The History of Our Future

Or, how Macau became the Las Vegas of the 21st Century and is about to change Las Vegas forever

Photo by Mike Clarke

Photo by Mike Clarke

Back in the early days—2006 or so—American executives signing on for tours of duty in Macau felt like they were stepping into the Wild West. Street violence had subsided since the island’s 1999 reversion to mainland control, but there was still a sense that this was a frontier, a place where anything could happen. And when strangers rode into town—often from the former frontier town of Las Vegas—they went where strangers always go first: the saloon. In this case, that meant the Embassy Bar at what was then the Mandarin Oriental hotel. It was an admittedly upscale saloon, but for an expat executive it was an oasis, a free-port, a place to make crucial first connections and ease into Chinese life. It offered just enough reassuring familiarity, and just enough tantalizing strangeness.

“Until about 10 or 11, it was just a nice drinking establishment,” said one Las Vegas casino executive who was part of that first wave. “Then a band started playing, and all the foreigners would start arriving—and the ladies of the evening. All the regulars got to know each other—it was the only place that felt at all Western. And it was the only place I’ve ever been in where you’d have guys sitting with their wives in one section, and women looking for companionship right next to them.”

The newcomers—Americans, Brits, Australians—weren’t simply coming to China; they were coming to Macau, which had its own history and culture, a renascent Chinese city with lingering reminders of Portugal in expected and unexpected places. Reminders were in the picturesque ruins of St. Paul’s Cathedral, in the street names, in the cuisine, in the legal code.

The executives who signed on faced a big adjustment: Moving to Macau meant more than trading Mojave heat for Pearl River Delta humidity. There were no Western-style supermarkets there, and most executives had to learn how to get around without their own car. That, and living in apartments in which legacies of the sleepy colonial past went beyond faded pastel paint on the facades—no washers or dryers, for a start. Guys used to cruising home to a sprawling rancher in Summerlin now walked past rows of clothes hung out to dry, snatches of Cantonese floating out of the windows around them.


From Las Vegas, Macau looks like the new kid on the block: a fearsome tiger that has roared to dominance from out of nowhere, toppling longtime champ Las Vegas from its throne. But the city is actually old—centuries older than Las Vegas—and it hosted legal gambling before Nevada was even a state.

Macau emerged as a major city thanks to Portugal’s drive for global dominance in the 16th century. Portugal was a dominant trading and colonial power, and the first European country to open up much of Asia to commercial exploitation. Macau was a sleepy fishing village that was strategically placed at the mouth of the Pearl River, and about equidistant between Goa, Portugal’s chief India outpost, and its interests in Japan, where Portugal had a virtual monopoly for much of the second half of the 16th century.

The Portuguese offered the Chinese imperial government a deal: In exchange for paying rent and for helping to root out the pirates who had been endemic to the area for centuries, they could have free rein in Macau. For a while, the Portuguese were the kings of Asia, making more money year after year with no end in sight: Macau became a bustling, cosmopolitan trade nexus. Then the bottom fell out. In 1638, Japan closed its harbors to the Portuguese, cutting off one of its most lucrative markets, and Macau began to drift.

By the 19th century, the British were rapidly expanding their own empire, muscling in on India and China and setting up their own outpost in Hong Kong, about 40 miles northeast of Macau, on the opposite side of the Pearl River estuary. Hong Kong thrived as British influence waxed powerful, and Macau was relegated to second-tier status.

Macau’s Portuguese rulers had tolerated the opium trade for years, but it took a new governor, Isodoro Francisco Guimarães—who was in charge from 1851-63—to take the bold step of legalizing and taxing all vice for Macau’s benefit. With legitimate trade gone, it wasn’t such a gamble to hope that illicit pleasures would produce some tax money for his government. The games offered were exclusively of the traditional Chinese variety, with longtime favorite fan-tan the most popular. It’s still played in Macau casinos today.

Gambling and prostitution proved profitable, but what Macau offered was hardly luxurious: Establishments were more flophouse than palace. The city had its charms, though: One contemporary wrote that it was home to more “shameless, beautiful, savage” women than any other port in Asia.

Still—and this is a constant in Macau’s history—there was a feeling that the city could do better. Licensing the fan-tan houses (which ran in tandem with the cathouses) helped the colonial government pay the bills; it didn’t stoke any real development in the city. With few good industrial or commercial prospects, Macau seemed to have hit a wall.

Then came the 1930s. We’ve all heard about how that decade gave us Nevada’s modern regime of legal gambling. But something happened in Macau then as well. Gambling had been legal there for as long it is now in Las Vegas, and the government decided to shuffle the deck. It ruthlessly suppressed the rabble of the fan-tan houses, shifting its imprimatur to casinos in relatively upscale hotels. By doing this, the governor hoped to draw wealthy visitors from surrounding cities instead of the reckless sailors who were the chief fan-tan devotees.

But there was more to it than that. As part of the modernizing effort, the government chose to auction off the right to offer games to a single private company that, in return for its share of the monopoly, would give a bigger cut of the proceeds to the government. After all, without competitors, the gambling enterprise could run more efficiently.

So starting in 1937, the Tai Xing syndicate, helmed by Laorong Fu, took control of Macau gambling, retaining its hold through the storm and stress that gripped China during the years of war and revolution. Fu’s son, Tak Iam Fu, ran the company through the 1950s and became quite wealthy, acquiring a great deal of real estate and the Hong Kong/Macau ferry. The ferry was particularly important, since with the communist mainland government barring its population from Macau, British-owned Hong Kong was Fu’s chief feeder market.

But Fu didn’t do as much to promote development as the Portuguese government would have liked, and in 1961 it opened the gambling monopoly up to bid again, this time asking for a company that would promote Macau as a “gaming and tourism” destination.

The winner? The Sociedade de Tourismo e Diversões de Macau (STDM), a company run by Stanley Ho, a 40-year-old shipping millionaire with hardscrabble roots. Like Fu, Ho ran casinos in hotels throughout the city. But the similarity ended there: Ho introduced Western games, including baccarat, to the city in 1962.

That was an inspired move. Over the next three decades, baccarat would grow to become, by far, the most popular casino game in Asia. And it cast Ho as a Westernizing reformer, willing to open the city to new ideas even as he invested in new hotels.

But there was a dark side. In the 1980s, Stanley Ho created a junket system that proved both profitable and difficult to police. Instead of taking on the risk of extending credit to big players, he essentially rented out his high-end gambling rooms to VIP room operators, who in turn subcontracted with junket operators to bring in specific groups of gamblers.

That meant the people licensed by Macau to run casinos couldn’t really know who was playing in their high-limit rooms, let alone collect their tax information. There were two to three layers of plausible deniability between the players and the casino executives. Back in 1960, the Nevada Gaming Control Board had adopted its List of Excluded Persons—colloquially known as the Black Book—to keep “undesirable” mob types out of casinos; the Macau system, it seemed, was tailor-made to allow them in. Organized-crime groups were said to have a tight grip on money laundering and loan sharking in and around the VIP rooms.

In the 1980s and 90s, with money and power hinging on control of those VIP rooms, violence spilled over into the streets of Macau. Car bombings, stabbings and shootings became nearly commonplace. Things didn’t get better until mainland China took over. The Beijing government has its flaws, but hesitation in dealing with threats to public order is not one of them. In the words of one executive, “a Red Army brigade moved in, and never left.”

Las Vegas—despite its casinos’ reputation as banks for some of the nation’s most violent organized-crime families—never had that level of open viciousness. The outbreaks of gang violence in and around Macau casinos underscored the brutality of the triads, the high stakes of Macau casinos and the lingering cultural disconnect between China and America.


“The difference between Asian society and American society,” says a Las Vegas executive who has worked in Macau, “is that when you go to a 10-year-old kid in Macau, education is far and away the most important thing in the world to him. They want to do better. They don’t mind going to school for extra hours, going to school on Saturday; they want to be No. 1, because they want a better life.

“When I asked one of my friend’s kids—he was maybe 12—what he wanted to be, he said a hedge-fund manager. A hedge-fund manager. Over here, we’ve got college kids who probably don’t even know what a hedge-fund manager is, much less what they want to do with their lives. It just shows you how driven they are over there. It’s all about money.”

Mainland China is still officially communist, but Macau is a city where nothing is in moderation. This colors the way mainland visitors approach the city’s casinos. Visitors from the mainland have limited time, and they want to do two things: gamble and see something unusual or spectacular. Casinos that had knockout must-see appeal, like the Venetian (the biggest casino in the world), have prospered. Those that didn’t learned the hard way that to survive they had to deliver something else like the Venetian’s sheer size and scale or Wynn’s Lake of Dreams that would make a good story back in Guangzhou. The necessity of making that checklist puts enormous pressure on those who run Macau casinos. It’s a lucrative market, still something of a zero-sum game: A rival’s success is seen as a loss.


History caught up with the Portuguese enclave in 1999, when control of Macau reverted to Beijing, which promulgated the same “one country, two systems” method that it had applied to Hong Kong: The communist government pledged to not interfere with Macau’s capitalist economy for 50 years and gave it sufficient local autonomy to allow its casinos to remain open.

In 2001, the Macau Special Administrative Region (SAR), under the leadership of Edmund Ho (no relation to Stanley), reopened the gaming concession to bidding. Stanley Ho, after 40 years astride the city, was far and away its wealthiest and most influential citizen, with vast holdings including real estate, banks and key chunks of the city’s transformation network. That kind of power is difficult to comprehend in the United States: We speak of the big casino companies exercising undue influence, but imagine that one man owned every single casino, hotel and gambling saloon in town, plus McCarran Airport, Interstate 15, Green Valley, a few shopping malls and a bank. That’s power.

But Stanley Ho’s power couldn’t fend off competition. The Macau SAR, looking to modernize, wanted more than Ho could offer. So it allowed American companies to bid on three licenses.

In 2002, Edmund Ho announced the winners: SJM, a subsidiary of Ho’s company, STDM; Wynn Resorts, which at the time didn’t have any Macau casinos in operation, but did boast Steve Wynn’s impressive skills; and an alliance of Hong Kong-based Galaxy and Las Vegas Sands, which owned the newly opened Venetian and promised to build a similarly convention-heavy resort.

But the two companies had trouble working together and, rather than pitch one of them out, the SAR decided to let Galaxy keep the “concession” and to award Las Vegas Sands its own “subconcession.” The two companies went their separate ways and the government decided to allow SJM and Wynn to sell one subconcession each, raising the total of operators to six. That’s how Melco Crown—a joint venture between Stanley Ho’s son, Lawrence, and Australian media and betting scion James Packer—and MGM Resorts, via a partnership with Stanley Ho’s daughter, Pansy, won the right to build. And that was it: The SAR announced there would be no more licenses granted. The Las Vegas companies that had gotten in—Wynn, Las Vegas Sands and MGM—were in the catbird seat. Those that didn’t—chiefly Caesars Entertainment—were on the sidelines for what some vaguely hoped would be the biggest gambling boom in history.

Before those final subconcessions were granted, though, the gambling world shifted on its magnetic pole: A Las Vegas company opened a casino in Macau, and neither town has been the same since.


Paul Steelman has been designing casinos since the 1970s; his first job was to help convert Atlantic City’s weathered Haddon Hall into Resorts International, its first casino. Since starting his own practice in 1987, he’s designed casinos in Las Vegas, Mississippi, South Africa and Finland, among other locales. But when he accepted the commission to design the first Western-owned casino in Macau, he threw the rule book out the window.

“We didn’t really use a model,” he says of the early design process. “I stood in the old Lisboa and watched the Asians gamble. I realized it was a sport, not just an entertainment activity, and decided to design the first stadium casino. All of the existing casinos were low, smoke-filled rooms. I decided that I wanted to make a beautiful, large-volume casino, filled with natural daylight.”

Steelman was proposing the opposite of what Macau already had—Stanley Ho’s casinos were uniformly smoky, spread over three or four levels, and worn out. But building a late-1990s Vegas-style slot palace wouldn’t work. These weren’t the moderate-but-frequent players who come to Las Vegas, intent on gambling but looking for other entertainment as well. Sands Macao would cater to gamblers who, first and foremost, wanted to play baccarat, with as few distractions as possible. So Steelman created something novel—detractors called it a “baccarat barn”—that was open and spacious and, for a time, the most profitable casino in the world. Slot machines were almost an afterthought, and close adherence to feng-shui principles meant breaking many of the rules in the casino-design playbook—no maze-like casino here, just quick, open lines to the nearest gaming table. And no cocktail waitresses either; tea girls, walking the floor with steaming canisters of the beverage toted on their backs, would attend to all the needs most gamblers would have.

It was a taste of what would happen when West met East: a new hybrid, drawing on the heritage of both, but undeniably of its own kind.


The bidding process for Macau concessions wasn’t as fevered as it would be in Singapore a scant five years later: Asian casinos were an unknown quantity, and the gaming industry is never comfortable with unknown quantities. Many American companies gave a perfunctory effort at best; others chose not to bid at all. Concerns about organized crime were paramount. “Everyone we looked at doing business with,” said an investigator for a company that declined to bid, “ended up being connected back to the triads.”

It had been less than 20 years since the U.S. casino industry had purged organized crime from its ranks. In 1999, the Gambling Impact Study Commission had finally ruled that American gaming was free of the taint of the mob. Casinos had at last gained not just legitimacy, but a familiarity in America that was unthinkable in the 1980s. Thanks to the spread of tribal government and riverboat gambling, casinos were more mundane than mobbed-up in the public consciousness. Part of the bargain was remaining squeaky clean. Many executives thought American regulators wouldn’t countenance any dalliances with criminal elements in Asia.

‘Las Vegas Doesn’t Come Close’

A renowned writer takes us into Macau’s streets and gambling pits | Read more…

But the nature of Macau’s casino business, as it had been run up to that point, made it difficult to steer clear of groups with alleged organized-crime ties. Chinese government policies are partly to blame. For example, visitors from mainland China are permitted to bring a maximum of about $3,200 per trip with them; most gamble far more than that. So they head to one of the pawnshops that surround Macau casinos, not to pawn a family heirloom in hope of winning the rent money, but to make a clean, clinical transaction. They “buy” an expensive watch using a credit card, then immediately decide to “return” it, getting cash back in return. It’s a good deal for the pawnshop owner, who can make 5 to 10 percent per transaction, but it shows the ease with which gamblers can sidestep the spirit of the law while adhering to its letter.

Similarly, gambling debts can’t be legally collected on the mainland. That would be a problem for law-abiding businesses, but it somehow all gets sorted out in the murky web of connections between VIP-room concessionaires, junket operators and those linked to organized crime.

There are plenty of conjectures about the extent of organized crime influence in Macau VIP rooms, and the sources of funds that mainlanders lose there. But one fact is undisputed: Macau’s wealth is built on baccarat. You can find roulette and blackjack tables in Macau; you can even find tombola and boule, which are totally obscure to Las Vegas gamblers. But 91 percent of the money Macau casinos make comes from baccarat. In the U.S., it had been a favored game of high-rollers, something tucked off to the side in a special room, not a game to build a casino around. But in China, it’s a game to build an entire city around. There may be strange and even terrible stories about the sources of the money that is exchanged for chips in those VIP rooms, but the cash that baccarat generates means that there are few questions asked and fewer answers offered.


For 10 years, the conventional wisdom has been that Macau is just Las Vegas in an earlier stage of development, so in the short term Las Vegas licensees will do their best to steer clear of the more notorious triad-connected junket operators, and will hold their noses until modern casino management tames Macau like it did Nevada.

And on the surface, Las Vegas has changed Macau. The focus never shifted to slot players, and loyalty cards never gained traction (the citizens of the communist mainland guard their privacy more zealously than Americans). But with the opening of the Venetian Macao in the summer of 2007, several changes became apparent: With a Morton’s steakhouse, the resort made Western cuisine that much more accessible, and other steakhouses and Italian restaurants started to elbow between the noodle bars. A premium mass-market customer, who didn’t have the means to gamble in a VIP room but wanted more than hot tea and nonstop baccarat, began to emerge. In the end, Macau did become a bit more like Las Vegas.

So, since 2002, we’ve been waiting for Las Vegas to lead Macau out of the dark ages and into the brave new world of corporate finance, slot machines and players cards. It’s no surprise that when Sheldon Adelson’s Las Vegas Sands reclaimed a plot of land from the South China Sea, it called it the Cotai Strip. It’s also no surprise that the hotel Adelson built there looks very similar to the Las Vegas Venetian. Or that Wynn Macau echoes Wynn Las Vegas, right down to having a sister property named Encore.

But 10 years later it looks like Macau has also reshaped Las Vegas in ways that no one predicted. It’s made us more creative and more enterprising, prompting the city’s casinos to embrace change that they once shunned. It’s altered the architecture of the casino. And in a city where slots have long been dominant, it’s made baccarat the hottest game in the casino. With Macau giving three of the city’s biggest operators (Wynn, Las Vegas Sands and MGM) a lifeline during the worst years of the recession, it’s not overstating things to say that the Las Vegas gaming industry owes much of what stability it currently has to Macau.

Executives who do a tour in Macau return, as one executive who’s worked in both markets puts it, “much smarter, with a much broader view of what can be done as opposed to what can’t be done,” which explains the greater regulatory flexibility the State has shown in approaching innovations such as private gaming salons (a direct Asian import) and online play. It also explains the greater aggressiveness with which companies have pursued expansion opportunities, both domestically and internationally.

More fundamentally, Macau has changed the way Las Vegas runs. We don’t publicize the fact, but Macau isn’t the first city to knock Las Vegas off its perch. In 1982, only its fourth full year of casino gaming, Atlantic City surpassed the Las Vegas Strip in annual revenue. Las Vegas operators thought they’d educate the newly born seaside gaming haven, but visitors to the city had their own ideas: They preferred slots to table games, and the entire business model of casinos shifted to accommodate slot players, which was reflected in everything from casino design (this is around the time that casinos added stools to slot machines, letting players linger longer) to the rise of player-loyalty programs.

By the end of the 1980s, slots were ascendant on the Strip, and it wasn’t until 1999 that the Strip permanently surpassed Atlantic City in annual casino win. Thirty-five years later, could Macau shift the city back to baccarat?

Before the Great Recession, the future of Las Vegas seemed clear: It had staved off the challenge of domestic casino expansion, and would continue to become a pricier destination. Room rates were galloping upward, as was occupancy, which explains the ambitious plans to add tens of thousands of upscale rooms to the market. Slot machines were going to continue to be the primary money-maker for casinos, even on the Strip; that had been the trend for the previous 30 years.

The Great Recession changed all that. Domestic gamblers kept coming to Las Vegas, but they cut back their spending. The big companies that dominate the Strip teetered, in varying proportions, on the brink of bankruptcy.

And then dawned the baccarat recovery: Slot win continued to slump but, month after month, whale-size wins in baccarat, the game of choice for high-end Asian players, bailed out the Strip. Companies with booming operations in China, such as Las Vegas Sands and Wynn, roared back to prosperity; MGM, which had a smaller market share, bought itself some breathing room; and Caesars, locked out of Asia but still aggressively marketing to high-rollers there, inched away from the precipice.

Seeing Macau’s revenue skyrocket while Las Vegas’ slumped, some armchair analysts concluded that Macau was a threat. The opposite, though, was true: Macau (and, more broadly, China) was a boon to Las Vegas. Why? Simple tax mathematics: Companies, like individuals, want to pay as little tax as legally possible. The gaming-revenue tax rate in Macau for U.S. operators is 39 percent; in Las Vegas, it’s 6.75 percent. So let’s say a Las Vegas-based company has a player who, all things being equal, will lose about $1 million in a trip. If he plays in Macau, the casino keeps $610,000. If he plays in Las Vegas, the casino keeps $932,500.

The result of this Macau transfer? In 2005, Las Vegas Strip casinos won about 11 percent of their money from baccarat; by 2012, they were winning 22 percent of their total from the game. More than one dollar in every five lost in a big Strip casino today comes from baccarat, and much of that is from Asian high-rollers recruited in and around Macau.

Macau is also changing the way our casinos look. You might have noticed some of the newer casinos—Encore and the Palazzo come to mind—being brighter than older ones. That’s a direct response to Asian tastes. To transcend its triad past, new operators built casinos that were bright, airy and, above all, represented wealth and prosperity, not down-at-the-heels post-colonial blight. While some casinos had been moving toward brighter floor plans before the Macau boom, the Asian influence is apparent: The design shift from Wynn Las Vegas to Encore—a different color palette, a more open plan—is the most obvious example. Every casino with even pretensions toward high-end play has noodle bars in close proximity to its specialty Asian games pit, and shark-fin soup is readily available throughout the city, a clear response to Chinese palates.

And, according to Steelman, there have been deeper changes. American casino-goers (not all of whom are gamblers) don’t mind ambling around the vast, low-flung “podium” areas of older casinos—think Caesars Palace in all its low-density glory, with a sprawling low-rise containing everything but the guest rooms. But Asian gamblers “despise” (Steelman’s choice of a strong word here is telling) spread-out floor plans. They simply want to get to the games as soon as humanly possible. Casino designers used to exploit long walks by making sure they were lined with slot machines. Now, because they turn Asian gamblers off, they pay much closer attention to getting players from point A to point B as quickly as possible.

The next stage of the Las Vegas casino business will grow—culturally, conceptually, sometimes financially—from Asian roots. The purchase of Boyd Gaming’s Echelon site by Genting, a Malaysian company with interests in Singapore, is a sign of a shifting paradigm. The new Resorts World casino—to be designed by Paul Steelman, re-importing his own lessons from Macau—will cater both to Asian vacationers and to the rest of us who are already subtly learning to like the things Asian vacationers like. And so, on that land where the Stardust once stood, the history of Las Vegas might be writ small. The mob built the Stardust; the suits reformed, redeemed and sought to redevelop it. Now Asia has the keys. In other words, Las Vegas has only just begun learning from Macau.

Suggested Next Read

Freedom Train

Train Hopping

Freedom Train

By Ryen McPherson

The day I turned 18 years old, my father told me, “You fuck up now and you go to jail.” We were on a family vacation in Hawaii. A month prior, I had been kicked out of high school just before graduation. By summer’s end, I was bagging groceries and enrolling in useless courses at an underfunded community college in San Diego. I was now an adult.



Optimization WordPress Plugins & Solutions by W3 EDGE