Viva Macau! Asia's gambling capital

Casinos in the former Portuguese enclave are booming thanks to punters from the mainland. And now the big boys are getting in on the game, it could soon rival Las Vegas

The dice are rolling hot on the tables of what was once a sleepy Portuguese colony. With millions of mainland Chinese high rollers arriving every year, developers in Macau are racing to turn the former enclave into Asia's glittering gambling capital.

The stakes are high. At the baccarat table of one casino, a middle-aged Chinese woman shrugs off the loss of £6,000 on a single game, tipping her cigarette ash and restacking her chips. She gets busy again. There is a slight smell of sweat in the air.

Macau, the only place in China where casinos are legal, is poised to overtake the Las Vegas strip in gambling revenues thanks to a huge influx of cash from the mainland. "Macau over the next few years is going to develop into something unique," says Ciaran Carruthers, the senior vice president of Galaxy Resort, a Hong Kong casino company. He is shouting to be heard over the sound of a band on the gala opening night of the Grand Waldo Hotel & Casino.

The Grand Waldo is a large casino with 168 tables and 334 slot machines, but it also has restaurants, shops, a luxury hotel, spa, nightclubs, a fitness centre, a swimming pool, a children's playground and, inevitably for a casino targeted at the Chinese, karaoke facilities.

There is no question where the punters come from. The discerning ear can pick out the distinctive dialects of Fujian, Beijing and Shanghai - this is a playground for mainland Chinese gamblers.

It feels as if a casino is being built on every bit of land in Macau, making one fear for the elegant ruins of churches built by 16th-century Portuguese missionaries. Where no land is available, it is taken from the sea. The Grand Waldo is merely the first to open on the Cotai strip, a £13bn neon avenue of casinos, hotels and shops on 200 acres of reclaimed land that connects Taipa and Coloane, two small islands off the southern Chinese peninsula.

Elsewhere on the strip, beneath scores of cranes, armies of hard-hatted workers are putting the finishing touches on the Venetian Macau, a 39-storey replica of the Doge's Palace in Venice, with a huge statue of the archangel Gabriel on top and 3,000 suites inside.

The strip will raise Macau's current tally of 12,000 hotel rooms to 54,000 in 10 years. The backers of the scheme, the single biggest tourist investment anywhere, are betting it will steal the gaming jackpot from Vegas.

Macau generated £3bn in casino-gambling revenues, just slightly behind the Las Vegas strip's turnover of £3.2bn. But where Las Vegas beats Macau hands-down is on non-gaming income. In Vegas, visitors stay a lot longer, spend a lot more but gamble a lot less.

Many of the 19 million visitors lured to Macau's balmy precincts are day-trippers, or gamble their way through their visit, or stay in a massage parlour. Nearly three quarters of all money spent in Macau goes on gambling, leaving just £12 per visitor for other activities. In Las Vegas, gaming makes up just 41 per cent of the spend, with the rest, an average of £128, going on hotels, food, shopping and entertainment. Cotai's promoters hope the strip will solve the conundrum of how to make people stay longer. By injecting Vegas-style glitz, they aim to overcome the reputation for seediness and gang warfare that Macau has developed.

In recent years, corrupt officials have gambled away billions in the casinos of Macau, and Beijing is trying to stop this as part of a broader crackdown on graft. It won't be the first. Chinese authorities have fought a long battle against the national obsession with gambling. During the Song dynasty between 960 and 1279, they even cut off gamblers' hands. Yet today, the Chinese still bet on everything from fighting crickets to the Grand National at Aintree.

Casinos officially account for 80 per cent of economic activity in Macau, though the true proportion is probably higher. It became a centre for gambling during the 442 years that it was run by the Portuguese. Returned to China in 1999, it is now a special administrative region, under a regime similar to China's "one country, two systems" policy for Hong Kong. The law requires, for example, that only people from Macau or those with a special permit may work in the casinos, a boost to local employment.

The king of gambling in Macau is the octogenarian tycoon Stanley Ho, whose company, SJM, opened the Casino Lisboa, a 12-storey, circular tower, on 11 June 1970. With it came the 24-hour gaming experience that marked a revolution in gambling in Asia and earned Mr Ho almost mythical status in the city.

A good 80 per cent of gambling revenues in Macau flow through locally owned casinos, most of them run by Mr Ho. The Lisboa is a labyrinthine casino, still smoky and slightly run-down, and not as full as it used to be, but the punters are sweating and spending money. The Lisboa flies VIPs to its high-roller rooms by helicopter, and people can win or lose three or four million pounds in a day. Legend has it that one punter lost £67m in a single game of baccarat.

Walking the malls and circling the restaurants of the Lisboa are scores of legally tolerated prostitutes, many of whom live in the casino's hotel. Everyone gambles in Macau, even the sex workers. They cast lots to see who gets to patrol the prime public areas and who has to wait for clients in their rooms.

Looming over the old Lisboa is the emerging skeleton of the Grand Lisboa, a 44-storey building shaped like a lotus flower, Mr Ho's answer to the foreign pretenders who have challenged his domination of the market. His monopoly ended in 2002, when the government began offering concessions to outside investors.

Two years later, the Sands Macau opened. Its owners claim it is the world's biggest casino - 740 tables on 230,000 square feet on three floors, with more than 1,250 slot machines.The scene on the high-roller floor of the Sands, with 51 rooms for the big spenders, is very different from the Lisboa. Its main gambling hall is open and spacious, while the Lisboa's rooms are clearly built for the no-frills, hard-core gambler. It is so successful that it paid for itself in its first year.

The men who built Las Vegas are looking to Macau to keep the roulette wheels spinning and the former enclave is turning into a battle ground for two of the gaming industry's legends - Sheldon Adelson of Las Vegas Sands and gambling mogul Steve Wynn, both of whom have recently built huge casinos in Macau and are driving the development of the Cotai strip.

The verbal sparring matches between them are fun. Mr Adelson says Mr Wynn's new development is a non-event, while Mr Wynn compared the Sands Macau to a Wal-Mart store, somewhere no high-roller would ever go. Although rivals, they quietly need each other to do well; if one loses money, so will the other. This is not poker.

Mr Adelson expects to control 60 per cent of Macau's gaming market by 2010, and predicts that gaming revenues will rise to £7.5bn a year in the same period. Revenues from Sands Macau jumped 53 per cent in the second quarter of this year, accounting for two thirds of the firm's total income.

Jets of fire and water from a large fountain, and a recording of Frank Sinatra singing "Luck Be A Lady", announced the arrival of the Wynn Macau, the latest landmark in central Macau when Mr Wynn opened the £640m hotel and gaming complex earlier this month. It's not just the fireworks that are flash; An original Renoir sits behind the reception desk and Chanel, Prada, Christian Dior, Fendi and Louis Vuitton line the shopping arcade of the 24-storey Hotel; statues of camels lope through the swimming pools.

The hotel has 210 gaming tables and 380 slot machines, and a room starts at £200 a night, rising to £1,450 for a suite. "This place will go profitable tomorrow, on its first day. It'll take that long," Mr Wynn said at the launch ceremony, wearing a T-shirt proclaiming: "Knowledge destroys Fear".

Mr Wynn's company has a 50-acre plot on Cotai while Las Vegas Sands Corp is building a complex and luring several five-star hotel operators, such as Four Seasons, Hilton, Marriott, Sheraton and Shangri-La. Also under construction is the City of Dreams, which bills itself as the world's first underwater casino.

"In Macau, the invitation has been rather one-dimensional - just gambling," says Mr Wynn, who, as head of Mirage Resorts, transformed Las Vegas before selling the company and starting from scratch with Wynn Resorts. "Now the invitation is being enriched at a pace not seen in any other destination in the world. The speed of development is dizzying."

Mr Carruthers says that even if the developers succeed in getting people to stay a bit longer away from the tables, gambling will always be central to the former colony's appeal.

"The Cotai strip will be uniquely Macau and while retaining its huge allure as a gaming destination, will become more attractive to people in the region seeking non-gaming facilities as well," says Mr Carruthers.

"However, I still feel even those that come here for the hotels, fine dining, retail, conventions etc, will still find the gaming too huge an attraction to ignore," he says.

China is central to the expansion of Macau and companies such as Galaxy Resort have their sights firmly set on the mainland Chinese market. "How Macau changes and develops will be closely linked to the change and development in China," Mr Carruthers says. "Right now, most of our players are from the middle and lower classes in China, and it is the middle class that will drive growth here. This is true for much of the region and as the middle classes become ever more affluent and have the means to travel, Macau will be an obvious and convenient choice for many of them."

But gaming and tourism experts say Macau also needs to attract punters from across Asia, rather than concentrating on the Chinese market. Already there are signs that Japanese, Koreans, and punters from south-east Asia are coming to have a flutter.