Courting China

The budding romance between two far-flung cities is going as well as can be expected in Shanghai in the summer of 2008. Sometimes awkward and often dizzying, the long-distance courtship’s connections are building rapidly, the flirtations growing more intense. Chief matchmaker Jesse Davis, international public relations manager for the Las Vegas Convention and Visitors Authority, and Elvis, his trusty, hip-swiveling, lip-quivering sidekick, are touring the world’s fastest-growing city, hitting event after event—from press conferences to nightclub parties—in an effort to hook up the “Paris of the East” with the “Entertainment Capital of the World.”

Davis has been a quick study of the Chinese. He’s had to for the momentous occasion: the establishment of the LVCVA’s first outpost in mainland China, where 1.3 billion people live. He knows by now to skip the spicy chicken feet, but that duck liver is actually pretty tasty. He’s picked up a few mandatory Mandarin expressions. He’s gotten used to the Shanghai journalists’ pronunciation of “Las Vegas” sounding like “los wages.” And, of course, he knows the No. 1 rule for selling Las Vegas in China: Don’t mention gambling; it’s not allowed.

This last little work-around explains why Elvis made the trip. And it seems a glimpse of our most enduring icon was enough to set off a spark. Davis would return home with the belief that the Chinese view Las Vegas as a “bucket list” destination—a place they must see during their lifetimes.

Not that it’s a perfect relationship; those things take time. There was, for example, an uncomfortable moment at the Shanghai airport at the end of the trip. After carting the LVCVA crew around for a few days, their driver was noticeably stunned to learn that his passenger in the sparkly white jumpsuit was not the “real” Elvis.

“It just goes to show you,” Davis recalls with a laugh, “that as much as the Chinese have a certain knowledge of American culture and American icons, there’s still a gap.”

Yet, today, that gap may also serve as the perfect enticement for many first dates between Las Vegas and Chinese tourists in the coming decade. And for local tourism officials, faced with one of the worst economic times in Las Vegas history, there are plenty of reasons to be smitten.

With a gross domestic product of $4.6 trillion, China now has the second-largest economy on the planet. Even against the headwinds of the worldwide recession, China’s GDP grew 8 percent last year, thanks in part to a $586 billion stimulus package.

Also growing is the Chinese middle class—along with its taste for shopping, traveling and (despite being illegal on the mainland) gambling. There are now 850,000 citizens with a net worth topping $1 million, and collectively, they spend $7.5 billion a year on luxury goods, says Jessica Lo, managing director of Shanghai-based China Market Research Group. Most of those purchases happen overseas in places such as Hong Kong and Europe, but the Las Vegas Strip is gaining appeal.

“Las Vegas is one of the most dreamed of vacation destinations for wealthy Chinese males,” Lo says.

So it’s with good reason that the LVCVA has begun courting China. With offices now in Beijing and Shanghai, the agency hopes to dip into its $13 million annual international marketing budget to open one office per year in China over the next five years, says John Bischoff, the LVCVA’s vice president of international brand strategy. This movement follows a 2007 memorandum of understanding between the U.S. and Chinese governments that makes it possible for Chinese leisure travelers to get visas—a longtime problem in that country. Now, Bischoff says, Chinese group leisure travel is on the rise.

Overall, Chinese visitation to Las Vegas was up nearly 30 percent (from 87,000 to 112,000) between 2006 and 2008, according to the U.S. Department of Commerce, and that’s without direct air service. When McCarran’s international terminal opens in 2012, nonstops between Beijing or Shanghai and Las Vegas could become a reality, Bischoff says. As a result, Lo expects the
annual number of Chinese tourists to climb
to 250,000 by 2015.

That number could be closer to a half million, says Bill Hornbuckle, MGM Mirage’s chief marketing officer. The big question to him is the wealth of those visitors. “What’s important to understand,” he says, “is that the 150,000 we currently enjoy are the uber-wealthy.” Despite the impressive economic growth statistics and the fact that China adds 100,000 people to its middle class each year, a middle-class citizen in China earns about $10,000 annually, Hornbuckle says. And someone who earns $12,500 a year there is considered affluent. Therefore, casino marketers will likely stick to targeting the aforementioned millionaires.

There are other concerns, too. Naysayers, such as independent economist Andy Xie, warn of a looming real estate bubble burst in China. Property values there climbed more than 60 percent in 2009, The New York Times reported, and easy credit is becoming a concern among economists. In addition, China has not been totally immune to the worldwide recession. The latest International Monetary Fund Global Economic Outlook indicated that 2009 Asian exports were down 30 percent from their 2008 peaks. With weakened demand, questions remain about whether China’s manufacturing sector can continue to dish out hefty raises to its middle-class workers.

And what if these workers bank their money instead of spending it on travel? The Chinese are known to save 25 to 30 percent of their net income. “Our world economy is predicated on spending. The problem is, they save,” says Tola Chin, owner of Qins Inc., a local importer of stainless-steel restaurant products and equipment from China. “It will be interesting to see how it’s all going to play out.”

In the meantime, the growing role of technology in China could alter that mind-set. The Internet has created an “internationalization” effect, says Stuart Mann, dean of UNLV’s College of Hotel Administration. More foreigners are exposed to places and cultures such as the American West and Las Vegas every day, creating more desire for travel.

China today has 380 million “netizens,” Lo says, and those numbers are growing. There are speed problems, language barriers and government content restrictions, as seen with the recent spats Google has had with Chinese authorities. But if these problems are reduced, and with more Chinese able to travel, the Internet has great potential to create a cultural bridge that can only improve Las Vegas’ tourism prospects.

“Everybody wants to be part of the world community,” Mann says. “You get the sense of the world population wanting to come here.”

The Palazzo’s Zine Noodles Dim Sum is one of the top 10 Chinese restaurants in the country, according to Chinese Restaurant News. This was no accident, as Ken Wong will tell you. Offering the best to their high-rolling Chinese guests is the strategy of the resort’s ultra-exclusive Paiza Club, both in general or from moment to moment. Over a meal of authentic Hong Kong-style cuisine on a recent Friday afternoon, Wong, the executive director of operations and mastermind behind the club, tries to expound on the mission, but the endless ringing of two cell phones does it for him. The calls are from upstairs—Paiza guests with gambling budgets exceeding $1 million, and they all have requests. In five years, the executive proudly claims to have not turned a single one down.

“Whatever they could get in China yesterday, we want them to get here today,” Wong says. “Nothing is impossible; the impossible just takes a little longer sometimes.”

The routine features fresh and sometimes exotic seafood flown in daily—some of it still alive only minutes before guests eat it—and a corporate 747 jet bringing in the next group of “whales,” the highest of the high-rollers. The Paiza Club averages a mere five gambling guests a day, although the Chinese, who make up about 90 percent of its guests, tend to travel with large families. With cherry-wood finishes, breathtaking views and 20 butlers, the club offers the best of everything, but is also flexible enough to handle a kid’s request for a certain video game.

While all of this is great, Wong probably has Macau to thank more than anything for his growing business. In this Chinese territory, gambling is not only legal but the annual revenue from it has exceeded that of our city. This phenomenon hasn’t hurt Las Vegas. Instead, it has offered further incentive to visit the real Las Vegas, Wong says. This is why, even while the recession has most Las Vegas categories down, one number is up. “We’re not seeing any decrease in Asian guests,” he says, “but instead a slight increase.” So, although the LVCVA isn’t legally able to market Vegas-style gaming, it doesn’t really need to. Macau is a giant advertisement.

Golf, meantime, is a category that the LVCVA does promote, but again, the Chinese themselves may be the biggest driving force behind that appeal.

The sport’s popularity is growing immensely in China—and South Korean golfer Y.E. Yang’s dramatic victory over Tiger Woods in last year’s PGA Championship didn’t hurt. There are now more than 500 courses there, most built in the last few years. So Southern Nevada’s 40-plus courses are emerging as another selling point. In preparation, last year the LVCVA hosted a China “market familiarization” program for area golf course operators.

What’s more, golf courses are replacing karaoke as the “desired business meeting location for serious businessmen,” Lo says. And China has an endless appetite for conducting business overseas. Direct investment in the United States climbed from $385 million in 2002 to $1.2 billion in 2008. Chinese companies could participate in up to $40 billion in merger and acquisition deals overseas in 2010, according to China Daily.

One of the most prominent China-Vegas business connections involves Shanghai’s David Jin, who invested $30 million to build the Grand Canyon West Skywalk, which opened in 2007. Each year Jin now shuttles thousands of Asian tourists between Las Vegas and the Skywalk through his companies, Y-Travel and Grand Canyon West Express. The investment could be more prescient than local observers might assume. The three most requested tourism destinations for Chinese visitors are the Statue of Liberty, the White House and the Grand Canyon, according to the LVCVA, whose strategy includes marketing Las Vegas as a gateway to the national park.

There may be bolder Las Vegas moves from Chinese businessmen in the future. Robert Young, chairman of the Las Vegas Asian Chamber of Commerce, foresees Chinese ownership of a Strip casino in the coming decade. “I would not be surprised if a Chinese enterprise or a Chinese government-related agency would do a big acquisition in Las Vegas,” he says. “They are prospering and all of them are looking for something they can buy.” A Chinese government agency with an ownership stake in a Strip casino—what would “The King” say about that?