China to Macau: Duplicate Vegas' Business Model

Every new month in 2015 has brought a double-digit revenue decline for the Macau casino empire. So it’s little wonder why China has a clear message for its special istrative area: become more like Las Vegas.

This isn’t the first time that China has pushed Macau to change its business model to an all-around entertainment destination. But it seems that the world’s largest country is putting more pressure on the world’s largest casino destination to change now.

The urgency comes from the latest revenue numbers from August, which saw Macau casinos collectively haul in 18.62 billion patacas ($2.33 billion) – down 36% from a year ago. On the whole in 2015, Macau has pulled in 37% less revenue than in the first eight months of 2014.

To stop the slide, Chinese government officials hope that the gaming/resort destination can move from a gambling-centric economy to one that includes more nightclubs, restaurants, amusement parks and shopping malls – something Vegas has done an excellent job of. But optimism isn’t high everywhere on Macau’s ability to pull this feat off.

Ben Lee, managing partner at Macau-based consultancy IGamiX, believes that what Vegas has created will never be done again by another casino hub.

“Macau will never evolve into a Vegas model because there’s no other Vegas in the world, let alone Asia,” Lee told the Wall Street Journal.

What sets Sin City apart from other casino destinations throughout the world is their history. They’ve evolved over the decades to compete with new casino resorts, adding lavish hotels, convention centers and high-class restaurants to set their city. The result has seen Vegas go from earning 59% of its revenue through gambling in 1984, to earning just 37% of its revenue through casino games.

Asia, on the other hand, has a different history with casino gaming. Namely, their restrictions on casinos have created scarcity for a nation of over 1.3 billion people. As the WSJ explains, there’s only one casino per 29 million people in Asia; in America, there’s one casino for every 320,000 people. Greater China is an even bigger difference since there’s just one casino for every 39 million people in the area – all of which are found in Macau.

So obviously this gambling hub has the market cornered – they just have to get more people to their city. And China insists that this should be done through non-gaming amenities, no matter the difficulty in duplicating Vegas.