pace himself. "I've chosen a slower and more conservative path [than Adelson has]," says Wynn. "I passed on the chance of the quick one; I want to build an enduring reputation in Asia. We've just started here and we have a long way to go. We want to make the best possible impression, so it's important for us to do things right rather than fast."
A notorious perfectionist, Wynn designed his Macau gaming floor so that it remains airy but subtly breaks up into zones, using drapes and columns to create intimacy and simulate the clustered areas that Stanley Ho's players became accustomed to. As in Vegas, Wynn's 600 guest rooms in Macau are oversize, with luxurious bathrooms and comfy beds angled toward picture windows. Putting a spin on the famous dancing fountains that front the Bellagio, Wynn is imbuing the water in Macau with a crowd-pleasing fire show. He's importing brand-name chefs from Hong Kong and loading his shopping concourse with top-shelf retailers such as Gucci, Christian Dior and Chanel.
Maybe realizing how revolutionary it is for a Chinese city to be courting Western-style gambling, big-ticket designer commerce and the healthy capitalistic competition that comes with it (Stanley Ho recently complained about the Sands' bare-knuckle competitive tactics, which are common in Vegas but novel to him), Wynn considers all that he and Adelson and Lanni are bringing to Macau. "Companies like mine are being used as instruments of change here," explains Wynn, referring to Macau's speedy evolution into a top-flight tourist destination. "The government here is saying, 'Use your capital, and if you make money, congratulations. Use your expertise, make the changes we want, and we'll support you.'"
Not needing to mention that Macau's desired changes jibe perfectly with the heavy commerce that Wynn and his competitors intend to bring, he adds, "This is a real cool place to do business, and it's turning out great."
Michael Kaplan is a Cigar Aficionado contributing editor.
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