When the tables turn

The year 2007 will go down in history as the time when Macau finally put a stake through the heart of its quaint, sleepy image - and 2008 might be when it cements its place as the brightest jewel in the region's leisure crown. Many of the city's achievements over the past 12 months border on the phenomenal. It's surpassed Las Vegas in terms of gambling revenue and is closing in on Hong Kong in terms of visitor numbers; it opened the world's largest casino and played host to the world's sport and entertainment elite. The Macau Gaming Inspection and Coordination Bureau estimates annual casino revenue leaped nearly 50 per cent last year to a record US$10 billion.

Macau has no plans to pause for breath. Over the next few months, the gargantuan Venetian Macao Resort Hotel will be the stage for reunited rockers The Police and a triple world championship boxing bout, the upmarket Four Seasons chain will add a property to the developing Cotai Strip and the Galaxy Entertainment Group will complete the first phase of its GalaxyWorld Resort - a palatial development that could dwarf even the Venetian.

Small wonder the former Portuguese colony continues to generate a healthy buzz among gamblers, analysts and visitors alike. The cash being poured into new infrastructure, its star-studded events and its proximity to the mainland all make Macau an 'immense draw' for Asia's affluent, says John Koldowski, director of the strategic intelligence centre at the Pacific Asia Travel Association. 'In the short term, the only word is 'wow',' he says.

Rob Hart, a Hong Kong-based equities strategist with Morgan Stanley, says the 'spectacular' surge of interest in the city means monthly arrivals should continue to climb. Macau, he says, 'will probably never be quiet again'.

That suits people like Kevin Wong just fine. A few months ago, when the former chairman of the Asia Pacific Financial Services Association had to choose a base for its 2009 Life Insurance Congress, Hong Kong and Macau were both in the running. But the association eventually decided on Macau because the ready availability of casinos - and other, less salubrious forms of amusement - would guarantee 'a lot of excitement' among the 10,000 delegates expected to attend the event, according to Wong.

Even seasoned travellers who appreciated the old Macau's drowsy colonial character don't begrudge the city its recent success. 'By turning it into a big, Las Vegas-style destination, I think [developers] are broadening Macau's appeal,' says Philip Kenny, a 35-year-old resident of Hong Kong who's been visiting and living in the region for about a decade. It should be noted that a lot of the new development is being undertaken on reclaimed land and Macau has managed to save and maintain many more historic buildings than Hong Kong has. 'Dare I say it, [it could become] a family destination, and that can only be a good thing,' says Kenny.

So impressive has our fellow special administrative region's performance been that other territories are queuing up to adopt the Macanese model. Legislators in Japan have begun talks on a proposal to license a few mega-casinos, which they hope will resurrect the country's moribund tourism industry. Singapore has already given the go-ahead for two gaming operations of its own. And, despite the consistent refusal of authorities to comment, rumours persist that the Hong Kong government is poised to drop a longstanding ban on casinos to build a large facility on Lantau - which is not surprising, considering current Hong Kong Tourism Board chairman James Tien Pei-chun was one of the original advocates of the idea. But behind the bright lights and surging revenues, there are signs Macau's boom has come with some baggage its competitors are unlikely to envy.

The problems begin even before the visitor reaches its shores. Scalpers are contributing to a shortage of seats on the ferries that ply the waters between Macau and Hong Kong, snapping up tickets and reselling them to desperate commuters at inflated prices. The international airport operated at nearly full capacity last year and upgrades have been slow in coming.

The reliability of the ferries has been called into question by the January 11 collision between two high-speed vessels, which left about 100 passengers injured and more than 20 hospitalised. Operator Turbojet has launched an investigation into the incident, which probably had more to do with abnormally foggy conditions than any negligence on the part of the company or its captains. But as Turbojet and its competitors pile on more services to meet demand - the number of visitors to Macau arriving by boat leaped about 16 per cent last year - the route is seeing heavier traffic, making accidents more likely.

On land, immigration, taxi and hotel check-in queues have swelled to previously unheard-of lengths. For first-time visitors such as John Lui, a Singaporean businessman who recently visited for a conference, booming Macau can be an unsettling experience.

'The lines at the airport and the ferry point are long; [I] wish they had had more staff to process them. It's a good thing I got all my tickets in advance - it would have been quite a strain doing it on the spot.'

The burgeoning and increasingly cutthroat business in shepherding around groups from the mainland has led to incidents such as the one seen on December 4 on Hac Sa beach, when riot police had to be called in to calm 120 tourists from Hebei province who reacted violently to attempts by guides to hold them hostage after they refused to do any more shopping.

Lui believes Macau's service culture has failed to evolve. 'There are no smiles or 'can I help yous',' he says. 'Once you get past the [hotel] front desk, the level of English plummets ... God forbid you get lost anywhere without Cantonese.'

The director of the Macau Government Tourist Office, Joao Manual Costa Antunes, acknowledges authorities are facing 'a great challenge ... not only in terms of providing quality service but also to provide all the infrastructure and management that we need to offer [a] satisfactory experience to our visitors'. But he insists they're working to address shortcomings. Antunes says the office has withdrawn the licence of the tour operator involved in the Hac Sa fiasco and will 'strive to stamp out' future 'malpractices' through co-operation with other government agencies and rigorous application of the law. The office is also offering 'strenuous support' for training programmes intended to boost service standards. But the city's affluence makes it a magnet for opportunists, who are likely to do its reputation further damage.

One company that's already been hit with this label is Metis TransPacific, accused of being an imaginary air carrier. The little-known firm began advertising dirt-cheap flights between Macau and Vancouver, Canada, last year that could be purchased only by wiring money directly to a local bank account. Despite promises to start moving passengers in time for Christmas, Metis has yet to take off, in any sense of the term, and little attempt has been made to explain the delays beyond mysterious allegations on its website that 'rumour mongering and baseless accusations' have so far stymied its ambitions.

Edward Plaisted, chief executive of British-based industry consultancy Skytrax, has dismissed Metis as a 'spoof operation' set up to 'falsely obtain substantial sums of money'. Owner Chris Colbourne begs to differ, insisting the airline has arranged to compensate all customers affected by the delays and intends to launch flights in the next few months.

Metis hasn't been the only operator to leave holidaymakers stranded. The CotaiJet, a classy ferry service set up by the Venetian to bring visitors from Hong Kong directly to the Cotai Strip, was shut down on December 11 after only 10 days of operation. The suspension came on the orders of a Macanese court after a rival service, Hong Kong North West Express, disputed the government's right to award the operator, Cotai Waterjets, the lucrative route without a proper tendering process.

Stories such as these serve as warning bells that unchecked growth is fast becoming the largest issue facing Macau's tourism industry, and highlight the need for the city to concentrate on 'maintaining a satisfied audience' rather than stoking more demand, according to Koldowski.

'[Visitors'] expectations will increase over time ... so sooner or later [the government] definitely needs to begin focusing on other variables than simply the sheer number of arrivals,' he adds.

Of course, tourists' expectations aren't the only ones the government has to worry about. A marked increase in street protests last year, one of which resulted in police firing live bullets to warn off demonstrators, underlined the fact many locals have yet to share in the city's growing prosperity. In a recent survey of Macanese residents by a group of local and Hong Kong academics, about 50 per cent of those polled expressed dissatisfaction with the way the city is heading.

Some voices are warning that these rumbles of discontent could spiral into serious unrest, and attribute them to the same root cause - Macau's heavy reliance on casinos to attract the tourist dollar. With a constant stream of properties opening up, workers with hospitality experience or training have become a very hot commodity. In the past few years, average wages in the sector have almost doubled.

That makes it a great time to be a concierge or card dealer, but bigger pay packets have pushed up prices for everyone, including people who casinos and hotels aren't inclined to hire. Lee Kin-yun, head of a local gaming and construction workers' association, says Macau's new mega-resorts are particularly reluctant to employ the middle-aged - and, if they do, they only offer the temporary contracts presented to foreign labourers. He dismisses the city's ongoing makeover as 'superficial glamour'. 'There are a lot of people who haven't been able to take any good from it,' Lee says, sighing.

That's a sentiment shared by Jose Pereria Coutinho, an outspoken deputy at the Legislative Assembly, who says it's an 'absolute shame' that with its blazing economy about 30,000 people in Macau still fall below the poverty line. He's not even convinced the high salaries the leisure sector throws at some young people are a good thing.

'It's a false promise because they're spending all this money on [gambling], going to karaoke bars and buying expensive cars,' he says. 'They're not saving for their future, and Macau doesn't have a mandatory provident fund, so what's going to happen years from now?'

The rapid appetite of mega-resorts for labour has also forced the government to open the door to more foreign workers, most from neighbouring Guangdong province. More than 80,000 were officially welcomed last year, which has inevitably fuelled resentment in some segments of the relatively small domestic population. 'They're taking jobs from local people,' grumbles Lee, who says he's seen several cases of natives receiving their walking papers immediately after companies received the go-ahead to import help.

Nigel Morrison, chief financial officer of Galaxy Entertainment Group, says the firm sources workers locally whenever possible, but there aren't always enough of them to go around. 'We're not necessarily out to get the cheapest labour ... we want to support the local community,' he explains.

But he also admits the rise of sprawling, all-inclusive complexes such as Galaxy's much-anticipated GalaxyWorld has 'caused a lot of difficulties to some' - not least the hundreds of smaller restaurants, hotels and souvenir shops that also depend on holidaymakers and find themselves short of staff whenever a new property goes on a hiring spree.

Apparently alarmed by the backlash against the city's casino fixation, Macanese officials have been sounding more conciliatory of late. Chief executive Edmund Ho Hau-wah admitted in a November policy address that efforts to deal with the social problems accompanying development had been 'inadequate' and promised to make up for the oversights with more government-backed housing, education and pension plans. Authorities are also set to pass a labour law that officials say will improve the lot of local workers by introducing holiday allowances, extended maternity leave and minimum overtime rates. It will also streamline the labour importation process since opening the door to more foreigners is 'the only way to solve [shortages]'.

But, Coutinho argues, the law, which he describes as 'ladies' make-up', is unlikely to help low-income earners because it won't set minimum wages or give workers more rights in labour disputes.

The government is also moving to inject more variety into Macau's tourism industry, having set up an agency to draw more conventions to the city. It is heavily promoting cultural events that showcase its colonial heritage, such as an elaborate Easter procession. The aim, says Antunes, is to make Macau a 'model of diversified tourism' that draws non-gambling visitors with a seductive blend of historical, retail and culinary attractions.

Lui, however, thinks it's too late to play up Macau's traditions. 'The overlay of brash, modern culture is just too strong to make Macau much of an 'old world charm' type of attraction.'

The big question is what will happen to Macau if visitors stop coming - or spending. Any large-scale disaster, such as a terrorist attack or disease outbreak, would deal the tourist trade a heavy blow, but Hart reckons Macau has more to fear from the onset of simple 'casino fatigue'.

'The big driver [for tourism] has been new products' such as the Venetian, he says, and the supply of those is finite. Shares in firms running resorts in the territory, including Wynn Resorts and Las Vegas Sands, tumbled in the first days of the new year, when preliminary figures for December showed gaming revenues grew by just over 32 per cent - impressive, but only about half the rate registered for the same month in 2006.

Analysts also viewed the debut of Macau's latest mega-project, the MGM Grand, as a disappointment - despite a massive advertising blitz, it racked up a market share of only 2 per cent in its first week or so of operation.

If these trends continue, or more incidents dent Macau's image, 2007 might be remembered as the time the city hit its peak - and this year the beginning of a long, painful decline. Having transformed itself into Asia's unofficial entertainment capital, Macau has put all its cards on a single table. It remains to be seen whether the bet will pay off.