Over a decade ago, Macau was an almost experimental gambling province, attempting to steer itself into the big time following a handover from the Portuguese in 1999 with China declaring it a special administrative state by 2001 with different gambling laws.
The years that followed saw the previously crime-riddled region (post ‘99) considerably cleaned up and restructured by the authorities, leading to a regenerative masterstroke.
A unique initial business model worth the gamble?
Recognising the potential to create a gamblers paradise, focused specifically on high-rollers and attracting first and foremost, rich Chinese businessmen, Macau’s skyline swiftly began to change.
From 2001 onwards, it was all about consolidation and attracting customers with special VIP rooms created and sub-contracted to specialist gambling promoters who took a share of the profits in return for bringing in big spenders. In 2013, these high-rollers made up 66 percent of the total casino revenues.
Ultimately the gamble paid off. Macau began to gain a reputation as a magnet for the wealthy, with a special emphasis on superior customer service. It was enough to convince the rest.
With casino billionaire owners from the west fearing being left behind, investment began to flow, with several Las Vegas style resorts sprouting up with impressive magnificence.
Mammoth companies from the America and Australia began to pour money in, also capitalising on the Chinese love for being well looked after, adding not only world class casinos, but shopping malls, hotels and above all feats of architectural brilliance.
In no time at all, Macau became the epicenter of the east for gambling and for those who were savvy enough to expand their empire from Vegas, this began to pay dividends.
With the MGM and Wynn resorts making their presence known there in spectacular fashion they soon began to accumulate their fair share of the profits and were partly responsible for helping Macau eclipse Vegas as the number one for gambling revenue in the world.
While the vast majority of gambling wealth came from VIP gamblers, it was thought that it was a result of illicit gains as a result of corruption on the mainland which were then funneled into Macau, though the Chinese authorities had no proof.
Move to the mass markets
With China being the quickest growing nation economically in the world, Macau is now moving away from attracting VIP gamblers in a bid to target the country’s burgeoning middle class as steady and repeat customers for years to come.
Also seen as an alternative place for some companies to do business, many resorts are beginning to offer such facilities in a bid to diversify and gain credibility among other industries.
Boasting the largest casino in the world, in The Venetian, Macau (modelled on the Vegas original), the state certainly has the potential to continue in the same vein.
There was, however uncertainty about the region in early 2018 and a suspected slowdown of activity, though this is something that Macau has shrugged off.
“The growth rate in January is materially higher than our full-year estimation for Macau gaming revenue which is in the range of 6 to 12 per cent,” Sophie Liu, an associate director at S&P Global Ratings said in 2018.
“But the volatility still remains for the sector despite the strong result in January, given the market’s susceptibility to policy changes, economic conditions, and pronounced seasonality.”
If this was a warning, then Macau paid no attention. It didn’t get to number one by being cautious and with confidence now at an all time high, the sky really is the limit for the most promising gambling territory in recent times.