A few weeks ago, my curiosity over Macau’s transformation since my last visit led me to hop a ferry there from Hong Kong during a hard rain. In particular, I wanted to see firsthand all the new casino developments underway in Macau’s Cotai neighborhood.
The last time I toured Cotai in 2010, I recall being overwhelmed by the sheer powerful presence of its big-time, VIP game players. Steve Wynn was in town that day for a grand opening and serious, hard-core gamblers were all there were. VIPs would spend millions overnight at the baccarat table. Back then, insiders would tell me that in Macau, unlike in Las Vegas, people came strictly for the gambling and non-casino entertainment facilities were not needed. Indeed, Macau’s casino revenue has grown from US$10 billion in 2007 to US$38 billion in 2012, and revenues from the beginning of 2013 to August were up 16%.
But while the casino business may be showing healthy returns, Macau’s newest growth area has been in related, non-gaming hospitality businesses. Massive hotel construction projects are underway to accommodate the region’s ever-growing number of visitors—not only VIPs, but also a rising number of family tourists. Visitors to Macau reached 28 million in 2012, up from about 23 million in 2009. Several factors seem to be driving tourism flows, including Macau’s improved infrastructure, its more affordable and family-friendly hotel rooms and increasing entertainment events. Pop musician Justin Bieber is scheduled to perform at the Cotai Arena this month, and November brings one of the year’s biggest professional boxing matches to the Arena.
In terms of infrastructure, border checkpoint areas to Macau such as the Gongbei Border Gate have recently been expanded, and new facilities may soon increase daily capacity to 350,000 visitors, up from approximately 270,000 today. Other projects include a new Macau light rail system and a 26-mile bridge and tunnel project, due for completion by 2016. This bridge-tunnel will connect Hong Kong International Airport to Macau, and is expected to cut car travel time between both sides of the Pearl River delta from four hours to just 45 minutes.
With seven more casinos slated to open by 2017, the number of hotel rooms should increase to 41,000, up from approximately 25,000 currently. New development projects are also planned on nearby Hengqin Island, which is just one bridge away from Macau. These include golf courses, theme parks and aquariums.
What is most impressive about Macau today is the strong sense of collaboration and commitment from all involved parties: both Macau and mainland Chinese government officials and casino operators. While Asia’s other gambling centers (Singapore, Malaysia, Cambodia and the Philippines) have also seen waves of notable development in recent years, Macau, in my opinion, should be recognized as the gold standard of the gaming space in Asia.
Opinion column by Taizo Ishida, Portfolio Manager at Matthews Asia.
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Taizo Ishida is a Portfolio Manager at Matthews International Capital Management, LLC and manages the firm’s Asia Growth, Emerging Asia and Japan strategies. Prior to joining Matthews in 2006, Taizo spent six years on the global and international teams at Wellington Management Company as a Vice President and Portfolio Manager. From 1997 to 2000, he was a Senior Securities Analyst and a member of the international investment team at USAA Investment Management Company.