Macau casinos out of luck in recession
The tiny Chinese territory of Macau is home to the biggest casino in the world, which has thrived on high rollers. But as the markets have collapsed, Macau's growth has come to a standstill. Scott Tong reports.
The Macau, China, skyline. (Photo by Cecilia Chen)
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SCOTT JAGOW: It's already become a cliche that no industry is immune from this recession. So, I won't say that.
But I will point you in the direction of Macau, China. It's the world's gambling capital. Yes, even bigger than Vegas.
Macau seemingly came out of nowhere to rise up and become a casino giant. But the economy has just as quickly knocked it down a notch -- or 10. Reporting from Macau, here's Marketplace's Scott Tong.
SCOTT TONG: Macau is a tiny peninsula plus two little islands right next to Hong Kong. It became part of China nine years ago. And for 400 years before that, it was a part of Portugal. But today, the language of the moment is Italian.
This is Macau's Venetian resort, land of indoor canals, singing gondola operators, and the biggest casino on the planet. Hundreds of Chinese tourists pull the slots and wager at baccarat.
But foot traffic here has plunged the last three months. Just outside this building, two massive construction sites sit idle.
JOHN AP: Basically, the bubble has burst.
John Ap is a tourism industry analyst.
AP: It's always about build it and hope that they will come. And then when they don't come, then you get these spectacular collapses.
Macau's boom began seven years ago. U.S. casino operator Las Vegas Sands received the first foreign gaming permit here. It spent $250 million on its first resort. And it made its money back in just a year, thanks to a flood of Chinese gamblers.
AP: When you look at that spectacular success, then every other person and his dog, you know, wanted to get in on the action.
Competitors followed, like MGM Mirage and Wynn Resorts. The industry giants supersized the economy. And by 2007 Macau's gaming revenue topped Las Vegas and Atlantic City combined.
Sanjay Nadkarni: I mean, you see this humonguous sort of development here . . .
Sanjay Nadkarni teaches tourism at Macau University of Science and Technology, right by Casino Row. He says to understand Macau, pay no attention to the tourists at The Venetian. They don't matter.
Nadkarni: Many of them may just be gawking. And even if they were to go to the casinos, they're not exactly the big fish.
The big fish, high-rollers, put in 80 percent of all casino revenue. These VIPS are Chinese tycoons, and in some cases, corrupt officials playing with the public money.
Nadkarni: I mean, these people, we don't see them. It's all in whispers. We don't talk about it. Don't ask, don't tell.
The big fish even have their own loan sharks to ratchet up the betting. That provided the leverage for the casino industry on the way up -- until luck ran out.
Last summer China put limits on mainlanders' trips to Macau, in part to curb corruption. And then the markets collapsed.
Las Vegas Sands, in particular, got pounded. Its stock fell 93 percent last year. And by November, the company laid off 11,000 construction workers.
A few hundred guys in hardhats still trudge around, but jobs are scare here. This woman runs a construction-site food truck.
FOOD TRUCK OPERATOR [TRANSLATION]: Business is bad. The companies are failing. So my food business is down by half. How long can I stay afloat? I don't know.
The Chinese government is watching closely how hard Macau falls.
This resort and casino town is a high-profile jewel. And many assume Beijing will bail it out, if it has to. So don't bet against the house just yet.
In Macau, I'm Scott Tong for Marketplace.
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