Quotes of the Day

I've lost my nerve, and I'm not even gambling. The VIP room at the new Sands casino in Macau isn't for anyone with a weak stomach or a tight wallet, and I, unfortunately, have both. I'd need to put down $62,500 up front just to get a seat at one of the baccarat tables, and then ante up a minimum $1,250 for each hand. Yet at one table half a dozen Chinese tourists are tossing chips like they're playing tiddlywinks, while at another a Japanese man smokes a long cigarette and serenely studies his cards. I feel my blood pressure rising just watching them. For me, this is a rare glimpse into the exclusive realm of high rollers and high stakes, a world of expensive wines, private masseuses, and gourmet steaks. Here in Macau, excess is a 24-hour industry. The superrich get whatever they want, whenever they want it—palatial suites with steam rooms, karaoke machines, Jacuzzis, massage tables, plasma TVs and personal butlers. But don't even think of booking a room. The Sands invites only its highest high rollers to stay—and gives them use of the suites for free.

Macau these days is offering a similar heart-pounding experience to millions of other Asians, albeit on a less hedonistic scale. Downstairs in the Sands' main casino, which nearly sparked a riot because of its popularity when it opened nine months ago, it's 2 a.m. and the place is teeming. Everyone from young couples to old ladies jostle around the blackjack and fan-tan tables. On a stage behind a bar, a band featuring a blond Cuban vocalist in a shimmering gold bodysuit performs thumping covers of Shaggy and James Brown. Chinese tourists stand with mouths agape, unsure how to react. One of the musicians, desperate for approval, decides to give the crowd a quick lesson: "If you like this band, please clap your hands," he pleads.

Asia has never seen anything like it, and Macau is just warming up. Once a pleasant but seedy backwater—noteworthy only for its melting-pot architecture and cuisine and a handful of rundown gambling halls—the former colonial outpost is rapidly transforming into the region's pleasure dome: a paradise of fast bucks, showgirls, splendor and sin. Not far from the Sands, Las Vegas casino king Steve Wynn, who created the famed Mirage and Bellagio hotels, is opening a $700 million resort. A short drive away, on a stretch of reclaimed land called Cotai between Macau's two outer islands, another Vegas mogul, Sheldon Adelson, owner of the Sands, is building a $1.8 billion, 3,000-room Venetian hotel. Adelson envisions Cotai as a rival in scale and scope to the famed Las Vegas Strip, with a total of 20 hotels to be built at a cost of $12 billion. The Vegas tycoons plan to open opulent restaurants, stage cabaret shows, and attract NBA exhibition games and big-ticket rock acts.

Adelson says he's transforming Macau into "an Asian Las Vegas." Wynn labels Macau "the most exciting growth story of the decade." Propelled by hope and hype, real estate prices in Macau are soaring Shanghai-style. Macau-linked stocks have been among the hottest in the region. Meanwhile, the city's most photographed landmark, the ruins of St. Paul's Cathedral, is facing new competition for tourist eyeballs. Local magnate Stanley Ho is planning a theme park with an erupting volcano; the government is creating a colonial Portuguese square; and construction is under way on modern sports facilities, including a new arena, for this year's East Asian Games. Chinese President Hu Jintao visited the city in December to celebrate the fifth anniversary of Portugal's 1999 return of the territory to Chinese sovereignty, and to give Macau's Chief Executive, Edmund Ho, a very public pat on the back. "Macau's achievements since its return are a source of great joy to all of us," Hu said.

At the moment, Macau's potential seems brighter than Vegas neon. Over the first 11 months of 2004, 15.2 million tourists visited Macau, up 42% from the year before—an amazing number for a territory with a population of only 450,000 people. More impressive is the money they blow at the tables and slots. Last year, Macau's casinos raked in about $5.1 billion, up 34% from 2003. That's about the same as the Las Vegas Strip's gambling revenues. In fact, Marc Falcone, gaming analyst at Deutsche Bank in New York City, predicts that Macau will surpass the Strip this year. With 20% annual growth in gaming revenues expected over the next five years, Falcone says Macau could overtake the whole of Nevada as the world's biggest gaming market by the end of the decade.

That would make Macau the gambling center of the world. And why not? Its potential market is more than a billion people who live within a three-hour flight from the city. (Vegas, in contrast, has just 250 million residing within the same radius.) The rise of Asia's middle class means more and more potential punters have disposable income to splurge on roulette wheels and slot machines. In China alone, per-capita income has surged about 8% a year for the past two decades. Leisure time is expanding, and Asians who are obsessed with getting and spending are putting less emphasis on the former and more on the latter. "Modern Chinese are more receptive to Western lifestyles," says Francis Lui, director of Galaxy Resort & Casino, which is investing $700 million in three hotels in Macau. "Macau is in the right place at the right time."

Prentice Salter thinks so too—and he's grabbing a piece of the action. In 2002 the 33-year-old had a plum job managing the bars, clubs and restaurants at the Palms hotel in Las Vegas. But he left it behind when Adelson's company offered him a job in its new Macau venture. Salter was sent on a six-week tour of China's 10 largest cities to gather intelligence on what Chinese would want in a casino. He met with rich businessmen, slurped noodles with the locals, marveled at the country's spectacular growth, and became convinced that Macau was a sure thing. "I came back and was like, 'Yeah! This is a no-brainer,'" Salter beams. "So I sold the house, sold the car, sold the dog, flushed the fish down the toilet, and moved to China!"

Salter spent more than two years as the Sands' food-and-beverage director, then quit his job late last year. But he has no plans to return to Vegas, preferring to wager his future on Macau, where he's now planning his own gaming projects.

He now lives in an apartment on Macau's Taipa island that he's renovated into a pad so luxurious that the Rat Pack would feel right at home. The master bedroom boasts a Jacuzzi and a king-size bed elevated on a platform; the spacious kitchen has a professional beer tap. From a balcony, Salter enjoys a panoramic view of Macau peninsula, complete with flashing casino signs and a forest of construction cranes building new gaming parlors, hotels and other landmarks. "Imagine if I was on the ground in Vegas at Day One," Salter says. "Macau is going to do the same thing, but bigger and better."

Who would have thought it? Five years ago, when Portugal handed Macau back to China after nearly 450 years of colonial rule, the city had just a handful of proven tourist attractions, such as its annual Formula 3 Grand Prix (which ran its 51st race in November). But beyond that, the city's magnetism extended not much farther than nearby Hong Kong, whose residents used it as a weekend getaway, a place for a few hours of baccarat or a quick tryst with a Russian hooker. The economy had contracted from 1996 to 1999. Abandoned, half-built apartment and office towers sullied the skyline. Triad warfare raged so severely in the streets that in 1997 Macau's Secretary for Security even reassured tourists that they wouldn't get caught in the cross fire because the city had "professional killers who never miss their targets." The chaos seemed part of a malaise that had endured for centuries. When Portuguese adventurers founded Macau in 1557, it became the main gateway for trade with tightly sealed China. Slowly, other European powers ate away at Portuguese dominance in the region, and when the British founded the bustling port of Hong Kong only 60 km away, Macau was relegated to perennial second-tier status.

But several years ago, the tiny peninsula and its nearby islands discovered they had an ace up their sleeve: a 49-year-old former accountant named Edmund Ho. The first Chief Executive appointed to run the city following its return to China, Ho is credited by everyone from local taxi drivers to Beijing bureaucrats as the architect of Macau's revival, a renaissance "written, produced and directed by Edmund Ho," says Steve Wynn. The secretive Ho, a former member of China's National People's Congress who holds a bachelor's degree in business from Canada's York University, had the perfect mix of political connections and business acumen to press for change. His family ties also helped—his father was a respected Chinese community leader. And after taking office, he took the crucial steps that would rev up the economy by dismantling the 40-year casino monopoly held by Macau's most powerful individual, Stanley Ho (no relation to Edmund). Little has happened in the territory for the past half-century without the 82-year-old tycoon being a part of it. Through companies Shun Tak Holdings and Sociedade de Turismo e Diversões de Macau, Stanley Ho is one of Macau's largest property developers, and controls the dominant ferry service to Hong Kong, Macau's main department store, even the dog track, called the Canidrome. But the monopoly was keeping Macau in a straitjacket. "There just wasn't enough investment in new facilities to draw people in," says David Green, a Macau-based gaming consultant at Pricewaterhouse-Coopers. "It's the worst feature of a monopoly."

Macau's turning point came in 2002 when Stanley Ho's license expired. Edmund Ho's government put three new casino permits up for bid, garnering 21 responses from a Who's Who of the global gaming industry. Stanley Ho won one of the licenses, while the other two were awarded to Wynn's company and Galaxy Resort & Casino. Formed by Hong Kong investors, Galaxy then granted rights to its partner, Adelson's Sands, to open casinos. Chen Zuo'er, deputy director of the State Council's Hong Kong and Macau Affairs Office in Beijing, calls the opening of the gaming sector "a revolution." Wynn and Adelson are two of the visionaries who transformed Vegas from a sleazy gambling pit to one of the world's top tourist destinations. And as an added boost, China in 2003 began lifting travel restrictions on mainlanders so that they could go to Macau's casinos more easily. The number of mainland visitors to Macau jumped 73% in the first 11 months of 2004 to 8.7 million, and their spending has since become a mainstay of the city's tourism industry.

The effect of these reforms has been nothing short of miraculous. Macau's GDP grew 47.6% in last year's second quarter—yes, we put the decimal point in the right place—and for all of 2004, it is expected to grow more than 20%. Long-stagnant sectors have been given new life. In 1995 the government opened a grand, new airport, only to discover that few airlines wanted to use it. But last year, Asia's leading no-frills carrier, Malaysian-based AirAsia, began flying in from Bangkok and Kuala Lumpur. Richard Branson's Australian-based airline Virgin Blue is in talks with China National Aviation Corp. to launch a budget carrier with the territory as its base.

But the hottest part of the economy is property. Macau resembles a city-size construction site as many once empty buildings are fixed up or rebuilt and rented out, especially as apartments. New casinos can't be built quickly enough. Galaxy crash-renovated an office building across the street from the Sands into the Waldo Hotel, complete with a small casino, in only five months. As an office tower, it had stood vacant for five years, but since its opening last July, the Waldo has been crammed with some of Macau's wealthiest high rollers. Property prices are spiking. Real estate consulting firm Colliers International estimates that residential property prices have jumped at least 50% in the past 12 months. In a frenzy reminiscent of the heady days of the dotcom boom, investors in Hong Kong have gone crazy over companies listed on the Hong Kong stock market with any connection to Macau, now widely known as "Macau-concept" stocks, though recently some have been cooling off a bit. In November, the shares of little-known technology company Cyber On-Air Group skyrocketed 542% in one day after it announced the possible acquisition of a stake in a hotel-casino project in Macau. Stocks in Stanley Ho's companies have also been a hit. Share prices of his Melco International Development, a restaurant-and-property firm, have increased seven times since September.

The economic boom has turned Macau into a fantasyland where fortunes are made and dreams fulfilled. Only a few years ago, young college grads, desperate for jobs, were fleeing the city. Nowadays, Macau has one of the region's hottest labor markets. The hotels currently being built will need more than 20,000 employees, and Macau, with its total work force of just over 200,000, doesn't have enough manpower.

For Alice Chan, who grew up in Macau, the labor crunch has been better than a lucky streak at a blackjack table. A recent graduate of Macau's hotel-management school, Chan, 23, passed up an offer from a Macau hotel to take a guest-relations position at the Sands last February. Her starting salary of $875 a month was about 30% more than what she had expected. But when the Sands delayed her starting date, a depleted bank account forced her to look for something else. In May, she landed a position as a flight attendant for Air Macau. Her minimum salary: $1,500 a month. She immediately bought herself a motorbike, and took a vacation last year to Los Angeles. "I'm afraid I've gotten spoiled," Chan says.

No one symbolizes the new Macau better than Fiona Ngan, who, at 27, is managing a 400-room hotel, the Casa Real. Two years ago, the Macau native was a few days away from beginning a job as a credit analyst at Ernst & Young in Hong Kong when she received a phone call from her father asking her to come home. The economy was set to boom, he told her, and her services were in demand. Ngan was perplexed. She hadn't lived in Macau for 10 years—she attended both high school and college in Australia—and hadn't anticipated returning. For young and career-driven Ngan, Macau was the sleepy village where she grew up, not a place for an ambitious businesswoman. "I wanted someplace more competitive, with more advantages," she says.

But as a good daughter in a Chinese family, Ngan followed dad's orders. He already operated VIP gambling rooms in Macau, but wanted to acquire a hotel of his own. He handed the inexperienced Ngan the project. She and her brother negotiated to buy a dilapidated hotel near Macau's ferry terminal and an office block next door that had been vacant for seven years. The two buildings were renovated and launched in October as the Casa Real, with the old office tower converted into a casino (operated by Stanley Ho). Ngan chose all of the Portuguese-style décor herself, and proudly shows off the suites with models of sailing ships, upholstered sofas, and bathrooms with brass faucets shaped like geese. Today, Ngan is home to stay. "This city is going to be hot," she says.

Feeling that heat is Stanley Ho, who, after years of having the city to himself, is suddenly finding himself having to compete against some of the sharpest gaming operators in the world. In just the few months since their grand openings, the two foreign-operated casinos—the Sands and the Waldo—have claimed about 25% of the gaming revenues. The Sands is also creating an entirely new, mass gambling market—centered on the millions of regular-Joe tourists flooding into Macau—that Stanley Ho long ignored in favor of high rollers. The Ho family seems to look on the criticism of their lost monopoly with a tinge of bitterness. Without the monopoly, Macau "wouldn't even have a gaming operation today," says Pansy Ho, Stanley's daughter and the managing director of the Shun Tak Group. "There could never have been another way."

But though Stanley Ho may have lost a hand or two, he's not ready to fold. In fact, his companies are benefiting from the boom. "If it was not for the American operators coming in, we would never have gotten into the limelight that's putting us on the world map," says Pansy. "The market itself is expanding." Stanley is leveraging his long-established ties to Hong Kong and mainland high rollers to keep his casinos full, while using some razzle-dazzle of his own. Next to the Sands, he is constructing a theme park called Fisherman's Wharf, featuring a faux African village, a Chinese fort, a Mississippi steamboat hotel and a towering erupting volcano. Near his flagship hotel, the rundown Lisboa, he's building the $250 million Grand Lisboa. Pansy inked an agreement with MGM Mirage to open a major hotel-casino. And in November, Stanley formed a joint venture with Kerry Packer, Australia's richest man, to build casinos all over Asia. The two already broke ground in December on another project, the $190 million Park Hyatt Hotel on Taipa. In a recent CNN interview, Stanley boasted: "For the past 40 years I have never made so much money in my life."

Yet many in Macau wonder whether the good times will ruin the city's laid-back ambiance—and whether the boom will come to an abrupt end. Businessmen say the government will have to throw Macau open to imported workers to keep the casinos running, which could drastically transform the life of the city. Finding an empty taxi in Macau these days is difficult. Sensitive to the concerns that the territory's colonial charm will be buried under a mountain of glitz, Edmund Ho is recycling gambling taxes into preserving Macau's historic monuments. In one planned project, the government will rip up a soccer field to create a colonial-style plaza, the Tap Seac Square. A theater dating back to 1860 is being restored and will reopen early this year for performances. Macau has also submitted 12 of its historic sites, including St. Paul's Cathedral, for UNESCO World Heritage status.

If you think that all this smells of extraordinary popular delusions and the madness of crowds—you know, Dutch tulips, Y2K—you're not alone. There are plenty of economists who fret that exuberance in Macau has gone too irrational, especially in the property sector. Salter, the former Sands' manager, encountered a man with a suitcase full of cash going door to door in his Taipa apartment building, offering to buy flats on the spot. "There is so much interest in Macau at the moment that we can see the early signs of a bubble forming," warns David Faulkner, a director at Colliers in Hong Kong.

Still, the combination of China's economic explosion and Vegas glitz makes Macau's immediate future seem too exciting to worry about bubbles—unless it's those in your champagne or your Jacuzzi. "It's like Kevin Costner's Field of Dreams," says Herculano de Sousa, CEO of Banco Nacional Ultramarino in Macau. "Build it and they will come." So how big will Macau get? Bigger than Vegas, baby.

• Michael Schuman
• Macau is in the middle of a building spree that will turn the former colony into Asia's Las Vegas— or maybe something even bigger