Sudden bust in China gambling mecca

The laid-off worker from Hunan province hung back from the baccarat table as his wife placed bets. He sipped water and explained how he justified traveling to this former Portuguese colony on China’s southern coast -- the only place in the country where gambling is legal -- and blowing $450 in savings.

“We are not rich, so we took a train to Guangzhou first, then we took a bus to Zhuhai,” bordering Macao, said Zhang, 50, who gave only one name. “We are staying in a hotel that costs only $15 a day, and we eat from food vendors for no more than $3 a meal. We don’t buy anything here,” he added, scanning the half-empty tables at the mega-casino known as the Venetian Macao.

Four years ago, gamblers broke down the doors of the newest casinos to race for seats. Two years ago, Macao raked in $7 billion in annual casino revenue, surpassing the Las Vegas Strip as the world’s biggest gambling center. Officials hoped some of that lucre would help transform the seedy, sleepy enclave into a thriving convention and family entertainment center.

But today, Communist Party officials who once welcomed U.S. companies such as MGM Mirage, Wynn Resorts and Las Vegas Sands have put the brakes on the millions of mainland visitors who flow into the territory and, like Zhang, appear to give their cash to foreign companies without investing in Macao itself. The impact of the new visa restrictions has changed the look and feel of Macao, where boom times have suddenly given way to gloom.

Most mainland residents, who make up more than half of Macao’s visitors, are now allowed only one visit every three months, under a policy from China’s Public Security Ministry. Access from Hong Kong, an hour’s ferry ride away, has been sharply restricted by Macao authorities. And mainland visitors en route to another Asian city, who used to be able to stay in Macao for up to two weeks, can now stay only a week.

In some establishments, business has fallen by half. The number of individual tourists -- those not traveling on business or as part of a tour group -- fell to 470,049 in October, a 26% drop from the previous October, according to Macao’s Statistics and Census Service.

“From August onward, our customers have been reduced by half,” said Emily Chen, manager of Macao’s Seven Seas Travel Agency. “Because most of the casinos here depend on mainland tourists, the money flows out continuously from China to foreign countries. That’s why the government wants to control it.”

The central government in Beijing is also trying to get a handle on the endemic corruption and money laundering long associated with the territory, which was returned to China in 1999. State media reports on officials caught up in bribery scandals often cite repeated visits to Macao; a former economic planner for the city of Xiangtan, in Hunan province, was sentenced in May to 19 years in prison for blowing $219,000 of public money during 36 visits here since 2002.

But authorities may also be trying to temper Macao’s boom because of broader concerns about whether the territory has grown too quickly, threatening to destabilize an economy that was experiencing a slowdown even before the recent global financial crisis.

“In the past, the increased numbers of tourists from the mainland have already exceeded the receiving capacity of Macao,” said Antonio Ng Kuok-cheong of Macao’s Legislative Assembly. “As a result, we welcome the new visa policy.”

After officials broke the monopoly held by local casino tycoon Stanley Ho in 2002, gambling revenue here nearly tripled between 2003 and 2007. Steve Wynn’s $1.2-billion Wynn Macau resort opened in 2006. The $2.4-billion Venetian boasts its 3,000 suites make it the world’s biggest hotel.

But then the downturn hit neighboring Guangdong province, a big source of gamblers and one of the regions hit hardest by factory closures and job losses. The crisis has also curbed wealth in Hong Kong, another main supplier of visitors. Together with the visa restrictions, those developments have nearly bankrupted over-leveraged casino kings such as Sheldon Adelson, the billionaire chief executive of Las Vegas Sands and once the third-richest man in the U.S.

Construction cranes now stand idle over half-finished mega hotels and malls on a reclaimed piece of land known as the Cotai Strip, including an expansion of Adelson’s Venetian project. Luxury stores have posted signs advertising prices as much as 70% off.

Legislators are weighing whether to lower the salaries of casino employees in an effort to guarantee their jobs. More than 10,000 construction workers are out of work, including 4,000 from Hong Kong and 4,000 from the mainland.

In the meantime, though, gamblers continue to find ways to maximize their casino time despite the new restrictions, which began in November 2007. The policy is inconvenient, some said, but ultimately useless in deterring those who are determined to gamble.

Luo Meiyun, 45, a clothing trader from Hangzhou, in Zhejiang province, said she used to be able to come four times a month and stay up to 28 days. She would bring $1,500 to $3,000 each time. Now she can visit only once a month, for seven days, and she sees scores of empty tables.

“The policy is totally unnecessary. People who want to gamble will still take all kinds of measures, such as using a business pass or flying to another country first and then flying back,” Luo said as she crossed into Macao at Zhuhai, where the lines were unusually short. “It’s really a big headache. But the policy cannot cool people’s enthusiasm, because gambling is banned on the mainland.”

That may change soon. Officials are experimenting with a form of gambling in Wuhan, in Hubei province, in which bettors who guess the winner of a horse race will receive a lottery ticket that has a 60% chance of winning anything from 45 cents to nearly $600.

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Researcher Zhang Jie contributed to this report.