Inside Asian Gaming

INSIDE ASIAN GAMING | November 2008 18 Cover Story A lthough the global financial turmoil is a wild card that may have had an extra drag on Macau’s gambling turnover,for what logical reason would the relatively modest rationing of visas have a depressive effect on demand and turnover in the Macau gaming market? After all there are plenty more Guangdongers where those pioneering independent travellers and tour groups came from. People’s Republic of Guangdong If Guangdong province were a country, it would be the eleventh most populous on Earth. The official number of inhabitants is 113 million (the real figure is probably in excess of this). That’s only 14 million people less than the entire population of Japan and greater than the population of Mexico. EvenassumingonlyhalfofallGuangdong residents over the age of 18 were interested in coming to Macau and had the money to do it, there would be enough people to keep Macau’s tour buses and casinos full for at least the next two years, even if those individuals only visited once a year. Punching above their weight The answer as towhy the visa restrictions appear to be hitting Macau’s bottom line may be that a relatively small number of people like to visit often. These are likely to bepeoplemotivatedprincipallybygambling rather than sightseeing, and they’re the ones most affected by the rationing. Pro rata the loss of a VIP player in this frequent visitor group is of greater significance than a mass player in a market still 70% driven by high stakes baccarat play. Some VIPs regularly bet the equivalent of a card dealer’s monthly salary andmore on a single hand of baccarat. In cash turnover terms they are really big, but in demographic terms,they are probably numbered in the low thousands for the whole Macau market. Why travel curbs? Why now? Although the financial markets have only recently discounted gaming operator stocks in response to the Macau visa restrictions, the writing has been on the VIP roomwall for some time.Warning signals that curbs on the industry were coming have been flashed for many months. The difficulty is that so many different messages have been sent out from various sources that it’s not clear what are the key aims of Chinese officials in implementing the policy. The Macau SAR government and China aren’t sharing their thinking publicly with the market, so it’s been open season for speculation and conspiracy theory. What we can say is that this being China rather than the United States, then forces other than simply the logic of the market are likely to be in play. The odds are also that it’s for some practical reasons rather than ideological ones. China’s leaders have a history of adopting free market methods to encourage foreign investment while at the same time reserving the right to intervene politically when it perceives it advantageous or necessary. This arm’s length pragmatism was first articulated more than 30 years ago by Mao Zedong’s eventual reformist successor Deng Xiaoping. When Deng was under pressure to explain China’s move from a socialist economy to a market-based one, he remarked: “It doesn’t matter if a cat is black or white, as long as it catches mice.” The Venetian Macao main gaming floor provides the minnows surroundings fit for a whale China made great strides under the reformist Deng Xiaoping Whales and Hungry Minnows A small number of passionate gamblers are providing most of Macau’s turnover