Things have gone so snake-eyed in Macao, the tiny gambling mecca on the southern coast of China, that the Venetian resort fired half its gondoliers two weeks ago. Only two of its 51 custom-made gondolas are now needed to ferry tourists along the Venetian’s indoor “Grand Canal.”

“They called us all in for a meeting, gave people two days’ notice and handed them a plane ticket home,” said one of the surviving gondoliers, an American, who asked not be identified in order to preserve his job. “It was brutal.”

It got more brutal on Tuesday. The Venetian’s parent company, Las Vegas Sands, fired 500 workers in its Macao casino — the world’s largest — and moved to cut the hours of 1,000 other employees. Sands, based in Las Vegas, Nevada, said the layoffs amounted to 2 percent of its Macao workforce.

Things have gone badly for Sands in recent months — and for nearly everyone else in Macao, the former Portuguese colony that was handed back to China in December 1999. Gambling, illegal on the mainland, is allowed under China’s “one country, two systems” approach.

The stock prices of Macao’s six casino concessionaires are down an average of 80 percent on the year. Share prices in Las Vegas Sands, part of the empire of Sheldon Adelson, the American billionaire, are off 95 percent from their highs of a year ago.

“What really keeps me awake at night is that we haven’t reached the bottom,” said Antoine Chahwan, the general manager of the Four Seasons Hotel in Macao. “Every day there’s something new, some new bad news. There’s a lack of confidence all across the board. That’s my angst.”

Massive hotel and casino construction projects stand half-finished, most notably along the Cotai Strip, a stretch of reclaimed land that was supposed to be Macao’s answer to the Las Vegas Strip.

One large site on the strip belongs to Adelson, and it includes the would-be Shangri-La, St. Regis, Sheraton and Traders hotels. Construction there has come to such an absolute halt that 11,000 hard-hat workers were laid off and sent home last month, most of them to Hong Kong and mainland China. Anil Daswani, a Citigroup analyst who follows the gaming industry, calls the now-empty site “a ghost town.”

The Venetian Macao, Adelson’s $2.4 billion project that boasts 3,000 hotel suites, opened in August 2007 with the Macanese economy roaring along on a five-year winning streak. But the skeleton crews of normally upbeat gondoliers at the Venetian aren’t finding much to sing about these days. There just aren’t enough visitors willing to pay $13.80 for the 14-minute ride along the faux canals of “Venice.”

Sands has also stopped construction on a $600 million condominium tower in Las Vegas and has struggled to finance the completion of Marina Bay Sands, its $4 billion resort and casino project in Singapore.

Macao remains the biggest gambling market in the world and its gaming revenues are higher than the Las Vegas Strip and Atlantic City combined. Last year, gaming revenues here were $10.4 billion, according to the Macao government, and the overall economy grew 27 percent from 2006.

But as the title of a recent Citigroup report put it: “Macau — the fat lady is losing her voice.”

Evidence of gloom and desperation is not just found in the revenue and share-price numbers. Hundreds of dealers (who by law must be Macao natives), cashiers, croupiers and expatriate pit bosses have been sacked. High-bling shops and downtown streets are mostly deserted. Taxis are plentiful, and there’s no waiting for a table at the top restaurants. A weekend tee time at the country club? No problem.

The global economic downturn hasn’t helped, of course, but Macao’s hoteliers, casino operators and gaming experts say the real culprit are the visa controls being imposed by China.

Two-thirds of Macao’s gamblers come from mainland China — principally from neighboring Guangdong Province with a population, including migrants, of more than 110 million. The new regulations limit mainlanders to one visit every three months.

Most experts see the regulations as Beijing putting the brakes on a white-hot economy that was stressing the territory’s infrastructure, sending property prices soaring and causing social problems and labor unrest.

“The government is saying Macao is going too fast and we need to cool it down,” said Davis Fong, a business professor and director of the Institute for the Study of Commercial Gaming at the University of Macao. He cited a freeze on new projects and tighter regulations on the territory’s 31 casinos.

For Daswani, the Citigroup analyst, one key indicator of Macao’s recent bust is a precipitous drop in revenues from high rollers, the players who are brought in from the mainland to gamble, mostly at baccarat, in the so-called VIP rooms.

VIP gambling traditionally accounts for 70 percent of the overall gaming revenues.

“That’s what really worries me — the VIP gaming revenues are coming off,” he said.

The VIP rooms are usually not run by the casinos they’re located in. Instead, private contractors essentially lease the rooms and bring in their own gamblers. To a casual visitor, or to a Westerner just looking to sit in for a few hands of high-stakes baccarat, these rooms are unwelcoming and off-limits.

The contractors hire agents known as junket operators to identify and bring in mainland gamblers — family members, friends, business people, government officials, anybody with access to cash. The junket operators — some are legitimate, some are not — sell their recruits discounted chips that can only be used in a particular VIP room.

The rooms are quiet, uncrowded, smoke-filled, and the gambling is more like business and less like entertainment, according to those who have been in the rooms. Alcohol is uncommon and drunkenness rare. Hot tea is the drink of choice.

Baccarat is the game of choice. The game has relatively good margins for gamblers, but because casinos are still something of a novelty for mainlanders, many Chinese patrons are unaware that the casino has a statistical edge in every game.

When a gambler in a VIP room runs out of his pre-purchased chips, the room manager is usually willing to extend credit — often on the strength of a handshake or a scribbled IOU. If the gambler fails to make good on his debts, mainland thugs known as dai yi loan, or “big-eared men,” are sent to do the heavy-handed collecting.

Sometimes, however, loss of face is enough to make someone pay, and loan sharks have been known to spray-paint the front of a gambler’s house or apartment with the words “owes money.”

And if the decline in Macao persists, that could also be the writing on the wall for its casinos as well.

Originally posted 2008-12-25 04:43:49. Republished by Blog Post Promoter

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