Postcards From Tomorrow Square (14 page)

The next big change for Macau began in 1999, with the handover to China and the selection by the Chinese government of Edmund Ho (no relation to Stanley) as Macau’s chief executive. This Ho was raised in Macau, educated in Canada, and worked in the United States and elsewhere before returning home in 1983, when he was in his late twenties. He participated in the negotiations for Macau’s handover to China. His selection, at age 44, was seen as a significant signal that the Chinese authorities were interested in good government.

Edmund Ho quickly went to work as a reformer. “The Mafia-style murders just ceased,” says William Overholt of the RAND Corporation, who lived in Hong Kong at the time. “Suddenly there was serious planning for economic development, serious investment in infrastructure, serious interest in sound business regulation.” Edmund Ho apparently believed in good government, and his sponsors in Beijing thought Macau would do best if it were seriously cleaned up. In 2002, he ushered in Macau’s modern age by ending Stanley Ho’s monopoly and opening the casino business to foreign competitors. He acted as if he understood that the best chance to clean up the casinos would be to bring in companies that answered to laws and regulations outside Macau. At first, the rules authorized three casino operators, counting Stanley Ho (through his SJM, for Sociedade de Jogos de Macau, or “Macau Gaming Society”). Now the rules allow six.

In 2004, the first big foreign casino opened, the Sands Macao, owned by Sheldon Adelson’s Las Vegas Sands company. It was an instant success, creating profits so fast that it repaid all its capital costs in less than a year. In 2006, Steve Wynn opened the Wynn Macau, with rooms much bigger, fancier, and costlier than the norm for Macau. The other competitors are Galaxy, a company founded by Hong Kong construction tycoons and based in Macau, and two foreign-based firms affiliated with Stanley Ho’s children: MGM Mirage, in a 50-50 partnership with Pansy Ho, and Melco PBL, a partnership between the Packer publishing empire of Australia and Lawrence Ho, Stanley’s son. (Australian officials scrutinized his independence from his father’s influence, as American officials have done with Pansy Ho, before they approved the partnership.) Those are the players. Here is the play—that is, the many interlocking struggles in Macau that together create its larger political meaning.

If you were a financial analyst, as many, many of the people I’ve interviewed on this subject are, you would be interested mainly in comparing the six companies’ market strategies. For instance: Galaxy wants to be seen as the most authentically Chinese and is emphasizing the profitable if inelegant “grind” market.

(A note here on three terms:
gaming
,
win
, and
grind
. You can spot people who work in the gambling industry, because they always call their business “gaming.” They use
gambling
only in pejorative contexts, as in “problem gambling.”
Win
is the industry’s term for casino profit. Financial reports from the big casino companies list “win per table,” which means the house’s daily take from a baccarat or roulette table.
Grind
is a business term for low-stakes, high-volume customers—in American terms, busloads of quarter-slot players headed to Atlantic City. I am looking at a report from a major U.S. bank with a section headed: “The Grind Market: Brighter Prospects.”)

Galaxy’s new StarWorld is set slightly askew from the main boulevard that runs in front of it. This is one signal that it’s through-and-through Chinese. “Westerners look at it and say, ‘It’s crooked!’” Peter Caveny, head of investor relations for Galaxy, told me. “The instant Chinese look at it, they think, ‘Feng shui.’” The casino has an apparently limitless supply of six-foot-tall female Chinese models who stand just inside the front door. “People come in, they see the girls, they take a picture—and go upstairs and gamble,” Caveny said. “The noise, the excitement—it’s all just right.”

The Wynn properties take the opposite approach: classiness, modern Vegas variety. “Every one of the songs was chosen personally by Mr. Wynn,” a Wynn official named Reddy Leong told me as we watched “Performance Lake” outside the hotel, which sends off fireballs and jets of water in time with music ranging from “Luck Be a Lady” to “Thus Spoke Zarathustra.” The suites have high-thread-count linens, granite-appointed bathrooms bigger than my apartment in Shanghai, massage rooms with professional massage tables.

Stanley Ho’s SJM is opening the most new casinos and attractions—one that looks like a temple of Babylon, one like a Tang-era Chinese fortress, one like a volcano blended with a Tibetan palace, one like a Roman amphitheater. Its biggest casino, the Grand Lisboa, is so garish I do not know where a description would begin. (Perhaps with the casino dome itself, sort of like a billion-carat faceted diamond in pink and gold, surrounded by dozens of gold-colored St. Louis–style arches.)The company will also soon open a “Prague Harbour View” hotel, presumably inspired by Prague’s famous harbor.

The other competitors have varying strategies. Financial analysts are basically high on all six of the licensed casino companies.

If you were a gaming-industry insider, you would be interested in Macau mainly as the latest arena for the primeval struggle between Sheldon Adelson and Steve Wynn. In Las Vegas, the two are seen as opposite in all ways. Adelson, in his mid-seventies, is still brash and impolite, a relative newcomer to the business (he first made money with trade shows) who transformed the Las Vegas economy through his “MICE” strategy (Adelson’s term for bringing customers to Las Vegas not just for gambling but for “Meetings, Incentive, Convention, and Exhibition”). Thanks largely to him, Las Vegas has changed from a weekend destination to one in which hotels are busy all week long. “I can tell you that when Sheldon Adelson decided to build the [enormous] Las Vegas Venetian and cater to conventioneers, many people thought he was crazy,” Andrew Zarnett, a managing director at Deutsche Bank, said at G2E Asia, the Global Gaming Expo held in Macau. “But he was daring, he had a view, and he was right.”

Unlike Adelson, who shaped Las Vegas through mass marketing, Steve Wynn, now in his mid-sixties, shaped it through high-end innovations. At industry meetings, I listened to financiers and casino veterans contrast Wynn’s suaveness and perfectionism with Adelson’s bluntness and commoditization. I came away thinking that Wynn’s demeanor could have been the model for Wayne Newton’s performance in National Lampoon’s
Vegas Vacation
. “Steve Wynn was equally daring in going upscale, offering luxury and high-end restaurants, in the faith that the customer will pay,” said Zarnett.

The broadening of Las Vegas’s economic base is why Macau has in no sense overtaken it. Casino earnings make up nearly all of Macau’s tourist-related revenue, while they’re barely 40 percent of the Las Vegas Strip. The rest comes from conventions, shows, high-end dining, and fancy malls. Because of all these attractions, the average visitor to Las Vegas stays for nearly four days. The norm in Macau is still the casino-centric day trip. That’s one reason Las Vegas has 130,000 hotel rooms, versus 13,000 for Macau. In size, glitziness, and overall excitement, Macau feels much more like Atlantic City—really, like an especially large concentration of Indian casinos in California—than Las Vegas. The current growth surge in Macau is meant to correct these weaknesses.

Adelson’s Sands Macao is the town’s biggest casino, and his 3,000-room Venetian Macao is the city’s biggest hotel (plus casino and convention center). On my first visit to the Sands in January 2007, I looked from an inner balcony onto a gambling floor that, I was told, contained 20,000 customers, virtually all of whom appeared to be Chinese. The Wynn Macau looks different from anything around it: The city is aglare in blinking neon, but the only ornamentation on Wynn’s hotel is a large cursive signature of his last name. The casino itself is understated, along the lines of a gentlemen’s club. Hotel rooms at the Wynn are more expensive than at any major competitor, but the hotel has an 85 percent occupancy rate, versus 70 percent for Macau as a whole. In the battle for Macau, both men have won.

If you were an economist, you might be interested in Macau’s test of the hypothesis that everyone who gets into the casino business wins, not just the industry’s Men of Vision, like Adelson and Wynn. This is “win” in the casino sense, of course—that is, they end up with the money the customers lose.

The gambling business is unusual because of what analysts call its “supply driven” nature: The more places and ways there are to bet money, the more money people will bet. In many businesses, success for a new competitor means a defeat for those already there. In minor ways, this appears to be true even in Macau. Stanley Ho does not enjoy the monopoly he did a decade ago; as casinos add new tables, the win per table overall goes down. Some financiers worry that in the short term Macau may be adding too many gambling sites too fast.

But in the largest sense, the pie of gambling revenue grows and grows, so there’s more for all. Macau’s gambling win is bigger than that of Las Vegas—and Las Vegas is now adding capacity faster than it ever has before. (Macau also imposes a tax of up to 40 percent on casino earnings, far higher than in most U.S. states.) Fifty years ago, no U.S. state had a lottery; now 42 states do. “People would always ask, ‘Will Atlantic City hurt Vegas?’” Zarnett said to me. “‘What about Indian gaming? Or the riverboats?’ They all came, and Las Vegas continued to grow. Macau won’t hurt. Nothing hurts. New supply is always absorbed.”

Some animals, given all the food they want, will eat practically until they burst; others eat only until they reach a certain size. I asked I. Nelson Rose, a professor at Whittier Law School who has written many books about the industry, whether any society offered evidence that at some point people would have spent “enough” on gambling. He said that specific areas, including Macau, could become over-casinoed, but that a sustained worldwide surge in demand for gambling seems to be under way. And even if there is a theoretical limit, for now the potential in Asia is limitless. The 300 million people of the United States spend about $50 billion a year on gambling. Frank Fahrenkopf, head of the American Gaming Association, points out that within a five-hour flight of Macau live more than 3 billion people, who together now spend only about $12 billion. Supply will bring demand.

If you were a gambling-equipment supplier, you would be interested in knowing whether Macau’s casinos were going to make the “tables to slots” shift anytime soon. For anyone familiar with an American casino, the first glance inside the Grand Lisboa or even the Sands Macao is startling. To begin with, it’s (relatively) quiet. China in general is as noisy as American casinos, but Chinese casinos are surprisingly hushed. Perhaps that’s because there’s practically no alcohol; attendants walk around with trays of free drinks, but the drinks are water, tea, milk, fruit juice. (The Chinese theory is that placing bets requires full concentration, and gamblers don’t want to dull their senses or skills.) But mainly it’s quiet because there are practically no slot machines to whoop-whoop and clunk out coins when someone wins. In Las Vegas, slots account for roughly 60 percent of the total casino win; in Macau, roughly 5 percent. Catherine Burns, vice president of marketing for the Bally slot-machine company, pointed out at the G2E conference that the total number of slots in Macau is about the same as at the Mohegan Sun in Connecticut. What Macau’s casinos have instead are “table games”: not blackjack, craps, or poker—all of limited interest so far to Chinese gamblers—but roulette, a dice game called
da xiao
(“big-little”), and most of all, baccarat. Felt-covered tables for baccarat occupy most of Macau’s gambling space.

Customers will be wedged six-deep around one table, while dealers stand idle at the neighboring two. This pattern arises, I was told, from the widespread belief among Chinese gamblers that there are “hot” and “cold” tables, and much of the skill in gambling involves telling them apart. (The clustering of other gamblers around a table is one clue.) This leads to the question that might interest you if you were an anthropologist—or a potential investor in Macau: Is there a distinctively Chinese attitude toward games of chance?

Nearly all customers in Macau are ethnically Chinese. They come in roughly equal shares from the mainland, Hong Kong, and Chinese communities in Southeast Asia. “Do Chinese like gambling more than other people?” asked Ivan Yiu at the conference in Macau. Yiu, himself Chinese, is the coordinator of addiction services for a group of hospitals in Hong Kong. His answer was yes. I have seen many sociological studies that support that view. Here is one of Yiu’s pieces of evidence: In the United States, the overall rate of “pathological gambling” is 1.8 percent; for Chinese Americans and Chinese immigrants, it is about 3 percent. The variation, Yiu said, involves cultural characteristics and assumptions. Some of these may sound familiar to people who have seen or known problem gamblers of any background: a “lack of probabilistic thinking,” a belief that a player’s skill can surmount the odds (even in baccarat and roulette, which involve no skill beyond laying down a bet), the “delusion that one can foresee results by intuition and control results by ritual.” The main difference, Yiu said, is that in Chinese cultures, a larger proportion of people think this way. One other, more distinctive factor is a traditional belief that money won in gambling is as respectable as money earned any other way. According to Yiu, a gambler who has a good run at the roulette table will be just as esteemed as, say, Warren Buffett, with allowances for difference of scale.

W
ith the concept of respectability, we arrive at political values, regulation, and international law. If you were curious about the broad noneconomic effects of China’s economic rise, you would be watching the struggle over Macau’s “VIP rooms” as a proxy for larger questions about China’s adherence to “universal values.”