Bullets over Gaming

Paulo Coutinho

Much has been said and written about the cap on gaming tables. Apparently nobody seems to listen to what Secretary Lionel Leong has been consistently saying: no more tables over the cap of 3 percent per year (compounded), which is calculated on the overall existing tables: 5,711 by the latest count.
Arguably casino operators don’t understand the rationale behind this policy. It doesn’t take a Nobel Prize in economics to recognize that the cap is insufficient to fill the casino floors opening up in the short-to-medium term. Notably, top executives from Melco Crown, Wynn and Galaxy have voiced fears for the huge investments made in their new casino-resorts on the Cotai Strip; eight in total, six of them with massive floor-­areas.
If we laymen can detect this difficulty, we must take for granted that the government is well aware of the apparent incongruence.
What is the rationale then?
Casino experts agree that more tables equals more income. Governments everywhere are considering either relaxing legislation to accommodate games of chance, dreaming of substantial tax-derived income or expanding existing casino industries. In the USA, 20 out of 50 states now allow some sort of gaming with over 1,000 commercial or tribal casinos catering to patrons. Gaming in the States produces more revenue than Hollywood and the music industry combined. Over the years, Macau has reached gaming revenues identical to those of the entire United States. And the SAR’s income relies 80 percent on gaming.
Why then kill the golden goose? Why on earth would the government want to minimize the gains by curbing the number of tables, among other deterrent measures, while allowing operators to build massive properties?
Operators seem often confused if not defrauded by this policy. But they must be in state of denial. Apparently nobody heard Xi Jinping, the most powerful man on this side of paradise, declaring “war on global gambling.”
“A fair number of neighboring countries have casinos, and they have set up offices in China to attract and drum up interest from Chinese citizens to go abroad and gamble. This will also be an area that we will crack down on,” the Public Security Ministry said in February.
Also: mark the word, this is part of the overall war on vice – corruption, gambling, prostitution, lavish lifestyles – to cleanse the Party that rules China. Whether a noble purpose (the official line) or a vested maneuver to secure an authoritarian power – that’s not the point here.
An academic recently wrote that Xi views gambling as the opium that alienated 19th century China.
Indeed, Xi’s China Dream has no gaming in it. Since he stepped into power he eradicated any and all tentative projects of exclusive areas for gambling on the mainland – his words echoed even in Taiwan, where all plans for casinos were dropped. Not that long ago, in 2010, there was a deliberation by the State Council to transform Hainan Island into a “pilot zone” to test out gaming. And the infamous “cashless casino,” which was operating there in 2012, had some sort of “official” tolerance in Beijing. That’s gone with the wind.
The “new normal” is here to stay. In Macau, the evolution of gaming is pretty much spelt out in the caliber of the “eight bullet points” policy devised by Chui Sai On and Secretary Leong to evaluate gaming concessionaires ahead of the expiration of contracts that can be summarized in a brave new word: non-gaming.
If not to “eradicate” gambling, Chui’s last mandate is clearly to reduce its dimension in the economy and its visibility and availability in the city. Like the gaming experts, the government also knows that more tables equals more gamblers. They just see it differently.
So, the question stands, how are operators going to get their return on (21 billion dollars) investments in Cotai without enough tables?
Those properties were designed to have 10 or 20 fold what the cap actually allows them to have. It seems to me Secretary Leong’s intransigent stance is pushing the operators to do at least two main things: reduce the ratio of casino to total floor area, introducing more non-gaming activities, and move tables from the peninsula casinos (eventually forcing the shutting down of some “satellite” joints) to the new land of Cotai.
After all, it was a swamp.