Gambling in Macau

Gambling in Macau1: A Brief History andGlance at Today’s Modern Casinos

byPhilip H. Loughlin and Clifton W. Pannell

Introduction

Macau seems an unlikely place to findanother Las Vegas. It is a tiny area on thesouthern coast of the People’s Republic ofChina, a country where gambling was out-lawed, at least officially, after the Com-munist Revolution of 1949 (Figure 1). Yet,Las Vegas moguls are pouring billions ofdollars into Macau to build hotels andcasinos, and the revenues from gamblingthere are more than from the two largestU.S. gambling markets (Las Vegas andAtlantic City) combined.

Macau is only 11 square miles in sizeand consists of a peninsula and twoislands connected by landfill and bridges.About 544,000 people live there. It islocated in the western portion of the PearlRiver Delta. In 1557, with the consent ofthe Chinese, the Portuguese established asettlement in Macau. They were grantedsovereignty over the territory in 1887, butreturned it to China in 1999, at which timeit became a Special Administrative Region(SAR). Casino gambling, as we think of ittoday, didn’t start in Macau until the1930s, but its roots go back to the fan-tangames of the sixteenth century.

Period 1: The Early Years (1557-1847)

The original purpose and importanceof Macau was trade. Gambling was inci-dental. Macau was a port of the Portuguesesea-borne empire that at one time extendedeast from Portugal to Japan. For manyyears the Portuguese at Macau earnedimmense profits by shipping Chinesegoods home to Portugal and by facilitatingthe trade between China and Japan. Evenafter the decline of the Portuguese empire,Macau continued as the portal for the

sea-borne trade of other western nationswith China. In 1757, the Emperor of Chinarequired that in the future all such trade beconducted at the port of Canton, 90 milesup the Pearl River from Macau. For almost100 years thereafter, western merchants ontheir way to Canton were required to enterthrough Macau, and many of these mer-chants resided there (Figure 2).

The peninsula of Macau—the originalterritory before the islands of Coloane andTaipa later were added—was largely unin-habited when the Portuguese arrived(Pires, 1987, p. 10). Almost immediatelyafterwards it attracted large numbers ofChinese who came there to work or trade.Gambling, which entered the territory dur-ing those early years, was technically ille-gal, but nonetheless engaged in by theChinese and some westerners.

For the first three centuries after thePortuguese arrived, the Chinese authori-

ties kept tight control over the territory.China opened customhouses there to col-lect taxes on goods entering and leaving,and the Portuguese were required to payrent for the privilege of staying there(Pires, 1987, p. 11; Gunn, 1996, p. 16). AChinese official was stationed at Macau tosupervise the local population of Chineseover whom the Portuguese had no juris-diction (Lelyveld, 1973). Understandably,the Portuguese made no attempt to inter-fere with Chinese gambling activity. It wasaccepted as part of the Chinese cultureand was clearly outside Portuguese con-trol. If the Chinese authorities wanted totolerate it, as they did under arrangementsthat are not clear, then the Portugueseauthorities stayed out of it. That is, untilthe middle of the 19th century when thefirst step was taken that eventually led tothe modern casinos that are found inMacau today.

1 The name is spelled both ‘‘Macau’’ and‘‘Macao.’’ Opinions differ as to why this isso. This article will use the former spellingunless a proper name dictates otherwise. Figure 1: Macau, Location Map.

Spring 2010 FOCUS on Geography 1

Period 2: Gambling Legalized and Taxed(1847-1930)

The First Opium War

Conditions immediately after the FirstOpium War (1839-1842) indirectly led tothe legalization and taxation of gambling inMacau. The war fundamentally changedthe relationship between China and thewestern nations, in general to the advan-tage of the latter. At the end of the war,

Victoria Island (Hong Kong), 40 miles tothe east, was ceded to the British. Fivetreaty ports were opened in China in whichinternational trade could take place, andseveral western nations were given conces-sions in these ports. Emboldened by this,and taking advantage of the weakened con-dition of China, the Portuguese Governorof Macau wrested power from the Chinese.He stopped paying rent for the territory. Inreaction to the newly established free portof Hong Kong he declared Macau a free

port under Portuguese control and closedthe Chinese customhouses. He expelled theChinese officials who were there and beganto tax the Chinese residents. China resistedthe Portuguese efforts until 1887, when itceded sovereignty over Macau (Gunn,1996, p. 61; Porter, 1996, p. 91).

At the end of the war Macau was fac-ing serious financial difficulties. The loss ofbusiness to Hong Kong and the treaty portsdepressed existing revenue. In addition,Macau recently had been given fiscalresponsibility for two other Portuguese set-tlements (Timor and Solor) in the Pacificand faced a challenge raising new revenuefor that purpose (Gunn, 1996, p. 59). Thesolution was found in the scores—maybehundreds—of gambling establishmentsthat existed in Macau at the time. Accord-ing to the Macau SAR Gaming Inspectionand Coordination Bureau, gambling waslegalized in 1847 and taxed. The result wasan instant financial success, and taxes ongambling became a source of governmentrevenue thereafter because the gambling-house proprietors were paying the govern-ment large amounts of money each year fortheir licenses. In 1912, it was reported fromMacau that ‘‘gambling is here a busi-ness—all the business there is. [It] pays foreverything.’’ (Penfield, 1912, p. 283).

The Old Gambling Houses

The gambling establishments did notappear to be particularly inviting(Figure 3). They were characterized as‘‘vile,’’ ‘‘monotonously alike,’’ and ‘‘dingyaffairs with no pretensions towards decora-tion.’’ (Living Age, 1899; Ladies Home Jour-nal, 1927; Forbes, 1932). They ‘‘cannot butbe considered sources of demoralization,’’warned The New York Times in 1876 (TheNew York Times, 1876). Some of the patronsappeared no more inviting. ‘‘Leanwretches, with queues no bigger than arat’s tail,’’ said one article (Living Age,1899). ‘‘Rickshaw coolies, sailors, and har-bour riffraff,’’ said another (Penfield, 1906,p. 285). The Chinese game of fan-tan wasone of the more popular games played.One of the interesting aspects of the gamewas that the more refined players, whichwould include ‘‘foreigners and better-classChinese,’’ could observe the game andplace bets from balconies over the gametable (Gilbert, 1922). The ancient game ofsic-bo, in which bets were placed on the out-come of the roll of three dice, also was pop-ular. Both fan-tan and sic-bo are played inthe casinos today and remain popular withthe bettors.

Figure 2: 18th Century French Map of Macau Peninsula. (Source: Library of Congress.)

2 FOCUS on Geography Volume 53, Number 1

Period 3: Gambling Monopolized(1930-2002)

The next step in the evolution of gam-bling was taken when the governmentreplaced the licensing system with amonopoly system in which gamblingrights were given to one syndicate. Thisgave the government more control overthe industry. In return for the monopolyfranchise, the syndicate not only wouldpay a special tax, but, more importantly,it would bear related obligations as well.It was at this point that the governmentbegan to use the industry to serve thebroader needs of Macau. One of the signif-icant obligations was to be active inattracting tourists.

Authorities differ on exactly when andto whom the first monopoly concessionwas granted. But all agree it occurred inthe 1930s. According to Macau’s GamingInspection and Coordination Bureau, inthe year 1930, it was given to a syndicate

named Hou Heng. This syndicate held themonopoly until 1937, when it was given toanother syndicate named Tai Heng. Dur-ing this early period of monopolizationthree casinos were established, the bestknown being at the Hotel Central (stillextant) on the main street of Avenida Al-meida Ribeiro. The Hotel Central dressedup the gambling room and offered patronsa number of amenities such as food, ciga-rettes, and Chinese opera (Macau SARGovernment 1). By this time in Macau’shistory, the gambling houses were attract-ing tourists from a number of differentplaces—for example from Hong Kong andCanton by steamer, and from America bythe newly established trans-Pacific airroute (Figure 4).

The Second World War

During the Second World War, Macauwas officially neutral, or at least as neu-tral as it could be when surrounded by

Japanese military forces that wandered inand out at will. So many destitute refugeesflooded into the city during the war that atone point the Governor of Macau used allof the colony’s gambling revenue for theiraid. The wartime gambling halls were fre-quented by wealthy refugees, locals ofmeans, spies from various nations, andJapanese soldiers who reportedly lost a lotof money (Gunn, 1996, p. 124; McGivering,1999, p. 109; McCartney, 2006, p. 41).Although gambling is said to havedeclined briefly after the War, by 1951 itwas again in full swing. One reportercalled it ‘‘endemic in Macau. It goes on allthe time.’’ (Rand, 1951).

STDM—A New Era

The gambling business dramaticallychanged in 1962 when the governmentawarded the next monopoly license to asyndicate named Sociedade de Turismo eDiversoes de Macau (Macau Tourist and

Figure 3: In the 1870s the western press depicted the gambling houses of Macau as ‘‘dingy affairs with no pretentions toward decoration.’’ Anopium smoker sits in the lower left. (Source: Harper’s Weekly, June 14, 1873. p. 517.)


Amusement Company), or STDM. The TaiHeng monopoly, which failed to win arenewal of its contract, had not kept upwith the times. Its primary offering wastraditional Chinese games in quaint butoutdated facilities. STDM, which held themonopoly for 40 years, was able to makethe industry more productive. In returnfor the monopoly, STDM agreed to make anumber of infrastructural improvements.For example, it dredged and maintained abetter channel between Macau and HongKong and provided high-speed ferry ser-vice between the two (Figure 5). It builtupscale hotels to offer better accommoda-tions to the tourists when they arrived.STDM also agreed to contribute to thesocial well being of the territory. For exam-ple, it resettled a number of squatters,assisted the government in financing civicconstruction projects, and offered supportto social and educational foundations.

The monopoly also promoted Macautourism in other countries. Further, itintroduced European games of chance inaddition to the traditional Chinese gamesthat had dominated the earlier gamblingestablishments. Now the casinos were

beginning to look like their Western coun-terparts. And, STDM introduced grey-hound racing and horse racing asadditional forms of gambling. In a rags-to-riches story, the syndicate was headedby a man, Stanley Ho, who had been one ofthe destitute refugees of the Second WorldWar (McGivering, 1999, pp. 100-102).

The main center of gambling moveddown the street from the Hotel Central tothe new and much more elaborate CasinoLisboa, a casino and hotel complex thatbecame a landmark (Figure 6). It openedin 1970 and quickly became the mostfamous casino in Macau. By 1985, therewere five casinos in Macau. One, the float-ing Casino Palace, catered primarily tomaritime workers. The Casino Lisboaoffered high end VIP gambling. The othercasinos served market segments inbetween (Wong, 1988, p. 282).

The fortunes of STDM were boostedby the 1979 economic reforms in China,coupled with China’s more liberal policieson citizen travel outside of the country.The Chinese government established Spe-cial Economic Zones (SEZs) in which for-eign investment was permitted and export

industries were encouraged. One of thesezones was adjacent to Macau, where anew city, Zhuhai, grew out of farm land in

Figure 5: 1986 Map of Macau.Figure 4: In 1930, the gambling houses advertised with lanternsbrightly lit at night. (Source: Asia,Vol. XXX, April, 1930, p. 239.)

Figure 6: During the STDM monopoly years,neon lights replaced lanterns. (Photo by PhilipLoughlin.)


just a few years, creating great wealth andattracting millions of Chinese from allparts of the country. Naturally, since gam-bling was not legal in China, this provideda whole new clientele for the STDM justacross the border. Because casino gam-bling was not legal in Hong Kong either,and because other casinos in East Asiawere relatively undeveloped, Macau wasthe destination of choice for most of thevast China market. This cross-bordermarket became essential for future devel-opment of gambling in Macau.

In the 1980s, STDM began to promoteVIP rooms that soon became a major sourceof gross gambling revenue. The VIP roomswere created to cultivate players whowager substantial amounts of money. Therooms operate in many ways like a casinowithin a casino, restricted to VIP customersand marketed by VIP promoters and junketoperators who act as go-betweens for thecasinos and the customers (Wang and Ead-ington, 2008). The VIP rooms producedmore than two-thirds of all gross gambling

revenues in 2008 (Macau, SAR Government1). Outside of the VIP rooms, the mass mar-ket continued in full swing. It was reportedyou could find Chinese grandmothers insilk pajamas mixing with carefully dressedHong Kong businessmen.

Final Years of Portuguese Rule

Although the gambling industry tookon a new life in the 1960s, Portugal beganto lose its grip on Macau. In a spilloverfrom the Chinese Cultural Revolution, vio-lent riots broke out there in 1966. Manylocal Chinese communist sympathizerswere injured—some were killed—and anofficial apology was extracted from thePortuguese (Chan and Lo, 2006, p. 268).Then, in 1974, a revolution in Portugalwas followed by a policy of decoloniza-tion. Portugal offered to return Macau tothe Chinese after the 1966 riots and againafter the 1974 Portuguese revolution. Bothtimes China declined, thus postponing theinevitable until a time that suited China

better. Although the Portuguese remainedin nominal control, they had lost de factocontrol and now, once again, agents of theChinese government living in Macau dom-inated the Portuguese (Yee, 2001, p. 4;Lelyveld, 1973). During this period, Macauwas described as being, in essence, a cap-tive colonial power. ‘‘A Chinese territorycurrently under Portuguese administra-tion,’’ it was said (Chan and Lo, 2006,p. 269).

It was during these final years thatcasino-related crime became a problem.Triads were operating in the casinos. Tri-ads are international Chinese organized-crime syndicates similar to the Mafia. Theywere attracted by loan-sharking possibili-ties and by the VIP rooms, which were agood place to make and launder money. Itworked well for them for a while, until thelate 1990s when various Triad groupsfought violently over who was in charge.In 1999, the last year before the handoverof Macau, 37 people died in gang-relatedkillings (Manuel, 2001). The publicity was

Figure 7: Sic-Bo tables (foreground) still attract a large crowd today. (Photo by Philip Loughlin.)


doing no good for the gambling industry;tourists were being frightened away. For along time the Portuguese, whose authorityin Macau had been substantially weak-ened and who were on the way out,seemed incapable of controlling the vio-lence. Finally, undoubtedly orchestratedby the Chinese government and shortlybefore the handover, there was a crack-down on crime. In the year after thehandover only one person died in a gang-related killing. The presence of elements ofChina’s People’s Liberation Army wasprobably a major deterrent (Manuel, 2001).

At the handover, Macau became a Spe-cial Administrative Region (SAR) of China.An SAR is an administrative subdivision ofChina based on the principle of ‘‘one coun-try, two systems.’’ It is governed by itsown constitution, the Basic Law, underwhich the region is given a high degree ofautonomy, a separate political system, andthe right to its separate economic systemfor a period of 50 years. Macau followed

closely the model of Hong Kong, whichhad been returned to China in 1997 as anSAR. The model of ‘‘one country, two sys-tems’’ seems to be working reasonably wellso far in both cases.

Period 4: Gambling Liberalization(2002-present)

Liberalization

Immediately after the handover ofMacau, the new government announcedplans to study the gambling industry.There was a concern that the 40-year oldSTDM monopoly was too powerful andthat Macau could best be served by allow-ing competition. In addition, gambling inMacau was suffering from a poor reputa-tion. ‘‘It had an image of a seedy day-tripdestination with old, smoky casinos, andorganized crime.’’ (International Herald Tri-bune, 2006). Even the Lisboa complex, oncethe show place of Macau, seemed run-

down. Reporters described it as ‘‘dark andcramped.’’ (Friess, 2006). It was time for achange. It was time to liberalize. The goalsof liberalization were to make Macau amajor center of gambling by bringing com-petition and contemporary practices to theindustry, and to enhance the economy bydeveloping the tourist industry and pro-viding employment opportunities Further,the government hoped to go beyond thegambling and tourism market and attractthe so-called MICE (meetings, incentives,conventions and exhibitions) market. Forthat reason, Macau now offers several sitesfor large-scale meetings, some connectedwith the new casinos and some not(McCartney, 2006, p. 48; Fallows, 2007).

Using an internationally known con-sulting firm as an adviser, the governmentprepared a new gaming system that endedthe STDM monopoly and invited organi-zations with extensive gaming experienceand sources of capital to bid on franchises(Landler, 2002). Twenty-one companiesbid on the contract, attracted by China’sgaming market that was huge; potentiallyworth hundreds of billions of dollars(Healy, 2004). Three companies wereselected in 2002 to receive one of the new20-year contracts to run casinos. Theywere Sociedade de Jogos de Macau, or SJM(a subsidiary of STDM), Galaxy Casino,and Wynn Resorts, the last two beingAmerican companies with major opera-tions in Las Vegas2. Now everything wouldbe first-class and modern. Even the vocabu-lary changed. The word ‘‘gaming’’ wasnow preferred to ‘‘gambling,’’ and theword ‘‘players’’ preferred to ‘‘gamblers.’’

The first of the new casinos was thesuccessful Sands Macao, which opened in2004 to a raucous crowd pushing and shov-ing to get inside. By mid-2009, there were32 casinos where there had been only 11 in2002. From 2003, the last year before theSands Macau opened, through 2008, thenumber of annual visitors to Macau almostdoubled from 11.9 million to 22.9 million.More than half of these came from main-land China (Figure 7). (Macau SAR Gov-ernment 2).

During the same period of time, thetotal gaming gross revenue—that is thecasinos’ income before any expenses arededucted—grew by a multiple of almost

Figure 8: Map of Cotai area in modern Macau.

2 These three franchisees, or concession-aires as they are called, were each allowedto appoint another concessionaire, whicheach did, so that there are now six conces-sionaires in Macau running casinos.


four, going from US$ 3.6 billion to US$13.7 billion (Macau SAR Government 1).This growth was in spite of the economicdownturn of 2008. Gross revenue of US$13.7 billion is more than the two largestU.S. markets—Las Vegas, NV, and Atlan-tic City, NJ—combined. More than 99% ofthe total gross revenue comes from casi-nos, the rest from the other gamblingactivities that include horse racing, grey-hound racing, and a variety of lotteries.

The direct economic benefit for thegovernment of Macau comes from theincrease in tax revenue and other charges.The casinos pay a special gambling tax of35% levied on gross revenue. This producesmore than 75% of total government reve-nue (Macau SAR Government 3). There is arequirement that the franchisees pay up tothree percent more of the gross revenue tothe tax authorities for the specific purposesof urban development, tourism, and socialsecurity. Franchisees pay up to two percent

of the gross revenue to a public charity.Finally, the franchisees are charged a mini-mum of US$ 9.4 million annually for theright to hold their franchise. Because of thevery high tax on gaming, other taxes inMacau are relatively low, which is to theadvantage of other industries as well asindividuals (Pessanha, 2008, pp. 345-348).

The New Casinos

The new casinos are everywhere inMacau, including in Cotai, the landfilledarea between the islands of Coloane andTaipa (Figure 8). The Sands Macao wassoon followed by other notables—WynnMacau, a casino and hotel, in 2006 and theVenetian Macau, another casino and hotel,in 2007 (Figures 9 and 10).

SJM opened a new complex, theGrand Lisboa, next door to the old Lisboacomplex (Figure 11). In contrast to the oldLisboa, each of these new casino-hotels is

spacious and well-lit and offers hundredsof deluxe hotel rooms. Each offers shop-ping and entertainment, and in manyrespects functions as a resort. They look asif they had been uprooted from Las Vegasand replanted in Macau—which in a sensethey had. The 32 casinos offer a bewilder-ing array of 24 different games (Figure 12).They include roulette, black jack, andcraps, but the favorite game is baccarat. Itis the new fan-tan. Close to 90% of totalgross revenue from gaming comes frombaccarat, most of it from VIP customers.

The Macau casinos are not withoutcompetition. Although they are probablythe best known in East Asia, there areother gaming venues—for example SouthKorea, the Philippines, and some of theSoutheast Asian countries. However, incomparison to Macau, the growth of gam-ing in these other venues has been stuntedbecause of legal restrictions, and, in thecase of predominately Muslim countries,

Figure 9: The Wynn Macau, an example of one of the new luxurious hotel-casinos. It challenges the old and new Lisboa complexes across the street.(Courtesy Wynn Macau.)


because of religious restrictions. This maychange. The trend in many of these coun-tries has been towards legalizing gaming.In 2005, Singapore legalized casino gamingand issued two licenses for casino-resorts.In early 2009, Taiwan legalized gaming,and soon will have its own casino-resorts.Further, countries that already have casi-nos, such as South Korea, tend to beincreasing their number.

Conclusion

Over the last 450 years gambling inMacau has gone from a small sideshow tothe main event. The underlying policy oftaxing gambling to finance the governmentoriginated in 1847 and has continued tothis day under first Portuguese and thenChinese control. In the years immediatelyfollowing 1557, gambling was a back streetactivity. It attracted mostly local Chineseplus a few westerners. This was of no con-sequence to the local authorities—either

Chinese or Portuguese. In the 19th Centurygambling was legalized and taxed to raiseneeded revenue for the Portuguese govern-ment of Macau. At the beginning of the 21st

Century, the new government of theMacau SAR liberalized gambling in aneffort to boost the local economy. By 2009,the casinos were state-of-the-art, offering24 games of fortune 24 hours a day. Inaddition, Macau offers greyhound racing,horse racing, and a variety of lotteries. Allof this attracts more than 22 million visitorsa year and produces over 75% of the localgovernment’s revenue.

In thinking about Macau’s future,tourism and recreation appear to be themain activities on which Macau’s liveli-hood and economy will depend. Gamingand betting are the underpinnings of itstourist industry, and Macau appears wellpositioned and well located to take maxi-mum advantage of the Chinese enthusi-asm for gaming and recreation. The futurelooks bright indeed.

Acknowledgements

The authors wish to thank the Depart-ment of Geography at the University ofHong Kong and Mr. Wong Ting-bor (T.B.Wong) for assistance in drafting three ofthe maps. Thanks also to Ms. ReddyLeong of Wynn Macau and Ms. MabelWu of Venetian Macao for permission touse photos of their casinos and for theirgracious assistance and courtesies duringour visit to Macau. The Library of Con-gress allowed the copying of one of its18th century French maps for which weare most grateful.

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Figure 10: The architecture inside the Venetian Macao reflects thenew gaming image. (Courtesy Venetian Macao.)

Figure 11: The new Grand Lisboa towers behind the old Casino Lisboaand Hotel. (Photo by Philip Loughlin.)


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Figure 12: In 2009, the gaming tables are depicted as spacious, well lit, and surrounded by elaborate decorations. (Courtesy Venetian Macao.)


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Gambling in Macau