Macau gambling junket operator U Io Hung used to spend his days making travel arrangements for a handful of VIP customers. The gamblers, typically from Shanghai or Beijing, were flown to Macau International Airport on Gulfstream G200 jets costing $4,000 an hour. Rolls-Royce Phantom limousines then whisked them to their luxury suites. In private gaming rooms, the high rollers bet as much as $400,000 a hand on baccarat, with money loaned to them by U and his investors so they wouldn’t run afoul of China’s currency laws.
It’s a different market now in Macau, where China’s slowing economy and a government crackdown on corruption have caused high-stakes betting by top-tier customers to plunge 46 percent over the past two years. That’s prompted operators in the world’s biggest gambling market to focus on less wealthy tourists and families.
U, for instance, is working with travel agencies to attract guests from smaller cities in China and plans to bring in about 10 times more customers to make up for his lost revenue. Instead of shopping tours to Louis Vuitton or Prada, he’ll take his new clients to more affordable Zara or H&M stores and arrange activities for their kids. Says U: “We need to find a way out of the dilemma.”
Casino lords such as Wynn Resorts and Las Vegas Sands think they have a solution: Make the Asian gambling hub more like Las Vegas, which last year got 65 percent of its revenue from nongaming activities that draw a much wider demographic. That’s led Macau lately to downplay its historical image—one of smoky casinos populated by prostitutes and gangsters—and rebrand itself as a resort for the masses.
“If you want to go on vacation, if you are in Taiwan, Bangkok, Laos, Cambodia, Phuket, you should come here,” says Steve Wynn, Wynn Resorts’ billionaire chairman, whose $4.2 billion Wynn Palace opened in August, 10 years after his Wynn Macau. “The idea is that Macau will become, for the entire Pacific Rim, the destination resort city.”
Wynn, who in the 1990s changed the face of Las Vegas with properties such as the Mirage, featuring nightly volcano eruptions, and Treasure Island, the first Vegas casino with a resident Cirque du Soleil, says he’s seeing a similar transformation in Macau. Its Cotai Strip is now lined with attractions straight out of the Las Vegas playbook, including dancers in feathered costumes at Galaxy Entertainment Group’s Broadway Macau and a Ferris wheel built into the top floors of Melco Crown Entertainment’s Studio City resort. There’s a half-size replica of the Eiffel Tower on the grounds of the Sands Parisian Macao, which also features the Thriller Live homage show filled with Michael Jackson songs. And crowds line up to watch Wynn Palace’s synchronized fountains, a feature introduced at the Bellagio in Las Vegas in 1998.
“There are lots of good lessons that we can learn from Las Vegas,” says Maria Helena de Senna Fernandes, director of Macau’s tourism office. The city added an international film festival this year to its list of attractions, which includes the Macau Grand Prix auto race and walking tours of its historic district. Fernandes says Macau should use its gambling strength to develop its convention business as well as other nongaming attractions.
Unlike Las Vegas, where the decades-long shift toward nongambling activities was a response to growing competition from casinos across the U.S., Macau’s transition is being driven by government officials in Macau and Beijing. Officials have sharply limited the number of gambling tables new casinos can offer.
There’s no assurance the transition will work, says Clifton Pannell, a professor of geography at the University of Georgia who’s studied the region. Zaia, a Cirque du Soleil production at the Venetian Macao, closed in 2012, a sign the market isn’t interested in Vegas-style entertainment, he says. “Gambling is king in Macau, and it is hard to shake that reputation,” he says.
It won’t be for lack of trying. Sands Chief Executive Officer Sheldon Adelson was early in seeing Macau’s potential to attract a wide swath of bettors. Even as Sands and other casinos opened downtown, Adelson spearheaded an expansion in the Cotai area on reclaimed land between the islands of Coloane and Taipa. The Venetian, which opened there in 2007 and was modeled after his property in Las Vegas, has an arena for concerts, meeting rooms, and a shopping mall complete with canals and gondola rides. “When we first started building the Venetian Macao, Cotai wasn’t exactly the most popular place on the block,” Adelson says.
Sands’s latest project is also designed to lure mass-market customers. The $2.9 billion Parisian resort features 3,000 hotel rooms, a water park for families, and a shopping mall with artists and street performers. Sands is the local leader in increasing its nongambling revenue, now about 15 percent of its Macau total, according to Sanford C. Bernstein. The company’s properties in Las Vegas, though, get 77 percent of their revenue from things like hotel rooms, shopping, restaurants, and meetings.
Adelson’s Vegas-style competition in Macau includes Melco’s Studio City, which opened last year at a cost of $3.2 billion and features a Batman ride, and MGM Resorts International’s $3.1 billion MGM Cotai. Scheduled to open next year, the MGM property will include a theater that converts into a nightclub, one of the amenities Las Vegas has successfully used to lure younger guests.
The appeals to casual gamblers and tourists show signs of paying off. Mainland Chinese tourists, the bulk of visitors to Macau, rose to almost 1 million during the weeklong National Day holiday in October—the most tourists from China during Golden Week in at least a decade.
Erica Lim, 30, her husband, and their 3-year-old son, from Guangdong province, were among them. On her previous visits with girlfriends, Lim never stayed more than a night. “I was surprised there are much more fun things to do here now,” she said while waiting in line to ride Studio City’s Ferris wheel. “I’ve come this time to shop, eat good food, and play in the children’s fun zone with my son. They are still not cheap, but worth the money for a nongambler.”
The bottom line: Fewer high rollers are coming to Macau. So it’s copying Las Vegas, where 65 percent of 2015 revenue came from nongambling sources.