Postcard from Macau
May 7, 2010
Postcard from Macau
View of Macau's central district
One thing I enjoy the most about traveling is that I sometimes stumble upon the unexpected, which could be good or bad. Over the years, I’ve encountered my fair share of surprises that have often led to investment ideas. The latest surprise has come from Macau, where I spent a day and a half exploring its casino scene. Though just a short distance from Hong Kong, Macau is a place I had never been to until my recent trip to China and Hong Kong.
Before entering one major casino there, I had my own pre-conceived notion that people came for one reason: to make a quick buck, if not a killing. The image I had in my mind of the "mainland Chinese player" was that of the stereotypical sort of ragged gambler you would see in old Bruce Lee movies: an unshaven, middle-aged, chain smoking man. What surprised me the most was that there were many women at the casino tables. Another surprise was the casual and relaxed, almost “homey” atmosphere—a very different vibe from what I am accustomed to seeing in Las Vegas. People seemed to be playing Baccarat, with smiles on their face, as pure recreation. I got the sense that people were enjoying the game as entertainment, rather than hustling for money. Patrons were even dressed nicely—not to the extent of the flair of Monaco—but still dressed to be out for the evening.
Macau’s growth seems likely to continue, though its current casino operations are still dominated by VIP customers who are hosted by junket operators that bring high rollers to Macau. This old business model is not likely to be replaced with a Las Vegas-style “mass casino model” anytime soon. I don’t foresee a sudden increase in Chinese tourists heading to Macau for family vacations. But I do see a new appreciation in the entertainment value of Macau’s casinos, and strong, steady growth in the mass market. In 2008, 23 million tourists visited Macau, and the number of visitors has grown about 17% a year since 2002 when Macau’s gaming market was liberalized. Considering the 36 million visitors that Las Vegas attracts annually, this is not a small number. However, there are only 18,000 hotel rooms in Macau, compared to 150,000 in Las Vegas, which says to me that Macau has more development in store to become a major tourist getaway for mainland Chinese travelers. I will continue to monitor investment prospects in the region.
Matthews International Capital Management, LLC
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