High rollers head for Chinese enclave as American recession takes huge toll on 'original' gambling mecca.
In the go-go 1990s, Las Vegas was hyped as America's fastest growing city, a magnet for those who wished to share spiralling profits from construction and hospitality.
Story by Peter Huck The New Zealand Herald
Above: The multi billion dollar Sands Cotai strip which opened last week
The gambling mecca was on a roll and the sky was the limit, an optimism made explicit by the $1 million in cash behind acrylic glass that greeted punters who ventured into Binion's, home to the World Series of Poker.
No longer. Rocked by the nation's worst housing foreclosure rate, high unemployment and plummeting custom, Las Vegas is reeling from the deepest economic downturn - ironically provoked by unregulated financial gambling and a housing bubble - since the 1940s, when casinos came to the desert.
"Ordinarily, Las Vegas was the last to go into a recession and the first to come out," Mayor Oscar Goodman told the New York Times in 2010.
"This one is different."
The uber-bullish Goodman was confident things would improve, and by last year gaming revenues had made a modest recovery, but seismic change is shifting the focus from glitzy Las Vegas.
In the past decade or so, gambling has gone global. internet gambling has changed the equation, even as casinos proliferate on American Indian reservations and emerge around the world, from South Africa to New Zealand.
The biggest high roller is China, with Macau, a former Portuguese colony, rapidly emerging as the world's gambling hotspot. And while Nevadans like to say that whatever happens in Vegas stays in Vegas, gaming entrepreneurs Steve Wynn, MGM Resorts International and especially Sheldon Adelson, have supersized the Las Vegas model - glitzy casino resorts - to exploit China's gambling mania.
The Americans hope to tap into a motherlode of Asian cash - Adelson has casinos in Macau and Singapore and is eyeing Japan, Korea and Vietnam - a win-win strategy with a major downside: avoiding entanglement with organised crime groups, such as Macau's triads, that can bring unwelcome scrutiny from US officials.
Macau's rise has been meteoric. The Centre for Gaming Research at the University of Nevada Las Vegas says Macau is "the undisputed leader in gaming revenue". Last year, China said revenue was US$33.5 billion ($41 billion), a 42 per cent increase from 2010, or 5.5 times that of the Las Vegas Strip.
Investment Group CLSA Asia-Pacific Markets forecast that by 2015 Macau will dominate world gambling, with US$65 billion in revenue. This is expected to reach US$108 billion by 2020. American gaming moguls began to move in about a decade ago.
Spectacular growth followed. Macau is Vegas on steroids.
It also echoes mafia-era Las Vegas, when mobsters laundered money through casinos.
State regulators and Wall Street investment revamped Las Vegas as a resort destination in the 1990s.
Today, 40 per cent of revenue is from gaming, compared with 94 per cent in Macau, the rest from tourism and conventions. For decades, Macau was dominated by casino boss Stanley Ho, and the industry was triad infested. Can Americans remake Macau as a resort destination?
The man to watch is Adelson, 78, an outspoken figure who sometimes seems a throwback to old-school Las Vegas. He hit media radar in January after donating US$16.5 million to a Super PAC that backed presidential candidate Newt Gingrich. This seems a bagatelle for a man Forbes lists as the world's 14th richest figure.
Adelson's Macau plans include a gargantuan replica of the Las Vegas Strip on the Cotai Strip, a landfill his company constructed using three million cubic metres of sand, that joins Coloane and Taipa islands.
Besides the Sands Macao and the Venetian Macao (Macau's alternative spelling), Adelson plans the US$5 billion Sands Cotai Central with multiple casinos and 5800 hotel rooms.
"They aren't simply knockoffs of the originals on the Strip but, by many measures, have surpassed the genuine article in terms of size, amenities and luxury," reported Vegas Inc. "The Venetian Macao is the biggest casino in the world," says CGR head David Scwhartz. "They have about 800 tables. That's as much as 10 casinos on the Las Vegas Strip, minus the slots. These people like to gamble." In 2010, US$600 billion was wagered, quintuple the Las Vegas total.
American authorities suspect the real figure is far higher.
Last year the Congressional-Executive Commission on China said "gambling is tied to widespread corruption, organised crime, money laundering and movement of cash from mainland Chinese governments and state-owned companies into Macau".
It sounds like Vegas in its mobbed-up heyday. Triads have infiltrated the "junket" system that issues credit to mainland Chinese gamblers, legally limited to about US$3000 a trip, and collects debts.
Known as the "Macau Laundry Service", junkets are perfect for hiding money. The Washington Post says 57 per cent of high rollers are officials or state-owned business managers whose average loss is US$3.3 million, often public money.
The US believes such scams fund crime. This spells trouble for US-listed companies such as Adelson's Las Vegas Sands. Nevada law specifically forbids casino operators from mixing with criminals.
But how do you recover debts and milk Macau - 51 per cent of Adelson's sales - without triad entanglement?
US investigators want to know if the Sands Macao bribed local officials, alleged by Adelson's former man in Macau, and violated the Foreign Corrupt Practices Act.
"When the smoke clears, I am absolutely - not 100 per cent but 1000 per cent - positive that there won't be any fire below it," Adelson said, refuting corruption allegations.
Sometimes it's easier to dump US interests and head to Macau. In 2010, MGM Resorts quit Atlantic City, the second-biggest US gambling market, after state regulators demanded the US company sever ties with its Macau partner, Pansy Ho.
According to the New Jersey Division of Gaming Enforcement, Ho is under the influence of, and dependent on, her father Stanley Ho. He denies US claims triads "operate and thrive" inside his 16 (out of 33 in Macau) casinos.
As Macau plans the sort of audacious construction projects, albeit on a vaster scale, pioneered in Vegas big spenders such as Sheldon may have gotten in deeper than they thought, in a high octane economy where corruption remains China's Achilles heel.
By Peter Huck
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