What Macau Can Learn from Las Vegas By David G. Schwartz, Green Felt Journal, Vegas Seven November 19, 2014 at 8:34 am Hit hard by a government crackdown, the former Portuguese colony would be wise to borrow ideas from our city to help rebuild its stack. Back in 2002, when the government of the Macau Special Administration Region awarded its first gaming concessions to American companies, it was conventional wisdom that the former Portuguese colony would learn a great deal about gaming from the wizards of Las Vegas. That is, the architects of the Strip would take their highly successful business model to Asia and usher in a new era of gaming, applying the lessons of Las Vegas to a populace hungry for the real deal. Once those architects began planning resorts, however, it became apparent that Asia was not Las Vegas, and that what worked so well here for the previous generation—large slot parlors with table-gaming cores—was not at all adaptable to conditions on the ground in China. So American operators—Las Vegas Sands, Wynn Resorts and MGM Resorts International—did the adapting, emphasizing baccarat while adjusting to a market where VIP play dwarfed the mass market. Then the Great Recession hit, and Macau became an unexpected lifeline for the American companies fortunate enough to be operating there. While construction projects folded on the Strip, the Macau skyline continued to rise, and its gaming win continued to soar—a “mere” $2.8 billion in 2002; by 2009, arguably the Strip’s low ebb, it was $15 billion, more than twice that of Las Vegas. Last year, Macau clocked in at $45 billion; by comparison, all commercial casinos in the United States took in roughly $37 billion. So Las Vegas ripped a few pages from the Asian gaming enclave’s book. It wasn’t the first time; in the 1980s, Las Vegas became more like Atlantic City by emphasizing slot machines after the latter city’s revenue surpassed ours. This time, Vegas would emulate Macau’s focus on VIPs. Baccarat represented 7.5 percent of total Strip casino win in 2003; in 2013, it was responsible for more than 24 percent of all the money casinos won. Macau seemed to have it all figured out. But then fate—in the form of an anti-corruption crackdown by the Beijing government this summer—intervened. Double-digit monthly win increases quickly slowed, then dipped into the red. Last month, Macau casinos won 23 percent less than they did at the same time in 2013. That kind of drop is reminiscent of Nevada’s worst recession years. Macau’s annual revenues are still up from last year, but five consecutive months of decline are enough to shake even the most optimistic observer. With the duration and intensity of the crackdown still a mystery, analysts currently see the future of Macau lying in the premium mass—those a step or two below the private-room high-rollers—as well as the masses of middle-class Chinese vacationers. This is why those currently building Macau resorts—including the aforementioned trifecta of Las Vegas-based companies—aren’t panicking. History, it seems, is on the side of the (relatively) low-roller in Macau: Since 2011, the percentage of Macau gaming win generated by VIP baccarat has dropped from 73 percent to 60 percent—the opposite of the trend on the Las Vegas Strip. At the same time, non-VIP baccarat (mostly the premium mass gamblers) has risen from 18 percent to 30 percent. So perhaps the Las Vegas approach—focus on both the masses and the high-rollers, with plenty of non-gaming elements to appeal to everyone else—isn’t so ill-adapted to Macau. Today’s Strip resort owners not only are comfortable with making the majority of their money from things besides gambling, they embrace it, investing heavily in everything from observation wheels to sports arenas. There’s hope that the ongoing pivot to the mass market in Macau will see that city’s casinos weather the worst of the crackdown storm. Recent Las Vegas history suggests that broadening a gambling town’s appeal can help it overcome even major shifts in gamblers’ behaviors. Looks like Macau can learn a thing or two from Las Vegas after all. David G. Schwartz is the director of UNLV’s Center for Gaming Research. – See more of David’s Green Felt Journal Columns at Vegas Seven.