Macau – the only place in China with legalized casino gambling. Last week, officials in Las Vegas said Macau edged out the Las Vegas Strip in revenue in 2006, raking in US$6.95 billion. The Las Vegas Strip’s US$6.69 billion was a record, but not enough to stay ahead of Macau.

The year 2007 is the “Year of the Pig,” according to the Chinese zodiac. But it’s not an ordinary pig year which comes every 12 years, it is believed to be a “Year of the Golden Pig”.

The idea that this lunar year should be a Golden Pig Year can be traced back to the Tang Dynasty (618-907 AD). Emperor Gaozu of the Tang Dynasty issued a new coin in 621 called “Kaiyuan Tongbao,” which inherited the style of “Zhu” coins created during the Qin Dynasty (221-206 BC). Five years later, when Emperor Taizong acceded to the throne, China stepped into a great period of prosperity that lasted for about 200 years. The Tang Dynasty also reached its peak under the rule of Emperor Taizong.

People believed the “Kaiyuan Tongbao,” or “Zhu” coins brought about the wealth and peace to the country, thus named the coin “Golden Zhu.” It happened that 627, the year Emperor Taizong succeeded to the throne, was a Year of the Pig, so people said it was a Golden Pig year, as “Zhu” is pronounced the same as “pig” in Mandarin.

Some say that China has now entered another period of great strength. Statistics such as provided in the chart makes it apparent why China has developed so far so fast, and will continue to do so.

Gamblers from Hong Kong, Taiwan and other locations in Asia can reach Macao in a relatively short period of time using various methods of transportation. Visitors from more distant locations in Asia can take advantage of short travel times by air to Macao or to Hong Kong (followed by a short hydrofoil ferry or helicopter trip to Macao).

Simply put, easy access from major population centers promotes Macao as a popular gaming destination in Asia. Macao completed construction of an international airport in 1995 that provides direct air service to many major cities and countries in Asia, such as Manila, Singapore, Taipei, Bangkok, Beijing and Shanghai. The Macao International Airport can accommodate large commercial airlines and has regularly scheduled air service to approximately 11 cities, including at least eight in China, with links to numerous other major Asian destinations.

Most importantly, China opened two border crossings with Macau shortly after the opening of the Sands Casino and allowed it’s citizens to cross the border. This resulted in a wave of lower income punters that fill the main gaming halls, and if they do not return same day they may sleep in such places as massage parlours and parks in order to not waste money on a hotel room – more money for gambling! Such play is a welcome bonus for the casinos, tending to even out the volatility from high-roller play in the VIP rooms.

Stanley Ho (SJM) had complete control of all gaming in Macau for 40 years. However, China’s leadership wanted Macau to expand its portfolio to include upscale shopping malls, resorts and convention centers. It seemed that Ho couldn’t turn around the market on his own. China announced that the monopoly would end just a day after the former Portuguese enclave returned to Chinese rule in 1999. The government awarded additional licenses and opened the market to foreign operators that have helped to transform that city into one of the world’s most successful tourist hotspots.

Ho still has the edge over new entrants from Las Vegas and Australia, with his 18 casinos controlling more than half of the market. His market share has been declining with each new casino that opens in Macau. However, one of the most popular sayings in the city is that when the water rises, all the boats go up with it. Although Ho’s casinos won’t be as dominant as they once were, they’ll still make money. Additionally, Ho is still the largest owner of land in Macau. So while he may have lost some gaming revenue, the rest of his land bank portfolio is worth an increasingly huge amount. The land costs are going up in Macau, so he’s worth more and more.

The Grand Lisboa, a gleaming gold complex, looks to be a bold bet to reassert SJM as the #1 operator in Macau. This is Ho’s biggest response so far to foreign companies who have stormed into Macau and seized big chunks of the gaming market. Stanley Ho is now joined by his widely respected son Lawrence and is fighting back. He is learning from his adversaries, by adopting some of their policies and hiring western expertise.*

*Recommended reading: The Art of War, by Sun Tzu. Chinese strategy explained: know yourself and the enemy, use deception, spies, and “win with ease”.

Frank McFadden, previously with Sands, is now President of SJM. He has put together a largely expatriate management team from the foreign casinos. This approach differs markedly from the other SJM casinos where management and policies are 100% Chinese and nothing much changed for 40 years, including the paint and the carpets.

The Grand Lisboa was designed by teams of International architects and interior designers. The property is shaped like a giant lotus flower and opened in 2007 just before Chinese New Year; with 240 gaming tables, 480 slots, and six restaurants. The new Grand Lisboa is connected by a footbridge with the original Hotel Lisboa which Stanley Ho opened back in 1971.

The remainder of the complex, which includes a 47-storey tower, will open with 430 hotel rooms later this year. With a breathtaking light show from the world’s largest integrated LED screen installed on the Grand Lisboa’s exterior, Ho has clearly upped the ante on his competitors.

Sands Macau opened in May 2004. They did a lot of things right. They hired a good set-up team, mainly executives and managers with many years of previous experience in the land-based and ship-based casinos of Malaysia, Cambodia, Hong Kong, and Indonesia. They were familiar with Asian games, Asian practices, Asian play, and knew how to find and train good Asian staff.

They went with an open-plan interior design suited to the Asian clientele. They were successful from opening day and never looked back. All construction bonds were paid off by May 2005. Most of the original employees have been rewarded with multiple promotions, and managers have seen the value of their stock-options double or more.

In 2006, the casino completed an expansion increasing the casino from 165,000 sq. ft. to 229,000 sq. ft. The casino now contains around 740 table games. The Las Vegas Sands Corporation uses this figure to claim Sands Macau as the largest casino in the world.

Wynn Macau opened in Sept. 2006 with around 212 table games and 375 slot machines and approx 100,000 sq. ft. of casino gaming space.

In the first phase they have 600 hotel rooms and suites, 7 restaurants, and 26,000 square feet of retail space.

Walking the casino floor is an almost surreal experience. It is a Las Vegas casino transported to China, complete with water show at the entrance. With Chinese punters and staff, and a few Vegas types standing around in the Pits asking questions. The punters are awed by the luxury. They peer in the windows of the five-star restaurants with award-winning chefs but yearn for a plate of noodles. They admire the designer label clothing, luggage, and jewelry in the shops. It’s all there: Bulgari, Chanel, Fendi, Giorgio Armani, Prada, Christian Dior, Louis Vuitton Piaget, Rolex, Tiffany & Co… But the Chinese wonder why the prices are so outrageous – never realizing that these are originals, not the copies that they have back home. They lust after the Russian hookers in the upscale nightclub “Tryst”. They admire the beautiful outdoor pool, but would not use it of course. Then they sit down to play, and Wynn has some of the strongest high-end play in Macau.

Taipa is an island situated at the south of the Macau peninsula. The area is approx. 6.3 sq. km. There are two bridges connecting Macau and Taipa. The third bridge will be opened to the public soon. Taipa is best known as a resort island. With increasing number of population, it has become another good residential place for young locals to escape from the busy city.

Taipa has a newly opened border crossing with mainland China.

Macau International Airport, the University of Macau, the Jockey Club’s Raceway, Carmel Gardens and Taipa Praia, Taipa Folk Museum, Macau Stadium, Pou Tai Un, Taipa Village are all located on Taipa.

The Taipa Village is a very popular place for good Macau cuisine. The two stories high buildings, flower pots, narrow quaint streets with antique street lamps remind one of a unique Southern European scene in a Chinese community. On weekends, it is usually crowded with tourists and local residents. Many casino employees are moving to Taipa now in anticipation of being based on the Cotai strip. Property rental and purchase prices have not yet reached the same heights as in Macau. Recommended snack foods are; baked bird-nest, egg custard, and grilled pork chop bun. The beer is good too.

Coloane is one of the two main islands of Macau. It is located directly south of the other main island, Taipa and east of the Greater Hengqin Island.

In neighbouring Zhuhai, the Las Vegas Sands Corp is making significant strides toward the development of the Venetian Hengqin International Convention and Resort Project, although it remains subject to governmental approvals.

The Cotai Strip is 1.8 miles of reclaimed land between Coloane and Taipa. Las Vegas Sands will own most of the Cotai Strip’s hotel and casino infrastructure. The company will manage most of the casino space, while the company’s hotel partners will manage their respective hotels and amenities. The hotel partners are:

The Venetian Macau, Four Seasons, Far East Consortium, Marriott, Ritz Carlton & Tang (casino to be managed by Melco PBL), Shangri-La and Traders, Sheraton and St. Regis, Hilton and Conrad, Fairmont and Raffles

The first phase of the Cotai Strip is scheduled to open this summer with the grand opening of the $1.8 billion 3,000 suite Venetian Macao, and construction or preconstruction activities have commenced on all of Las Vegas Sands’ seven sites on the Cotai Strip. Sheldon Adelson has said that when the Cotai Strip opens, most of the casinos on the peninsula – where Ho’s Lisboa and Grand Lisboa is located – “will be toast”. “When the entire Cotai Strip is open, the competitive battle will be finished”, Adelson told The Associated Press in an interview last year.

I feel that the size is of gaming in Macau will cause the biggest problems as well as the biggest attractions;

People management. To get them across the border, to move them around Macau, to provide food, rooms, sanitation. Where will the staff come from? Macau is reaching 100% employment, and China has so far refused to allow Chinese citizens to work as gaming staff, thus all gaming staff have to be recruited from overseas and trained in language, culture, as well as gaming procedures.

Oversight. US and Australian corporations are already operating. UK may be next – Richard Branson and his “Virgin” brand of UK have announced an interest. Respective home-governments and regulatory agencies are going to require squeaky clean operations with regards to Triads, money laundering, prostitution, loan sharking, etc etc.

As the Chinese say, “May you live in interesting times.” They mean it as a curse…

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