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 worlds 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 worlds 20 richest economies. This case study examines the extent to which its reputation as the Easts Las Vegas is deserved and includes contextualising background on Macaus development as a tourism destination, with a specic 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 dened as: a name, symbol, logo, word mark or other graphic that both identies 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 Ofce (MGTO), the ofcial 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-rst century gambling paradise has turned Macau from an unknown city to one of the worlds 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 MGTOs efforts to brand the city as a place for entertainment certainly seem to have paid off and the citys 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 (20022008) 2002
4672 202.2 6 125 99.4 23,496

Economic Indicators
Median Employment Earnings (MOP ) Employed population (000) Unemployment rate (%) GDP per capita (at current prices, MOP 000) Consumer Price Index (excluding rent) Gross Gaming Revenue (MOP 000)

2003
4801 209.9 5.5 142.8 97.8 30,315

2004
5167 228.4 4.1 181.5 98.8 43,510

2005
5773 237.45 4 195.2 103.1 47,133

2006
6701 277.3 3.8 230.9 108.4 57,521

2007
7800 313.3 3.1 292.2 114.5 83.846

2008
8000 326.3 1.7 313.1 124.3 109,826

Source: Statistics and Census Service of Macau (DSEC) (2009). 2

Case Study 1: Branding Macau as the Las Vegas of the Far East

Macaus 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 Peoples 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 ofcial 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 Macaus listing as one of the United Nations Educational, Scientic and Cultural Organizations (UNESCO) heritage sites and the ending of the multi-ber arrangement (MFA). By 2006 Macau was listed as one of the worlds twenty richest economies, when its gambling revenue surpassed that of Las Vegas. Macaus gambling industry was started in the sixteenth century when it rst opened its harbour to visitors and it was legalised in 1847 by Macaus Portuguese government. The citys 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 Diverses de Macao (STDM) and its rst casino, the Casino Estoril, opened. The STDM dominated the citys 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 citys 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 citys 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.

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 ve star hotel, in May 2004 Las Vegas Sands (an afliate 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 hotelcasino 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 ve 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 ve star hotel rooms built under the six different concessionaries are available. These, together with the 3653 hotel rooms already available in the ve 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 20032008. As a whole, there are currently 46 hotels operating in Macau 20 ve star, 12 four star and 14 three star together with 31 casinos in the Macau Peninsula and on Taipa Island.

Table 2 Concessionaires
SJM Galaxy Venetian Wynn Melco MGM Total

Number of casinos (20032008) 2004

13 1 1 0 0 0 15

2003
11 0 0 0 0 0 11

2005
15 1 1 0 0 0 17

2006
17 5 1 1 0 0 24

2007
18 5 2 1 1 1 28

2008
19 5 3 1 2 1 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 Macaus 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 19992009, 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 Macaus 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 beneting 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 owed 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 ow 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.

Macaus 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 MGTOs tourism marketing. Interestingly, although Macau is famous for its gambling industry, casino gambling is fourth out of the top ve main reasons for visiting the destination which seems to contradict the popular belief in the city that visiting casinos is the
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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 Macaus 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, Macaus scores of amboyant 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 gure 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 FDI Indicators

No. of FDI enterprises Total equity capital Total stock of FDI Inward FDI Direct Investment Income No. of Employees of which: residents

Major indicator of inward foreign direct investment (2001-2007 (billion MOP) 2001
560 2.7 23.8 1.3 2.3 31,210 29,905

2002
715 10.0 26.1 3.0 3.2 29,629 27,930

2003
723 11.0 28.5 3.3 4.0 28,623 26,485

2004
1024 11.0 31.2 3.9 7.2 36,718 32,524

2005
1411 12.3 40.2 10.0 11.3 45,204 39,674

2006
1823 13.1 52.0 12.8 19.7 69,334 54,070

2007
1853 14.5 63.0 13.2 11.1 78,341 61,031

Source: Gaming Inspection and Coordination Bureau, Macau SAR (2009).

Case Study 1: Branding Macau as the Las Vegas of the Far East

Figure 1 FDI inows 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 Macaus 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)

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 ofcials can apply for business visa. This imposed signicant 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 rst 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)

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 Macaus gambling industry has undoubtedly had a dramatic impact on the citys 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, reecting 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 citys 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 prole 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 Ofce (http://www.macautourism.gov.mo), how do you assess the successfulness of the branding activities carried out by the Macau Government?

Destination Branding

2. Having visited the ofcial website of the Macau Government Tourism Ofce (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 rst 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
Anonymous. (2006). Macau: Asias New Boom Town. Hong Kong, China: The University of Hong Kong, Asia Case Research Center. China Internet Information Center (CIIC). (2009). National Peoples Congress. Retrieved 28 March 2009, from the World Wide Web: http://china. org.cn/english/index.htm. Gaming Inspection and Coordination Bureau. (2007). Annual Report of Concessionaires. Retrieved October 22, 2008, from the World Wide Web: http://www.dicj.gov.mo/CH/index.htm Gaming Inspection and Coordination Bureau. (2009). Gaming Statistics. Retrieved April 22, 2009, from World Wide Web: http://www.dicj.gov.mo/ EN/Estat/DadosEstat/2009/estat.htm#n5 Lam, C. C., & Vong, T. N. (2010). Macau: The Gambling Paradise. Proling the Roles and Motives of Customers. Journal of China Tourism Research. Li, J. (2007, October 18). Macau JulySept casino gambling revenue rises 46%. The Wall Street Journal. Retrieved October 22, 2008, from the World Wide Web: http://www.marketwatch.com/news/story/macau-july-sept-casino-gambling-revenue/story.aspx?guid=%7BEA718FBD-9DEE-4756A79C-E986831DC992%7D Statistics and Census Service of Macau. (2009). Statistics. Retrieved 22 April 2009, from the World Wide Web: http://www.dsec.gov.mo/e_index.html. Ritchie, J. R. B., & Ritchie, R. J. B. (1998). The Branding of Tourism Destinations: Past Achievements and Future Challenges. Paper presented at the Annual Congress of the International Association of Scientic Experts in Tourism, Destination Marketing: Scopes and Limitations, Marrakech, Morocco.
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