Case Study 1: Branding
Macau as the Las Vegas of
the Far East
Clara Lei Weng-Si and Cindia Lam Ching-Chi
Institute For Tourism Studies (IFT), Macau
Introduction
A former Portuguese colony, the tiny city of
Macau at the southern tip of China has captured
the world’s attention in the last few years. Its recent rise to prominence began not because of its
handover back to China in 1999, but as a result
of the liberalization of its gambling industry in
2002 and its subsequent development of a reputation as the Las Vegas of the Far East. Before this,
most of its population was employed in small
enterprises (especially family business) or in the
public utilities sector. Since this date, however,
tremendous changes have taken place in Macau
and it now has the highest gross domestic product per capita in Asia and is one of the world’s
20 richest economies. This case study examines
the extent to which its reputation as the East’s
Las Vegas is deserved and includes contextualising background on Macau’s development as a
tourism destination, with a specific focus on the
changes after the liberalization of its gambling
industry in 2002.
Destination Branding
According to Ritchie and Ritchie (1998: 103), a “destination brand” has
been defined as:
a name, symbol, logo, word mark or other graphic that both identifies
and differentiates the destination; furthermore, it conveys the promise of
a memorable travel experience that is uniquely associated with the destination; it also serves to consolidate and reinforce the recollection of
pleasurable memories of the destination experience.
It could be said that Macau has undergone an atypical branding experience.
Through the activities of the Macau Government Tourism Office (MGTO), the
official branding organization, Macau has been differentiated as a place for relaxation, entertainment, recreation and Meeting, Incentive, Convention and Exhibition
(MICE) activities. However, more organically, through other global communication international channels like the world media, Macau has been differentiated
as a gambling paradise. Both these images of the city have coalesced into a very
favourable market position for the destination, resulting in positive outcomes for
the tourism industry of Macau.
Becoming a twenty-first century gambling paradise has turned Macau from
an unknown city to one of the world’s 20 richest economies. This has aroused
enormous global attention and led to a huge upsurge in tourist arrivals, who are
also attracted by its unique cultural heritage and its eclectic cuisine. Therefore, the
MGTO’s efforts to brand the city as a place for entertainment certainly seem to
have paid off and the city’s enormous gaming revenues are supported by “highroller” gamblers and millions of less wealthy but equally valued tourists (Table 1).
Table 1
General economic indicators of Macau (2002–2008)
Economic Indicators
2002
2003
2004
2005
2006
2007
2008
Median Employment
Earnings (MOP )
4672
4801
5167
5773
6701
7800
8000
Employed population
(‘000)
202.2
209.9
228.4
237.45
277.3
313.3
326.3
Unemployment rate (%)
6
5.5
4.1
4
3.8
3.1
1.7
GDP per capita (at current prices, MOP ‘000)
125
142.8
181.5
195.2
230.9
292.2
313.1
Consumer Price Index
(excluding rent)
99.4
97.8
98.8
103.1
108.4
114.5
124.3
Gross Gaming Revenue
(MOP ‘000)
23,496
30,315
43,510
47,133
57,521
83.846
109,826
Source: Statistics and Census Service of Macau (DSEC) (2009).
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Case Study 1: Branding Macau as the Las Vegas of the Far East
Macau’s tourism industry and gaming
Macau is a small city with a geographic area of 29.2 square kilometres and
a population of 538,000, of which 313,000 are employed. From the sixteenth
century until 1999 when the city was returned to the People’s Republic of
China (China), Macau was under Portuguese administration. However, prior
to the negotiation of the handover of sovereignty between China and Portugal, major economic changes took place from the mid-1970s onwards. The
pegging of the exchange system for Patacas (the official currency of Macau)
began in the mid-1970s, followed by the establishment of a closer diplomatic
relationship between China and Portugal in the late 1970s. The handover negotiations began in mid-1980s, leading to the return of sovereignty to China in
1999 and the liberalization of the Macau gambling industry in 2002. In 2003
came the development of the Closer Economic Partnership Agreement (CEPA)
and the Individual Visitor Scheme (IVS), followed in 2005 by Macau’s listing
as one of the United Nations Educational, Scientific and Cultural Organization’s (UNESCO) heritage sites and the ending of the multi-fiber arrangement
(MFA). By 2006 Macau was listed as one of the world’s twenty richest economies, when its gambling revenue surpassed that of Las Vegas.
Macau’s gambling industry was started in the sixteenth century when it first
opened its harbour to visitors and it was legalised in 1847 by Macau’s Portuguese government. The city’s modern gambling industry emerged in 1962 with
the introduction of a monopoly system when the casino monopoly concessionaire was registered as the Sociedade de Turismo e Diversões de Macao
(STDM) and its first casino, the Casino Estoril, opened. The STDM dominated
the city’s gambling market for the next 40 years. However, after the handover
of sovereignty to China in 1999, the Macau Special Administrative Region
(SAR) began the liberalization of the gambling industry, which has been the
major source of revenue for the city’s government since the 1960s. The liberalization became effective on 8 February 2002, through the Gambling Tender
Commission of Macau Special Administration Region which ended more than
forty years of gambling monopoly in Macau. Since then, the city’s gambling
industry has been operated by three concessions and three sub-concessionaires
(most of the gambling operators also run hotel businesses). The concessions
are: Sociedade de Jogos de Macau (SJM), a subsidiary of STDM; Galaxy
Casino, S.A. (Galaxy) based in Hong Kong; Wynn Resorts (Macao), based in
the USA. The sub-concessionaires are: the Venetian Macao S.A. (Venetian);
MGM Grand Paradise, S.A. (MGM); the Melco Crown Jogos (Macau), S.A.
3
Destination Branding
Once the six companies were granted the concession and the sub-concessions were formed, most of them began their construction of casinos and
other related facilities. Investors in casino operations are obliged by law to
build hotels and other recreational facilities in Macau. After the opening of
Sands Macau, a casino attached to a five star hotel, in May 2004 Las Vegas
Sands (an affiliate of the Venetian) was thereby obligated to invest MOP567
million (1USD is approximately equal to 8MOP) in its Macau developments
by June 2009. Meanwhile, the Wynn contract stipulated that there should be
a hotel, casino and recreational complex to be operated by Wynn, and this
MOP567 million hotel–casino project was completed and opened at the end
of 2006. As a result of these kinds of investment projects, the Macau hotel
industry has undergone a dramatic structural change.
As shown in Table 2, all the concessionaires have established casinos
since 2004 and the total number of casinos has increased from 11 in 2003
to 31 in 2009. Most of the hotel projects are five star and more than 18,000
hotels rooms are expected to be available in this category after all the current projects are completed. As of December 2008, a total of 7265 five
star hotel rooms built under the six different concessionaries are available.
These, together with the 3653 hotel rooms already available in the five star
hotels, which existed prior to the 2002 gaming liberalization, made a total
of 10,918 hotel rooms at the end of 2008. For four and three star hotels, the
number of rooms has increased from 4660 to 7038 during 2003–2008. As
a whole, there are currently 46 hotels operating in Macau – 20 five star, 12
four star and 14 three star – together with 31 casinos in the Macau Peninsula
and on Taipa Island.
Table 2
Concessionaires
Number of casinos (2003–2008)
2003
2004
2005
2006
2007
2008
SJM
11
13
15
17
18
19
Galaxy
0
1
1
5
5
5
Venetian
0
1
1
1
2
3
Wynn
0
0
0
1
1
1
Melco
0
0
0
0
1
2
MGM
0
0
0
0
1
1
Total
11
15
17
24
28
31
Source: Gaming Inspection and Coordination Bureau, Macau SAR (2009).
4
Case Study 1: Branding Macau as the Las Vegas of the Far East
As a result of Macau’s return to China in 1999 and liberalization of its gambling industry and the subsequent casino and hotel developments, the number
of tourists coming to the destination increased continuously throughout the
decade 1999–2009, reaching almost 30 million visitors in 2008 (a 12% increase in 2007). Unemployment rate has therefore fallen consistently since
2004, falling from 4.1% to 3.6% at the end of 2008, whilst Macau’s gross
domestic product (GDP) per capita is MOP313,000 and GDP real growth rate
is 14.3% (Statistics and Census Service of Macau, 2009). The tertiary sector
contributed an average of 90% to the Macau GDP between 2002 and 2007, an
annual average of 51% of which came from the gambling industries (Statistics
and Census Service of Macau, 2009). As might be expected, the employment
category of “recreational, cultural, gambling and other service” is the most
important in Macau, accounting for almost 70% of the employed population.
Within this, “hotels, restaurants and similar services” and “wholesale and retail trade” account for over 30% each, whilst those employed in “construction”
(about 30% of the employed population) are benefiting from the foreign direct
investment (FDI) underpinning the casino concessionaries – and of course,
numerous further casino and hotel projects are also in the pipeline.
Indeed, in terms of sectoral distribution, foreign capital to Macau has flowed
mainly into cultural, recreational, gambling and other services, which together
accounted for MOP37.9 billion in 2007, or 60% of the total inward FDI. FDI
in hotels and restaurants has raised in recent years, reaching MOP2.5 billion at
the end of 2006, 4% of the total inward FDI (although this slowed to MOP1.4
billion at the end of 2007). Table 3 and Figure 1 demonstrate how the inward
FDI flow has slowly picked up since 2002 from MOP3.0 billion to MOP3.3
billion in 2003, MOP3.9 billion in 2004 and further leaps to MOP10 billion in
2005 and MOP13.1 billion in 2007, as foreign capital from the casino operators has gushed into the city.
Macau’s tourism industry
Sightseeing, cuisine, culture and heritage, shopping, and casino gambling
are the major reasons why tourists visit Macau (Lam & Vong, 2010) –
attractions which are consistent with the MGTO’s tourism marketing. Interestingly, although Macau is famous for its gambling industry, casino gambling
is fourth out of the top five main reasons for visiting the destination – which
seems to contradict the popular belief in the city that visiting casinos is the
5
Destination Branding
primary tourist motive. In order to understand this apparent discrepancy, we
need to consider the differences between “hard-core” gamblers and tourists
who might visit casinos as a tourist attraction. According to a study of casinos in Macau by Asia Case Research Center (2006), net wins from highrollers (i.e. those who bet high stakes) were almost three times higher than
from the mass-market segment. The Gaming Inspection and Coordination Bureau of Macau (2007) also noted that two-thirds of the revenue from casinos
came from high-rollers. According to analysts and casino industry executives,
high-rollers are hard-core gamblers who will spend half a million or more of
Macau’s local currency (US$62,500) in casino betting on each of their visits to
Macau (Li, 2007). Gambling is obviously the main purpose of these tourists’
trip to Macau but for most others, Macau’s scores of flamboyant casinos are
unquestionably must-see attractions in the city and in this sense, their casino
visit is more likely to be regarded by them as sightseeing a tourist landmark.
This explains the high ranking of sightseeing and the relatively low ranking
of casino gambling as a major reason for visiting Macau – most tourists look
upon visiting casinos as an act of sightseeing.
During 2008, more than 30 million tourists came to Macau, roughly a 12%
increase on the 27 million who came in 2007 and building on double figure
percentage increases from 2004. At the sam e time, however, the average length
of stay for the tourists is only 1.44 days and the average hotel occupancy rate
for 2008 is just 74.5%, which represents a 3.5% decrease compared to 2007
Table 3
Major indicator of inward foreign direct investment
(2001-2007 (billion MOP)
2001
2002
2003
2004
2005
2006
2007
No. of FDI
enterprises
560
715
723
1024
1411
1823
1853
Total equity capital
2.7
10.0
11.0
11.0
12.3
13.1
14.5
Total stock of FDI
23.8
26.1
28.5
31.2
40.2
52.0
63.0
Inward FDI
1.3
3.0
3.3
3.9
10.0
12.8
13.2
Direct Investment
Income
2.3
3.2
4.0
7.2
11.3
19.7
11.1
No. of Employees
31,210
29,629
28,623
36,718
45,204
69,334
78,341
of which:
residents
29,905
27,930
26,485
32,524
39,674
54,070
61,031
FDI Indicators
Source: Gaming Inspection and Coordination Bureau, Macau SAR (2009).
6
Case Study 1: Branding Macau as the Las Vegas of the Far East
Figure 1 FDI inflows and stock (2001-2007). Source: Statistics
and Census Service of Macau (DSEC) (2009)
(Statistics and Census Service of Macau, 2009) (see Figure 2). To further contextualise Macau’s tourism growth, we must also understand that aside from
the liberalization of the gambling industry, the tremendous increase in tourists
is also a result of a critical tourism policy, the Individual Visit Scheme (IVS)
implemented by the Central Chinese Government.
Figure 2 Percentage change on tourist arrival and hotel occupancy of Macao for
Years 2004-2008. Sources: Macao Statistics and Census Service (2008)
7
Destination Branding
Individual visit scheme (IVS)
In China, residents have to adhere to strict procedures to apply for overseas
travel. Before the implementation of IVS, in order to visit Macau, residents
had to join group tours or apply for a business visa. The cost of the group
tours was expensive and only those individuals who work in companies with
overseas business connections or senior government officials can apply for
business visa. This imposed significant barriers for Chinese residents to travel
abroad and in order to support the development of the tourism industry in
Macau and Hong Kong, China implemented the IVS in 2003.
The IVS is a policy implemented by the Central Chinese Government, which
allows residents of 49 Mainland cities to visit Macau and Hong Kong in their
individual capacity. The scheme was first introduced in four Guangdong
cities (Dongguan, Zhongshan, Jiangmen and Foshan) on 28 July 2003. The
scheme has since expanded progressively and it is now implemented in the
following cities: all of the Guangdong province (all 21 cities), Beijing, Shanghai,
Tianjin, Chongqing, Nanjing, Suzhou, Wuxi (Jiangsu), Hangzhou, Ningbo, Taizhou
(Zhejiang), Fuzhou (municipal district), Xiamen, Quanzhou (Fujian), Chengdu
(Sichuan), Jinan (Shangdong), Dalian, Shenyang (Liaoning), Nanchang (Jiangxi),
Changsha (Hunan), Nanning (Guangxi), Haikou (Hainan), Guiyang (Guizhou),
Kunming (Yunnan), Shijiazhuang (Hebei), Zhengzhou (Henan), Changchun
(Jilin), Hefei (Anhui) and Wuhan (Hubei). There are approximately 270 million
Mainland residents from the above 49 cities with permanent household registration and they are eligible to apply for the relevant exit endorsement from the
appropriate Mainland authorities (China Internet Information Center, 2009).
Figure 3 Macau visitor arrivals by place of residence, 2002-2008.
Source: Statistics and Census Service of Macau (DSEC) (2008)
8
Case Study 1: Branding Macau as the Las Vegas of the Far East
The scheme has resulted in an enormous surge in the number of Mainland
visitors when, as seen in Figure 3, visitors from Hong Kong used to dominate
the total number of Macau tourist arrivals. Since the implementation of the
IVS in 2003 this domination has been replaced by the Mainland visitors.
Conclusion
The liberalization of Macau’s gambling industry has undoubtedly had a dramatic impact on the city’s development as a tourist destination and its organic
destination image has been closely linked to the gambling industry developments. Nevertheless, research (Lam & Vong, in press) reveals that sightseeing
and not gambling is the primary reason most people visit Macau, reflecting
the marketing strategies of the Macau tourism authorities which do not focus
particularly on gambling. In building a place reputation for Macau and to diversify its tourism offerings, the city’s tourism authorities have worked hard
for some years to promote festivals and sports events. The Meeting, Incentive,
Convention and Exhibition (MICE) segment has been a major marketing focus for the Macau tourism authorities and notable events held recently include
the East Asian Games (2005) and the Asian Indoor Olympic Games (2007),
whilst the Macau Grand Prix and the Dragon Boat Competition are annual attractions for tourists. In addition, there are many more conventions and exhibitions, which take place each year. Despite these high profile events, it seems as
though the branding created by the Macau tourism authorities based on events
is neither being effectively communicated to potential tourists nor that tourists simply do not see event tourism as a strong motive to visit Macau (Lam &
Vong, in press). This leaves Macau with a rather blurred brand image and with
a gap between what the MTGO is marketing and what tourists say they come
to enjoy in the city. Despite this, of course, Macau emerges as a major success
story of recent tourism development as the city is prosperous and the outlook
encouraging – largely as a result of the IVS that is enabling Chinese Mainland
tourists to visit this intriguing city which is on their very doorstep.
Discussion questions
1. Based on this case study and further information from the Macau Government Tourist Office (http://www.macautourism.gov.mo), how do you assess the successfulness of the branding activities carried out by the Macau
Government?
9
Destination Branding
2. Having visited the official website of the Macau Government Tourism
Office (http://www.macautourism.gov.mo), provide suggestions to enhance
how the branding strategy is carried through online.
3. Statistically, Macau has experienced tourism prosperity since the liberalization of the gambling industry. What kind of negative impacts might also
be associated with this development?
4. Examine the destination of Las Vegas in the USA (http://www.visitlasvegas.com). Compare the differences and similarities between Macau and
Las Vegas in the first decade following the liberalization of the gambling
industry in each city (Macau in 2002 & Las Vegas in 1931). Discuss how
each city uses gambling in its destination branding activities and consider
the impacts of gambling on their respective economies, particularly since
the current economic downturn.
References
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http://www.dicj.gov.mo/CH/index.htm
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