For a while, the Big Story was how hot Las Vegas was. Then it was Macau: The Next Generation. Now that Vegas has cooled off a bit and Macau’s hitting a plateau, we’ve got a new story: Macau is in dire straits. Even Time has picked it up:
But in the wake of the faltering global economy, Macau is not such a sure bet anymore. The problem is that some of those giants embarked on overzealous building sprees — since 2004, the number of casinos in Macau has more than doubled to 31 — and now the global credit crisis is threatening to topple at least one of them. Adelson's company, Las Vegas Sands, has undertaken an aggressive expansion plan over the past few years, winning the bid to build the $4.6 billion Marina Bay Sands casino-resort in Singapore and developing a $743 million casino-resort in Pennsylvania, among other projects. The credit crisis has left the overextended company in danger of defaulting on $5.2 billion of loans secured by its Las Vegas operations. Last week, the company said it would work towards completing the Marina Bay site, but Singapore's government is making backup plans to enact if the Sands fails to raise the necessary funds to complete construction. Then, on Nov. 13, the cash-strapped company announced that it would layoff up to 11,000 construction workers in Macau, after its decision to suspend work on part of the Cotai Strip — a $12 billion undertaking. On Thursday, Las Vegas Sands' share price closed at $5.58, down 95% from its peak last December.
If you factor out the visa restrictions and other extrinsic factors, it’s hard to argue against Macau’s growth in the long term. Of course, all those extrinsic factors are what makes Macau…Macau.
I just wish that we could get stories weren’t so extreme. It’s always “this is the best every” or “things can’t get any worse.” Usually, though, things can get better, and of course things can always get worse.
But I doubt you’ll see a story whose gist is: Macau is a promising market but it’s currently got challenges that only smart operators will be able to overcome. It’s too nuanced, and it probably requires too many value judgments.