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Home  News & Interviews Commentary Monthly Comment Macau Gets Set to Bring on the Bling
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Macau Gets Set to Bring on the Bling |
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 Here are two different interpretations of the same story.
1) The number of Macau's visitor arrivals reached 1,921,384 in June, a remarkable year-on-year rise of 20.3 per cent.
2) The number of mainland Chinese visitors to Macau fell by 16.5 per cent in June after neighbouring Guangdong province brought in visa restrictions in May.
One is from China's state news agency, Xinhua, and the other the Financial Times. Both are based on official statistics. But the potential impact on Macau's stratospheric tourism surge of new government restrictions on Chinese mainland entry visas has become a hotly debated topic – particularly as figures from China's Statistics and Census Service show that that 58 per cent visitors to Macau in June came from mainland China, with 32.2 per cent from Hong Kong and 6.3 per cent from Taiwan.
The concern is rather timely. Later this month, Sheldon Adelson's Las Vegas Sands Corp. will open the cavernous Venetian Macau resort hotel, adding to his already-popular Sands Macau development. The Venetian is an integrated resort that occupies enough space to fit "ninety Boeing 747 jumbo jets". It includes a 3,000-room hotel – the first to open on the man-made Cotai Strip linking Macau with the islands of Taipa and Coloane – a giant casino, 100,000 sq m of meeting space, 350 retail outlets built around Venetian-style canals, 22 restaurants and a 15,000-seat event theatre/sports stadium. Manchester United's players stayed there during the club's summer 2007 pre-season Asia tour.
We undertook a hard-hat guided tour of the site during the final stages of construction in late Spring, and can confirm that – even taking into account the physical statistics – the scale of the development is eye-opening. With clouds of dust choking our throats and piles of construction materials, air-conditioning units and packing crates clogging the bare wooden floors, a sense of expectation still lingered in the air. During the visit, we counted at least 53 men carefully spray-painting the gold-framed edges of mock-Italianate ceiling frescoes.
Sands is also investing an additional USD2 billion in hotels and condominiums along the Cotai Strip, bringing in names like Ritz-Carlton, Four Seasons, Mandarin Oriental, Hard Rock, Playboy and a Cirque de Soleil show theatre, among several others. According to Jones Lang LaSalle, around 37,600 new hotel rooms are under construction in Macau or being planned from 2007 onwards – tripling its current room inventory. The bling factor is unavoidable.
Thus far, Macau's tourism growth has been rooted firmly in its gaming halls. Macau is the only location in China where gambling is legal, and ever since the government ended Stanley Ho's decades-long monopoly on the industry in the late 1990s, it has sought to clean up its previously sleazy and crime-ridden image.
The results are impressive. In 2006, Macau attracted 22 million visitors who spent USD7 billion in its casinos. Analysts suggest that figure could top USD10 billion this year. Macau, says billionaire gambling tycoon, Steve Wynn, is "the safest bet on Earth." This is no surprise, given that his Wynn Resorts company has just reported a second-quarter profit of USD89.6m (compared to a loss of USD20.1m in the same 2006 period) as revenues doubled because of its Macau resort. The announcement boosted Wynn's shares by 11 per cent. Meanwhile, Sands Macau's revenues hit USD373.5 million in the second quarter, a 21.6 per cent uplift from the same 2006 period
While the headline figures speak of a boom time, there is some underlying concern. Guangdong province residents are now restricted to single entry permit visits into Macau, instead of double entry. Permits for business travel have been suspended indefinitely and urgent applications have been cancelled. This is also affecting Chinese residents across the country.
Some media reports have suggested that the restrictions are an attempt to curb cash outflows by local government officials and the flow of illegal labour into Macau. Others claim that May Day protests in Macau, which made news headlines worldwide, unsettled the Beijing government, which is doing everything in its power to avoid negative media coverage ahead of next year's Olympic Games in Beijing. A more plausible view is that China is simply managing the flow of tourism access to Macau, just as it did with Hong Kong, to ensure high demand and to act as a macroeconomic regulator.
Whatever the reasons, the impact is seemingly starting to impact strategy. Wynn Macau President and General Manager, Grant Bowie, told TTGAsia that the company's plans for its second phase opening have been altered. "Not only do we need to get the right balance between gaming and non-gaming, we also have to build a wider market, one which will continue to attract the kinds of high-end visitors we target."
Wynn's original expansion plans included about 11,427m sqm of additional gaming space, a theatre and new F&B and retail amenities. This would have given it around 470 table games and 1,400 slot machines. It now seems likely that more upscale retail outlets will be added, with a consequent downscaling of new gaming space.
Macau's tourism model does appear to be evolving. While day-tripping southern Chinese gamblers will continue to keep visitor numbers (and revenues) up, Adelson and his fellow Las Vegas kingpins want to drive different inbound demand patterns. The cavernous Venetian Macau is the first major play in "repositioning Macau as North Asia's top destination for leisure and corporate travellers." It aims to do this by staging large-scale commercial exhibitions and conferences, hosting lavish theatrical shows, major sporting and cultural events and overloading everything with a massive dose of stardust. Just like the
first Venetian did in Las Vegas. These attractions will target longer-staying, higher yielding guests and spread Macau's clientele base from largely leisure-based to business-focuses travel and tourism. Indeed, one of the Venetian Macau's tag lines is "Where lavishness meets business."
Macau's economic transformation has prompted other Asian countries to also reassess gambling in a constitutional – and tourism development – context. Singapore overturned a ban on casino gambling as part of plans to double visitor numbers by 2015, and awarded casino franchises to Las Vegas Sands and Malaysia-based Genting International. Both will form part of spectacular integrated tourism, entertainment and shopping developments scheduled o open later this decade. South Korea plans to turn Jeju Island into a gaming destination and Japan, Taiwan and Thailand are scrutinising the gaming industry's potential tourism benefits for their economies.
Macau may have a head start and the support of the Las Vegas bling billionaires, but, ultimately, it won't be the only gaming-based tourism industry in the region. Which is why Venetian is starting to change the model, and spread the scope of its biggest bet yet.
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