Game theory

The world’s largest gambling hub is desperate to diversify. Macau’s gross gaming revenue in 2018 was equivalent to around 70% of the territory’s GDP. Watch out for authorities using their clout to force casino operators like the $56 billion Las Vegas Sands and $16 billion Wynn Resorts to invest more in theatres, arenas and malls.

The timing is ripe with the rebidding process for concessions due in 2022. With lucrative licences at stake, the government could coerce casinos to offer more business- and family-friendly options. Beijing is also eager: China’s President Xi Jinping urged Macau to pursue diversification during his visit in December.

Other centres have used stick to force change: Japan, the Asia region’s newest gambling market, has required resorts to reserve resources for building non-gaming attractions. Meanwhile, Singapore’s licence extensions in April saw Sands and Genting agree to build a 15,000 arena, a theme park, and new business facilities.

True, casino kingpins know how to hedge a bet. Sands’ Sheldon Adelson won big by making Las Vegas a hub for events and exhibitions. These commitments add up, however. In Singapore, the two operators pledged a combined $7 billion for their expansion. Investors dumped Genting’s local stock, leaving it down almost 10% in a single day on the news.

Investors in Macau casinos have reason to worry. Although a new bridge brought more visitors to the tiny territory last year, the newcomers are not keen gamblers. Tourist numbers rose 13% in the first eleven months of 2019 but gross gaming revenue fell over the same period. Beyond the gaming floor, per capita spending also fell by a fifth in the first three quarters of 2019.

Growth is already looking more modest on the back of a domestic Chinese slowdown. In the first half of 2018, the likes of Wynn Macau and Sands China saw their adjusted EBITDA rise by more than a quarter: but during the same six months of 2019, Sands’ rose by low single digits, while Wynn’s shrank. Splurging on new ventures in a period of uncertain demand would be painful. Macau’s new tourism makeover could come at a cost for the house.

China's gambling mecca runs of luck

Macau, China’s sole gambling mecca, is the inverse of Las Vegas.

Its tiled promenades are tidy and largely free of panhandlers. There are no flashing pyramids or fake Eiffel Towers, but plenty of stone facades designed centuries ago by Portuguese craftsmen. Inside its 30-plus luxury casinos, gamblers tend to gulp milk tea instead of Jack Daniel’s.

In recent history, Macau has been a raging success story. It has become the world’s most profitable gambling city, raking in more cash between a few of its casinos than the whole of the Vegas strip — all without descending into disorder and open sleaze.

But Macau’s run of good luck is over. The coastal enclave, long flush with mainland Chinese cash, was recently declared the world’s fastest-plummeting economy.

And it ended 2015 with a grim statistic: year-on-year gaming revenue nosedived by just over a third to roughly $30 billion, according to government data. That’s like losing the entire GDP of Cambodia or Senegal at slot machines and card tables.

Macau’s gloom, described by one Hong Kong bank as a “death spiral,” is not about to dissipate anytime soon.

Part of Macau’s downturn can be blamed on China’s overall economic slump. As the only Chinese territory where casinos are legal, Macau soared in the past decade alongside the explosion of Chinese wealth.

But the glitz and glamour of its casinos — one of which is topped with 24-karat gold-gilded cupolas — was paid for by a boom era that China may never replicate again.

The crash is also attributed to a crackdown led by China’s President Xi Jinping. Pervasive corruption, he warns, could bring on the “downfall of the state.”

So he’s crusading to purge every official who’s illegally funneling government funds into their private accounts. This campaign has brought heavy scrutiny to any large sums moved off the mainland — including cash transfers to Macau.

Before the crackdown, high rollers from Shanghai to Shenzhen were easily courted by brokers, some linked to organized crime, who beckon the super rich to Macau’s casinos. These middlemen serve a dual purpose: doting on the wealthy gamblers like royalty while loaning them gobs of cash to be repaid with interest.

Called the “junket” system, it has attracted tycoons and dodgy politicians alike. It’s also notoriously slippery. The American gambling magnate Steve Wynn, whose casino empire stretches to Macau, has described these operations as a “giant, entrepreneurial pyramid scheme” and said monitoring its operators is “almost impossible because they multiply like rabbits.”

Communist party chieftains and their cronies, feeling the government’s gaze upon them, are now rightfully afraid of jaunts to Macau where they may be accused of spending ill-gotten funds or laundering money.

And since China’s corruption crackdown shows no signs of stopping, Macau may be forced to reinvent itself.

There is plenty of excess in Macau, where the skyline is dominated by behemoth gambling complexes — one of which claims to be the largest casino on earth. But Macau has never embraced the brand of in-your-face debauchery epitomized by Vegas.

Beckham signs up in Macau

David Beckham has been signed up by Las Vegas Sands in Macau to represent and promote the Casino operators business in Asia focussing on its dining and retail business within their resorts.

The former Manchester United, Real Madrid and England football star attended a press conference in Macau to announce the deal, with it being David Beckham’s first ever visit to Asia’s largest gambling hub. Details of the deal are not really clear following the press conference as Mr Beckham was unable to answer reporter’s questions, but Sands China Chief Executive Officer Edward Tracy wants to use the appeal of the Beckham brand to increase sales in their non-gambling business which currently represents 40% of their total income and believes the impact of the former football star will help the company achieve that.

Earlier this year, the former England captain said he would act as a global ambassador for soccer in the world’s most populous nation, and the China Football Association invited him to promote the game among the youth. With such a well-recognised celebrity as David Beckham with Sands the impact in China would help promote the operator without breaking any laws which restrict direct advertising of gambling in China.

“I miss football but I’m happy that I have something set up and I can just jump into another career as long as I get off the field,” Beckham told reporters in Macau, referring to his company Beckham Ventures as well as work on various brand tie-ups and charities. “I’m glad that there are so many business opportunities presenting in front of me and I can become a businessman now.”

Venetian Macau suing two Chinese gamblers

Sheldon Adelson’s Venetian Macau took legal action in a Hong Kong court this week to recover approximately $4.5m (£2.8m), against two of its former high roller customers from China.

In one lawsuit, filed on Wednesday with Hong Kong’s high court, the Venetian is trying to recover $3m from Zou Yunyu, who once featured on lists of China’s richest people and has an estimated $220m fortune from her company, the Shanghai Gaoyuan Property Group.

In the second case, the Venetian is pursuing $1.5m from Xie Xiaoqing, a businessman and deputy to the provincial legislature in Hubei province, according to Hong Kong media.

The Venetian is one of four casinos owned by the Chinese arm of Adelson’s Las Vegas Sands Corp. Adelson’s fortune is valued at over $20bn and his interests span gaming empires in Nevada and Asia, the Israeli newspaper market and Republican politics in the US. In the 2012 elections, he and his wife, Miriam, donated $95m to Republican candidates, including a massive late surge of $33m to pro-Romney political committees.

Macau’s rise to the top of the casino market has been powered by wealthy mainland Chinese gamblers, but the lawsuits highlight the difficulties in collecting debts if they return to the mainland, where gambling is illegal and debts aren’t recognised by courts. Both Macau and nearby Hong Kong have separate legal systems from mainland China.

Macau sees $38 billion revenue in 2012

Macau’s gambling revenue jumped 13.5% to a record $38 billion in 2012, official figures showed on Wednesday, despite the pace of growth in the world’s largest gaming hub slowing from a year earlier.

Gaming revenue rose to 304.14 billion patacas from 267.87 billion patacas in 2011, according to statistics posted on the official Gaming Inspection and Coordination Bureau website.

But the pace of growth slowed from 2011, when revenues surged 42% year-on-year to $33.47 billion.

The former Portuguese colony of Macau, the only part of China where casino gambling is legal, overtook Las Vegas as the world’s gaming capital in terms of revenue after the sector was opened up to foreign competition in 2002.
Six firms are licensed to operate casinos in Macau, which was handed back to Beijing in 1999.

Casino operators have plans to build new multi-billion-dollar resorts on Macau’s Cotai Strip, a former swamp which has been reclaimed and transformed into a glittering centre for gamblers.

Macau gambling revenues rise over 3% in October

Gambling revenue in Macau rose 3.2% in October year-on-year, government data showed on Thursday.

October’s revenue of 27.7 billion patacas ($3.5 billion) was the strongest revenue figure this year. Analysts had forecast growth of around 2% during the month.

Slower economic growth in China and heightened political scrutiny as the country prepares for a generational power shift have been keeping many cash-rich Chinese gamblers away from Macau’s baccarat tables.

Spending by China’s expanding middle class has kept overall gambling revenues from dropping significantly, but growth rates have fallen substantially over the past six months.

Macau Police raid Casinos

Macau police raided casinos and hotels in an operation with Chinese and Hong Kong authorities after a series of murders and attacks targeting guests, it has been reported.

Police questioned nearly 1,300 people and detained 149 of them for further investigation as part of an operation codenamed “Thunderbolt,” according to a statement from the Unitary Police Service.

The crackdown is a reminder of the deadly gang wars the plagued Macau in the late 1990s, but over the last couple of decades has been totally cleaned up. In the early 90′s criminal groups known as triads fought for control of casino VIP rooms and loan-sharking operations resulting in the deaths of 40 people in shootouts. The jailed leader of the 14K triad, ’Broken Tooth’ Wan Kuok-koi, is near the end of his prison term after being sentenced to 15 years in 1999. His release is not known to be the cause of this recent police activity or whether gangs are positioning themselves for his imminent release.

Macau police arrested 17 people on Aug. 2 for cheating in three of the city’s casinos. Those detained were involved in a scheme where casino dealers took bribes and used tiny cameras to take images of cards on baccarat tables, Macau’s Judiciary Police spokesman Chan Kin-hong said.

The case involved $11.6 million and took place at three casinos in Macau city and Cotai Strip, including those run by U.S. casino operators, Chan said, without specifying the names of the casinos.

Hong Kong police arrested 130 people and seized millions on Hong Kong Dollars in cash and property in anti-triad raids to combat money laundering on Aug. 2, as part of the “Thunderbolt” operation with the Macau and Guangdong law enforcement agencies.

Sands given more time for Macau development

Sands China said it has been given more time to build their casino resort in Macau on land granted by the government, however it does expect to pay a penalty for the delay under the agreement.

The Macau government extended a deadline to develop a plot called Parcel 3 to April 17, 2016, from April 2013, Sands said in a statement. The government also said the casino operator will be notified about the penalty amount for delaying the construction, according to the statement.

Construction has yet to begin on Parcel 3, which is slated for the company’s biggest project after the $5 billion Cotai Central resort opened this year. Sands’s rivals Melco Crown Entertainment, SJM Holdings and MGM China Holdings are also awaiting land grants or government approvals for construction in the world’s largest gambling zone.

The new resort will target the mass-market and feature“family-oriented” facilities, Sands said in a separate statement.

The Parcel 3 resort would increase Sands’s presence on Cotai, a strip of reclaimed land. Operators are adding resorts there to draw more of the Chinese tourists who boosted Macau’s casino gambling revenue by 42% last year.

In regulatory filings with the U.S. Securities & Exchange Commission, parent Las Vegas Sands had said it would apply for the extension because it would be unable to meet the April deadline.

If the extension isn’t approved, the company may have to take a charge for some or all of its $96.7 million in capitalized construction costs and land premiums as of March 31, 2012, Las Vegas Sands estimated in a May filing.

The company was initially required to complete the development by August 2011 and the Macau government had already given it one extension, according to the May filing.

Who’s money laundering in Macau?!

There has been speculation and rumours in the Asian press that unnamed suites in top hotels had been allegedly “decked out to look like genuine gambling halls with security staff, dealers and other customers.” The report, in the South China Morning Post alleges that punters drinks were spiked and bogus chips were handed out.

The hotel in question hasn’t been named and is again, only speculated within the report. The Asia Sentinel blogged: “The story, which the paper has not followed up, clearly suggested that the company, despite its legions of security staff and cameras, either had no control over what was going on there, or had knowingly subcontracted rooms to a mainland group which was given carte blanche to make its own arrangements within the hotel as well as freedom to bring in clients from the mainland. Although these side rooms, often operated by triads, have been a fixture of Macau’s gaming scene for decades, they had been thought to have been prohibited by the multinational gaming companies.”

According to the report, the gang that organized the heist had crossed the border at least 19 times in the previous two years before 16 people were arrested in a raid on a luxury hotel and charged with fraud and drug trafficking.

The report goes into speculating which hotel this could be, the Asia Sentinel thinks it could be: “the Venetian Macau, the largest hotel/casino complex in Macau, which is owned by Las Vegas Sands, the US-based empire of gambling magnate Sheldon Adelson.”