With the Chinese government clamping down, the world’s biggest gambling hub must decide whether to stick or twist. Harry Dean dons his dinner suit and investigates
Just as the history books recognise Bugsy Siegel as one the founders of Las Vegas, so too in Macau there is one man who made it all happen. His name is Stanley Ho, or Ho Hung Sun to the Cantonese — Hong Kong’s thirteenth richest man and the owner of a monopoly on Macau’s gambling industry for 40 years. To those in China, Ho must have seemed untouchable after so long.
It must have come as a surprise, then, to open the paper one morning in January. Scores of police had descended on the Grand Lisboa hotel, in the heart of Macau’s gambling district. They arrested 102 people in a crackdown on an alleged prostitution ring, including 96 women from mainland China and Vietnam and an executive director of the hotel, Alan Ho — the nephew of Stanley Ho, owner of the Grand Lisboa.
No charges have yet been brought, so we can’t speak of responsibility or organisation, but I have certainly seen the infamous ‘chicken run’ in the basement, where women walk the marble floors pretending to look at the handbags while casually casting a glance and a ‘hallo’ in a punter’s direction. What took everyone by surprise was that the police felt so empowered to challenge Stanley Ho himself.
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The political backdrop to this is having a profound impact on Macau’s casinos’ bottom line. Macau’s gaming revenue dwarfs Las Vegas’s at $45 billion to $6.5 billion, but since Xi Jinping became Chinese president he has been ruthlessly attacking allegedly corrupt officials on all levels, arresting, charging and — in the recent case of Zhou Yongkang — sentencing them to life in prison. This crackdown has taken a lot of money out of Macau, as well as enthusiasm.
Illustration by Cameron Law
The knock-on effect has been significant: by May 2015, monthly revenues were down 37 per cent from 2014. It is particularly impacting the VIP players who find it harder to play under the radar. The Australian billionaire James Packer, who jointly owns Melco Crown Entertainment with Lawrence Ho, Stanley’s son, saw profits for their worldwide gambling empire almost halve to A$201.8 million (’95 million) in the six months to the end of 2014, down from A$382.5 million the year before.
Shareholders are beginning to question the rationale of casinos with global aspirations staying so heavily invested in Macau. Indeed, at the start of this year Lawrence Ho announced a plan to delist Melco’s secondary listing from the Hong Kong stock exchange. This is yet to happen, but others may follow suit in uncertain political times.
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One would think the drivers of business in Macau are the players. Wrong. The real economic generators are the junket operators. For as long as Macau has operated, the casinos have preferred to rely on locally registered junket operators to bring players into their gaming rooms, manage a private room for their gambling and, crucially, take responsibility for collecting the debts.
Junket operators are a key part of Macau’s gaming ecology, organising trips for and extending credit to mainland high-rollers in return for commission from casinos. However, with the eyes of the Chinese government watching and with an increasingly hostile and emboldened police force, the more attractive option for VIP players is to look elsewhere, at some of South East Asia’s other gaming destinations.
In anticipation of this, many of the junket operators have been switching their attention to other markets and striking up deals with less established but presumably ‘safer’ casinos. They are sanguine about relocation, with one telling me: ‘The bottom line is we go wherever our clients want. The more they worry about Macau, the more they want to go to somewhere like the Philippines or Korea. The result is the same. It’s still gaming, just in a different place and in a different currency. Either way we win.’
No other local market nearly matches up with Macau, but they are hardly insignificant. Singapore is the largest, at $6 billion, while Japan (where gambling will soon be legalised) is expected to have a gaming revenue of $15.1 billion by 2020. In short, there are many more options in Asia beyond Macau than people realise.
Take the Philippines. Four years ago its government anticipated the potential of this growing market and carved out a strip of land called Entertainment City, right by Manila’s airport. It gave out four licences for operators who came promising to build $1 billion casinos. One went to Melco Crown, which has built City of Dreams complete with a Robert de Niro-sponsored Nobu; one to Genting for its Resorts World Manila; one to Bloomberry for the Solaire Casino; and the last to Japanese tycoon Kazuo Okada’s Manila Bay Resorts project.
In Singapore, there is of course the resplendent Marina Bay Sands, a 2,561-room hotel with a gigantic casino over three floors with more than 2,300 slot machines. (In a sign of how Singapore wants tourists in its casinos but not locals, Singaporeans have to pay a ‘casino entry levy’ to get in, which others do not.)
Even supposedly communist Cambodia now has the NagaWorld hotel and entertainment complex, which last year posted a 20 per cent increase in annual gaming revenues (to $381 million), largely thanks to sharing a border with China.
Back in the Philippines, the number of junket operators in casinos has quadrupled in the past two years. At Solaire, there are now 50 junkets occupying twelve VIP rooms. Luxurious gaming areas are cordoned off from the rest of the gaming floor, with a concierge service and a 24-hour food and drinks service. Players can fly in (often at the expense of the junket), stay in 350sq m villas with private pools and play as much as they like, without any worry that the Chinese police will be able to track them down.
The Philippines’ casino operators aren’t blind to the politics of their business, though. One told me: ‘Obviously we’re happy to take the business from China, but we’re realistic. We know it may not last and when President Xi relaxes, things will go back to the way they were. Then what do we do?’
Despite the data indicating that VIP players are heading elsewhere to escape the wrath of Uncle Jinping, mass-market gaming in Macau remains a more stable but less lucrative target market and one which must be more closely courted. Indeed, Melco is planning on opening what it says will be a ‘family-friendly’ casino by the end of this year, called Studio City.
It seems that defeat, at least until the next Chinese president is installed, has been declared. That said, with China on its doorstep, nowhere will ever replace Macau as the leader of the pack in Asia, and that is really thanks to the Chinese’s insatiable thirst for a roll of the dice. As long as the Chinese proverb ‘If you don’t gamble, you don’t know how lucky you are’ holds, Macau has nothing to worry about — and President Xi probably knows this.
