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Corruption crackdown changing Macao

2015-02-03 09:23 Shanghai Daily Web Editor: Wang Fan

Macao's winning streak as Asia's gambling capital is coming to an end after a decade of growth that transformed the city into the world's No. 1 casino market.

A flood of money from China's mainland boosted its casinos, both local and foreign owned, which now rake in about seven times more than those in Las Vegas.

But the tide has turned as the Chinese economy slows and President Xi Jinping's corruption crackdown deters mainland gamblers from lavish spending.

Casino revenue fell for the eighth straight month in January, declining 17.4 percent over a year earlier, according to data released yesterday. Last year, revenue from the city's 35 casinos fell 2.6 percent to US$44 billion.

That marked the end of a decade of supercharged growth which began when the government of the Chinese territory ended a 40-year casino monopoly, opening the door to foreign operators. Analysts and government officials forecast the contraction will last until the middle of the year.

Macao now faces the task of changing to a new model of growth. The authorities want to wean the city off so-called VIP high-rollers: wealthy patrons wagering staggering amounts in smoke-filled private rooms brought over from the mainland by junket agencies.

Instead, the focus is now on family-friendly resort developments to attract China's burgeoning middle class. Junkets are reportedly consolidating as funds dry up amid the crackdown while casinos are busy adding theme rides and boxing matches to resorts as they prepare for Macao's new reality.

"There's a big chunk of that market that's simply disappeared largely in the wake of the anti-corruption crackdown," said Grant Govertsen, an analyst with Union Gaming Research in Macao.

Arrests in prostitution bust

"The challenge for the operators this year and next and beyond will be trying to find out what does the customers want other than the table game," he said.

Earlier this month, Macao police carried out one of the city's biggest prostitution busts, arresting 102 people including Alan Ho, the nephew of Stanley Ho, the aging billionaire who held Macao's sole casino license for four decades. The arrests startled Macao because the ring had operated blatantly for years out of the Ho family's Hotel Lisboa, where Alan Ho worked as a manager, leading many to believe it had tacit support.

Judiciary Police said the syndicate had 2,400 prostitutes on its books and "illegal earnings" of US$50 million.

Macao's transformation is set to accelerate over the next three years, putting more strain on labor and resources. Eight casino resorts are scheduled to open along with big infrastructure projects including a light rail system and a 30-kilometer bridge to nearby Hong Kong and Zhuhai on the mainland.

The new casinos on the Cotai Strip, Asia's version of the Las Vegas Strip, include significant non-gambling attractions aimed at drawing a more wholesome class of visitors.

US billionaire Sheldon Adelson's Las Vegas Sands Corp, for example, will launch its US$2.7 billion Parisian resort, complete with replica Eiffel Tower, in 2016.

Melco Crown Entertainment's Studio City project, opening later this year, is a Hollywood-inspired gambling and entertainment complex with a Batman virtual reality ride.

It'll take years for Macao to complete its transition, but when it's done, "ultimately everybody wins," said Govertsen.

"The government gets to say, Hey, Macao has been cleaned up, there's a lot less VIP, there's a lot less corrupt influence," he said. "And there's something for the average Chinese guy now."

Shanghai Daily - AP

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