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Casino kings betting on a Macau boom
2007-03-03
Chinese businessman Cao Yanglin let his lunch of slow-cooked beef rib with truffle puree and lemon cream sauce go cold as he talked about his gambling spree the night before at the baccarat tables in Macau -- the world's new epicenter for gambling. Muzi.com News 10037881-0 (muzi.com)The 58-year-old property developer said he won $3,840 at the Las Vegas-style Wynn Macau casino hotel, where he was enjoying his noon meal. But he said he lost $7,680 at the new Grand Lisboa, shaped like a giant Faberge egg covered in flashing lights. Muzi.com News 10037881-1 (muzi.com) The sting of losing so much money seemed to have faded for the smiling Cao, who resembled a TV anchorman with a deep voice, square jaw, dyed black hair and a blue blazer. He was busy musing about the amazing ongoing changes in China and how Macau would profit from the increasingly wealthy Chinese who have a reputation for wagering more than Americans. Muzi.com News 10037881-2 (muzi.com) "My father was a railroad worker who never left the country," said Cao, from the northern city of Tianjin, near Beijing. "But I've been to Macau more than 10 times and I've even been to Vegas. They need to have more baccarat tables there." Muzi.com News 10037881-3 (muzi.com) It's gamblers like Cao who helped this tiny city on the southeastern Chinese coast bump off the Las Vegas Strip last year as the world's gambling center. The city raked in $6.95 billion in gambling revenue, while the Strip made $6.69 billion, regulators in both cities said. Muzi.com News 10037881-4 (muzi.com) Macau -- the only place in China where casinos are legal -- says it's just getting started. More casinos, malls, convention centers, resorts and thousands of hotel rooms are being built in the city -- about one-sixth the size of Washington, D.C. Muzi.com News 10037881-5 (muzi.com) Those investing billions could be on the dream team of the global casino industry: MGM Mirage Inc., U.S. tycoon Steve Wynn and Las Vegas Sands Corp. head Sheldon Adelson, ranked No. 3 on Forbes' list of the richest Americans. Muzi.com News 10037881-6 (muzi.com) Also involved is James Packer, executive chairman of Australia's biggest media and gambling company, Publishing & Broadcasting Ltd. And the flamboyant Richard Branson of Britain's Virgin Group Ltd. has been talking about investing in a casino resort. Muzi.com News 10037881-7 (muzi.com) The tycoons say Macau is a financial no-brainer. They're certain that booming China will continue to get richer and millions of new gamblers will flood into the casinos. The moguls also plan to follow the same blueprint that was wildly successful in transforming Las Vegas from a seedy casino town to a global hot spot for dining, shows, conventions and shopping. Muzi.com News 10037881-8 (muzi.com) "Macau is the safest bet on Earth," Wynn, who opened his $1.2 billion casino resort here in September, told The Associated Press. Muzi.com News 10037881-9 (muzi.com) But some analysts are warning there are plenty of risks. China could get hit with political upheaval or an economic meltdown. New gambling resorts in Singapore and other parts of Asia could lure away visitors. Or the shoppers, conventioneers and families just might not show up like they did in Las Vegas. Muzi.com News 10037881-10 (muzi.com) "I think things could get pretty ugly there pretty fast," said Matt Hoult, a portfolio manager at ABN AMRO Asset Management who is predicting a glut in hotel rooms. Muzi.com News 10037881-11 (muzi.com) Business models that succeed in one part of the world sometimes flop in another. Wal-Mart retreated from South Korea and Germany. Disney struggled in France and its newest park in Hong Kong has been a disappointment. Will Macau be a boom or a bust? Muzi.com News 10037881-12 (muzi.com) Macau -- a peninsula and two islands -- was ruled by Portugal for 442 years before it was returned to China as a semiautonomous territory in 1999, becoming the last European settlement in Asia. Muzi.com News 10037881-13 (muzi.com) It has one of Asia's most intriguing and charming blends of East and West. Street signs are in Portuguese and Chinese. The signature snack is the creamy egg tart on puff pastry. There are still plenty of colonial-style mansions, churches and government buildings painted in pastel yellow, pink and peach. The city center, with streets paved with mosaic tiles, is on UNESCO's World Heritage List. Muzi.com News 10037881-14 (muzi.com) But Macau's dreary side is easy to find. The beautiful buildings are far outnumbered by drab concrete apartment blocks that often have rusty anti-theft bars and cages over the windows and balconies. Muzi.com News 10037881-15 (muzi.com) In the old casino district on the peninsula, the streets are lined with small stores illuminated with headache-inducing bright fluorescent lights. Shop windows are crammed with watches, Zippo-like lighters, gaudy jewelry and Buddhas made of gold. Cashiers stare glumly at customers from elevated booths made of bulletproof glass. Muzi.com News 10037881-16 (muzi.com) Prostitutes cruise the dark, littered side streets. Buxom, bleach-blonde Russian women in tight pants hang out at outdoor cafes behind the Holiday Inn Macau. Muzi.com News 10037881-17 (muzi.com) Skinny mainland Chinese prostitutes who could pass for tourists in cheap acrylic sweaters and jeans linger in dark corners of closed storefronts. They dart out to greet prospective men, saying, "Massage, massage?" -- the code word for "sex" at the rate of $63 an hour. Some hand out flimsy business cards with fake names like "Yang Yang" or "Ling Ling." Muzi.com News 10037881-18 (muzi.com) Macau was a darker, more dangerous place in the late 1990s when the Portuguese were preparing to leave. Criminal gangs -- or triads -- led by bosses with nicknames like "Broken Tooth Koi" waged turf wars with frequent drive-by shootings, kidnappings and car bombs that scared away tourists. Muzi.com News 10037881-19 (muzi.com) In a desperate bid to lure back visitors, one security official famously proclaimed there was nothing to fear in Macau because the triad assassins were professional killers who didn't miss their targets. Muzi.com News 10037881-20 (muzi.com) The violence mostly ended after 1999 when the Chinese People's Liberation Army marched into Macau. But the biggest change came a day after the handover. The Chinese government announced it was ending the four-decade monopoly on gambling held by Hong Kong tycoon Stanley Ho. Muzi.com News 10037881-21 (muzi.com) The news created a huge stir in the global gambling world, and more than 20 bidders vied for the three concessions that were offered. One went to Las Vegas mogul Wynn and another went to a partnership between Hong Kong tycoon Lui Che Woo and the Sands' head Adelson, who later split to develop their own projects. Muzi.com News 10037881-22 (muzi.com) The third concession went to billionaire Ho, now ranked 84th on Forbes' 100 richest people in the world. The balding, lanky 85-year-old mogul is still an avid ballroom dancer and likes to talk trash about his rivals. His favorite facial expression in public seems to be a smile of dazed wonderment, with his mouth partly open as if he's about to laugh. Muzi.com News 10037881-23 (muzi.com) Ho has long been regarded to be Macau's de facto leader because he owns almost everything in the town: land, hotels, 17 casinos, a helicopter service and the world's largest fleet of high-speed ferries that shuttle gamblers from Hong Kong, just an hour away. Muzi.com News 10037881-24 (muzi.com) One popular topic of conversation in Hong Kong -- where people are obsessed with tycoons -- is whether Ho became cozy with the mob during his four decades of controlling the gambling industry. Ho vigorously denies he has any triad ties and no clear evidence has been produced. Muzi.com News 10037881-25 (muzi.com) But the issue popped up again recently when a lawyer for Ho's estranged sister Winnie -- who has filed corruption lawsuits against her brother -- was severely beaten by bat-wielding thugs while eating in a crowded McDonald's in central Hong Kong on a Sunday afternoon. Immediately after the suspected triad attack, Ho issued a statement saying he had nothing to do with it. Muzi.com News 10037881-26 (muzi.com) He has been losing market share ever since his monopoly ended. This month, when he opened his new flagship casino, the $384 million Grand Lisboa, the tycoon told reporters his slice of the market has shrunk to 63 percent in 2006. Muzi.com News 10037881-27 (muzi.com) Losing the monopoly might be one of the best things to happen to him. Macau was in decline for years, and Ho was unable to single-handedly revitalize the place. The newcomers from Las Vegas have created a big new buzz that has produced spectacular growth numbers. Muzi.com News 10037881-28 (muzi.com) Gambling revenue has more than doubled to $6.95 billion since 2002. Visitor arrivals hit a record high 21.99 million last year -- a 17 percent increase over 2005. Muzi.com News 10037881-29 (muzi.com) Much of that extra money and tourist traffic is ending up in Ho's casinos. Muzi.com News 10037881-30 (muzi.com) When he opened his new Grand Lisboa in February, the river of thousands of shuffling people who flowed into the 500-table casino included Wu Haihua, a 54-year-old machinist from the city of Foshan in southern Guangdong province. Muzi.com News 10037881-31 (muzi.com) The stocky Wu, who looked like a wrestler with a flattop crew cut, said Macau's casino business was far from being saturated. "We have an expression in Chinese," he said. "When a business is good, the demand gets even bigger when more join in." Muzi.com News 10037881-32 (muzi.com) Inside the Grand Lisboa, the tables were packed. But the mood was much different from Las Vegas, where Americans like to whoop it up in a more party-like atmosphere. Chinese gamblers are much more serious. They usually don't drink as they hunker over their cards in quiet concentration -- interrupted only by sips of green tea or puffs on a cigarette. They prefer table games over slots. Muzi.com News 10037881-33 (muzi.com) Chinese gamblers also don't stay in town longer than a day; most daytrippers go on marathon casino binges with brief breaks for a bowl of noodles or a massage before heading home. That's got to change if Macau's huge expansion plans are to be successful. Muzi.com News 10037881-34 (muzi.com) The billionaires investing in Macau say people will stay for three and a half days if there are convention centers, glitzier shows, massive malls and five-star resorts. It worked for Las Vegas, they say. Muzi.com News 10037881-35 (muzi.com) But Rob Hart, an analyst at Morgan Stanley in Hong Kong, thinks that Macau will be more like Atlantic City -- a casino town surrounded by huge metropolitan areas that feed it with day-tripping gamblers. Muzi.com News 10037881-36 (muzi.com) "I don't think people will want to stay in Macau for three and half days on average -- ever," he said, adding that Macau will shift from being a male-dominated casino spot to one that's friendlier to women and couples. Muzi.com News 10037881-37 (muzi.com) Macau's unavoidable problem is that it's too small, Hart said. Muzi.com News 10037881-38 (muzi.com) "If you look at Las Vegas, you have 180 golf courses within a two-hour drive of Las Vegas. You have the Grand Canyon. You have whitewater rafting. You have a bunch of other things that you can do, which you're never going to have in Macau," he said. Muzi.com News 10037881-39 (muzi.com)
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