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Macau Regulates Casino Constructions

Posted on December 21st, 2010

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Macau is the only place in China where casinos are allowed. In a country where gambling is a pastime enjoyed by many, it isn’t a surprise that the casino industry of Macau is exploding. Add to that the recent rise in tourism and you get a booming industry like no other. In light of this recent boom of the casino industry in Macau, officials have recently curbed land grants to gambling giants, Las Vegas Sands Corporation and SJM Holdings Ltd. Chief Operating Officer for the Las Vegas Sands Corp., Mike Leven believes that Macau seeks to have an orderly and sustainable growth of their casino industry.

Macau believes that it is for the best interest of the general public to control casino construction. Officials believe that the only way to do is to control land grants to gambling companies. Leven believes that in order for Macau to successfully pull this off, they would have to only allow the construction of a single casino at any given time. They would only give the green light for the construction of another casino once previous establishments have settled in on the market. Mark Leven believes that Macau is trying to avoid the problems they encountered during the onset of the economic depression in 2008 where several projects were halted and workers were laid off causing massive unemployment in the area. “My feeling is Macau will allow it to grow, just not all at the same time,” Leven said.

According to Leven, regulating the construction of the casinos in the area would also serve to eliminate labor problems. During the construction of the existing casinos in present-day Macau, labor problems plagued the projects. With only a single casino allowed to commence construction Macau would not have to face such a problem and with several casino plans queued, periods of unemployment brought about after projects have been completed, would be eliminated. “They’re trying to manage growth in a healthy way,” Leven said. “They’re probably not going to allow them all to be built at once. When one gets built and gets close to opening, they’ll allow the next one to start construction, and it will open after the existing property ramps up.”

While all this is happening, construction for the expansion of Sands’ facilities in the area continues. While they were denied coati sites 7 and 8, Sands China continues to develop sites 5 and 6, which they have already previously acquired, for the development of St. Regis, Shangri-La, Sheraton and Traders resorts. The company also plans to develop site 3, also already previously acquired.

Sands China and SJM Holdings Ltd. are not the only companies that have their eyes on Macau. Mark Leven predicts that the next casino projects that would be approved by Macau will be Sands China, in their own site 3, Wynn and MGM—all giants in the gambling industry. All these projects will be located in Cotai, which most analysts believe to be the next Las Vegas.

Macau’s gambling revenue has jumped up to almost 60% since the last year. This has caused many developers to consider investing in the area. Among those interested is Steve Wynn, owner of Wynn resorts. Steve Wynn has expressed his readiness to expand in Macau saying that if allowed, he would start construction of a $2-$3 billion dollar project that would be operational within five years. MGM resorts also plans to expand their operations in Macau, expressing desires to open a second resort in Cotai. Galaxy Entertainment Group Limited, whose plans were put on hold when the financial crisis hit full force in 2008, announced that construction of their resort will be completed before the end the next year.

Future projects for casinos in Macau will be subjected to public auction. Analysts believe that the competition generated by the move will cause the price for the land to skyrocket. With Macau regulating constructions, they are essentially limiting the supply, and with such a huge demand to tap into the booming casino industry in Macau, companies will pay top money just to begin construction of their planned establishments.