A building boom has transformed the former Portuguese economy into a playground for Chinese consumers.
Not long from now an Eiffel Tower will loom over a stretch of land that was once part of the South China Sea. Its base is already clearly visible as construction crews work to finish the structure. Nearby, there are replicas of the Campanile bell tower and the Rialto bridge in Venice, a gold-colored building that vaguely resembles a pineapple, and dozens of other buildings that did not exist a decade and a half ago.
This is, of course, Macau, the tiny former Portuguese colony that was handed back to Chinese sovereignty in 1999 and has since undergone a building boom that has turned it into a gaming and shopping mecca for Asia’s increasingly affluent consumers.
Forget Las Vegas. Macau overtook the US gaming hub years ago, and now generates the gaming revenues that Vegas gets in one year in just a few weeks.
Even by the standards of China, where billions of square feet of residential and commercial space have been added over the past decade, Macau’s transformation is jaw-dropping.
Growth from gaming
The city, with a population of little more than 600,000, had 11 casinos in 2002. Now, there are 35, as casino operators such as Las Vegas Sands and Wynn Resorts rushed into the market after a monopoly that had been in place for decades was lifted that year. Many, like the Venetian, are on the so-called Cotai Strip, a piece of land reclaimed from the sea between the islands of Coloane and Taipa, roughly a decade ago.
Filling them are visitors from China and elsewhere: nearly 30 million people crossed into Macau in 2013, up from 11.5 million in 2002. Gaming revenues likewise have shot up, from about 22 billion patacas to 360 billion, or about US$45 billion, in 2013.
However, the growth in gaming revenues has screeched to a halt during the course of 2014, largely because the central authorities in Beijing have been clamping down on corruption and flashy consumption over the past two years. V.I.P. “high rollers” have stopped coming, or at least spending quite as much as they used to. 2014 may be the first year that gaming revenues shrank, rather than soared.
But the overall flow of visitors to Macau is expected to keep growing, to around 40-50 million a year, as improved transport links with mainland China will make the city easier to reach for the hundreds of millions of Chinese who have never been. Among the projects in the pipeline are better rail connections, more efficient border crossing points, and a 30-kilometre bridge across the Pearl River Delta that will link Macau with Hong Kong.
“Yes, gaming revenues have dropped during the past three to four months,” says Gregory Ku, managing director of JLL in Macau. “But people here are still very bullish. The place is still very busy.”
And property developers, casino and hotel operators and retailers are continuing to bet on Macau. Sands, the company behind the Venetian, for example, is adding the Parisian (complete with that half-size Eiffel Tower), due for completion in 2015. Sociedade de Jogos de Macau, or SJM, is building a $3.9 billion casino-and-hotel complex loosely modeled on Versailles. A new giant development by Wynn, complete with extravagant water fountains, is expected to open in 2016.
And retail rents and property prices (up sharply in recent years) have remained steady despite the drop-off in gaming revenues.
A new kind of consumer
What has changed is the kind of visitors who are coming: Increasingly, they come not to try their luck in the city’s 5,700 gaming tables, or to buy diamond-encrusted watches and luxury handbags. Instead, they are looking to have fun and eat out.
“The consumer profile is changing very rapidly,” says Tom Gaffney, regional director and head of retail at JLL. “It’s attracting more families, and people from all over China – not just Beijing and Shanghai.”
The developers have responded with more non-gaming activities. There are spas and swimming pools. There are kiddies’ activities and cinemas. And there are many, many shopping malls. Some 3 million square feet of retail space will be added in the coming years, raising the total to 7 million, while the number of hotel rooms is expected to rise from about 28,000 to about 48,000.
And it is no longer just the luxury retailers that take space in the city, but increasingly fast fashion retailers, too – Uniqlo, has taken space in Macau, as has Zara. That would have been unthinkable just a few years ago, says Gaffney.
As for the Eiffel Tower – it will have a viewing platform, and a 200-seat restaurant with spectacular views over the neon drama that is unfolding on the colorful Cotai Strip.