China isn’t the world’s business panacea of yesteryear.

We’ve been realizing that lately on the low- to middle-end side of business things. Manufacturing took a hit in the Pearl River Delta region. New labor contract law drove up employee costs.

Now, a rather high-tech, high-end industry – gaming – is experiencing major turbulence, according to Asia Times Online.

The evidence…

Yesteryear:

Las Vegas Sands opened Macau’s first Vegas-style casino in 2004, getting its US$240 million construction cost back within a year of opening.

Today: In the second quarter, Sands Macao’s casino revenue fell 30 percent to US$262 million, and operating income plunged 58 percent to US$40 million. MGM Mirage and Australia’s Crown reported losses in their Macau operations in the same quarter. Overall, Macau’s gaming revenue fell 3 percent in the second quarter compared with the first quarter. And Macau’s gaming revenue may fall still next year, according to the zone’s Chief Executive Edmund Ho.

Reasons cited for the slowdown include the global credit crisis and discretionary spending under attack, as rising energy and food costs has hit some areas of the world very hard.

But, as it turns out, China isn’t so very different from the West. According to the Times:

Part of the gloom may be a hangover from 2007, when Macau’s gaming revenue of $10.4 billion surpassed the take of Las Vegas casinos, aided by openings of three flagship casinos, SJM’s Grand Lisboa, LVS’s Venetian Macao, and MGM Grand Macau. ‘When there is a lull in the opening of new properties, Macau will have flattening performance,’ according to Jonathan Galaviz, a partner in Globalysis, a travel and leisure consultancy based in Las Vegas, ‘This is not too different from the same dynamic that has occurred in Las Vegas over the last several decades.’

There still are plenty of reasons to be optimistic about Macau, according to the Times, including:

• Macau, a city of 11.3 square miles, “is in the midst of an investment boom of at least $12 billion in its tourism sector alone.”
• Visitor arrivals “are projected to approach 32 million this year, three times the level of 2001, and doubled from 2004.”
• Macau’s GDP still grew 32 percent in the first quarter.

Tourism is one thing though, and gaming is another.

In 2003, there were just 424 tables, one-tenth as many as today, but revenue has increased only four-fold, the Times noted.

American ingenuity to transform Las Vegas into a family-friendly town helped it. Macau has yet to be considered anything other than a new gambling mecca.

Macau’s future remains very hopeful, as does China’s on the whole. But as Western executives look East in expanding business opportunities, it’s good to keep this crystal clear picture in mind: There is no crystal clear path to success here, not even in the most promising of industries.

    Channel: Vital News     |