From Boom to Gloom in China’s Gambling Mecca

Macau, China – The laid-off worker from Hunan province hung back from the baccarat table as his wife placed bets. He sipped water and explained how he justified traveling to this former Portuguese colony on China’s southern coast — the only place in the country where gambling is legal — and blowing USD 450 in savings there.

„We are not rich, so we took a train to Guangzhou first, then we took a bus to Zhuhai,“ bordering Macau, said Zhang, 50, who would give only one name. „We are staying in a hotel that costs only USD 15 a day, and we eat from food vendors for no more than USD 3 a meal. We don’t buy anything here,“ he added, scanning the half-empty tables at the mega-casino known as the Venetian Macao.

Four years ago, gamblers broke down the doors of the newest casinos to race for seats. Two years ago, Macau raked in USD 7 billion in annual casino revenue, surpassing the Las Vegas Strip as the world’s biggest gambling center. Officials hoped some of that lucre would help transform the seedy, sleepy enclave, less than a sixth the size of Washington, D.C., into a thriving convention and family entertainment center.

But today, Communist Party officials who once welcomed U.S. companies such as MGM Mirage, Wynn Resorts and Las Vegas Sands have put the brakes on the millions of mainland visitors who flow into the territory and, like Zhang, appear to give their cash away to foreign companies without investing in Macau itself. The impact of the new visa restrictions has changed the look and feel of Macau, where boom times have suddenly given way to gloom.

Most mainland residents, who make up more than half of Macau’s visitors, are now allowed only one visit every three months, under a policy from China’s Public Security Ministry. Access from Hong Kong, an hour’s ferry ride away, has been sharply restricted by Macau authorities. And mainland visitors en route to another Asian city, who used to be able to stay in Macau for two weeks, can now stay only a week.

In some establishments, business has fallen by half. The number of individual tourists — those not traveling on business or as part of a tour group — fell to 470,049 in October, a 26 percent drop from the previous October, according to Macau’s Statistics and Census Service.

„From August onward, our customers have been reduced by half,“ said Emily Chen, manager of Macau’s Seven Seas Travel Agency. „Because most of the casinos here depend on mainland tourists, the money flows out continuously from China to foreign countries. That’s why the government wants to control it.“

The central government in Beijing is also trying to get a handle on the endemic corruption and money laundering long associated with the territory, which was returned to China in 1999. State media reports on officials caught up in bribery scandals often cite repeated visits to Macau; a former economic planner for the city of Xiangtan, in Hunan, was sentenced in May to 19 years in prison for blowing USD 219,000 of public money during 36 visits here since 2002.

But authorities may also be trying to temper Macau’s boom because of broader concerns about whether the territory was growing too quickly, threatening to destabilize an economy that was experiencing a slowdown even before the recent global financial crisis.

„In the past, the increased numbers of tourists from the mainland have already exceeded the receiving capacity of Macau,“ said Antonio Ng Kuok-cheong of Macau’s Legislative Assembly. „As a result, we in fact welcome the new visa policy.“

After authorities broke the monopoly held by local casino tycoon Stanley Ho in 2002, gambling revenue here nearly tripled between 2003 and 2007. Steve Wynn’s USD 1.2 billion Wynn Macau resort opened in late 2006, featuring a man-made lake and a musical water show. The USD 2.4 billion Venetian boasts that its 3,000 suites make it the biggest hotel in the world.

But then the downturn hit neighboring Guangdong province, a big source of gamblers and one of the regions hit hardest by factory closures and job losses. The crisis has also curbed wealth in Hong Kong, another main supplier of visitors. Together with the visa restrictions, those developments have nearly bankrupted over-leveraged casino kings such as Sheldon Adelson, the billionaire owner of Las Vegas Sands and once ranked the third-richest man in the United States.

Construction cranes now stand idle over half-finished mega hotels and malls on a reclaimed piece of land known as the Cotai Strip, including an expansion of Adelson’s Venetian Macao project. Luxury stores have posted signs advertising prices as much as 70 percent off. Even the gondola operators on the ersatz Grand Canal in the Venetian have far less to do.

Legislators are weighing whether to lower the salaries of casino employees in an effort to guarantee their jobs. More than 10,000 construction workers are out of work, including 4,000 from Hong Kong, 4,000 from the mainland and 2000 from Macau.

In the meantime, though, gamblers continue to find ways to maximize their casino time despite the new restrictions, which began in November 2007. The policy is inconvenient, some said, but ultimately useless in deterring mainland visitors who are determined to gamble.

Luo Meiyun, 45, a clothing trader from Hangzhou, in Zhejiang province, said she used to be able to come four times a month and stay up to 28 days. She would bring USD 1,500 to USD 3,000 each time. Now she can visit only once a month, for seven days, and she sees scores of empty tables.

„The policy is totally unnecessary. People who want to gamble will still take all kinds of measures, such as using a business pass or flying to another country first and then flying back,“ Luo said as she crossed into Macau at Zhuhai, where lines were unusually short. „People will just spend more money and time trying to get to Macau. It’s really a big headache. But the policy cannot cool people’s enthusiasm, because gambling is banned on the mainland.“

That may change soon. Officials are experimenting with a form of gambling in Wuhan, Hubei province, in which bettors who guess the winner of a horse race will receive a lottery ticket that has a 60 percent chance of winning anything from 45 cents to nearly USD 600.

At the Venetian this month, Liao Heyin positioned himself at a baccarat table where minimum bets were USD 75. His first trip here from the mainland was in March. But now he is the proud owner of a Venetian membership card entitling him to free accommodations and meals if he gambles for several hours a day.

Each time he comes, Liao brings more than USD 7,000 in Chinese and Hong Kong currency, plus his bank card. But he said he never feels rich.

„When I play, I always hear the gamblers next to me talk to someone over their cellphones. People at the other end tell them how to bet and the stakes are always very big,“ he said. „I guess the people on the other side of the phone are high officials who cannot so conveniently come to Macau.“

Liao, who wore Louis Vuitton shoes and carried a Louis Vuitton bag, declined to give his occupation. „At home in Guizhou province, we also gamble, but the police often catch us,“ he said. „Not only will our winnings be confiscated, but we also have to pay fines to the police.“