Xi Jinping to Discuss Casinos with Hainan Hotel Magnates

Chinese President Xi Jinping plans a visit to Hainan Island this week to talk to hotel magnates about attracting more tourists to the South China Sea tourism destination. It is expected President Xi and those hotel owners will discuss land-based casino gambling and new tax concessions.

During his visit, China’s leader will speak at the Baoa Forum to the economic leadership of Hainan. Those in attendance plan to celebrate the 40th Anniversary of China’s economic opening, economics reforms instituted by Deng Xioping. The economic opening is given credit for turning the Republic of China from a purely Marxist state to one which allowed western-style capitalist ventures.

Hainan’s business elite do not expect President Xi to announce the legalization of casino gambling, but they do hope to hear of new policies that will bring more tourists to their island. They do hope the premier outlines the proposed regulatory framework which could lead to regulated casinos on Hainan.

Only a month ago, reports surfaced that high-ranking officials in Beijing had approved broad policies that would allow for legal integrated casino-resorts for Hainan Isle. China experts said such proposals would not have reached a late state unless Xi Jinping supported them.

Impact on Macau Casinos’ Revenues

Any such policies would have a tremendous effect on Macau’s casinos, as well as the global casino industry. Macau is the world’s largest gambling destination, with roughly 4 times the gaming revenues that Las Vegas generates each year. Having a second Chinese casino city doubtless would impact Macau’s revenues.

Hainan Island is located off the southern coast of China near Vietnam. The island is known for its tropical resorts, so Chinese mainland residents visit Hainan for beachfront vacations. It is a natural location to add a second casino destination in China.

Impact on Global Casino Industry

The impact would go beyond Macau. Chinese jetsetters make 130 million visits overseas to foreign casinos each year. If these high rollers had a second destination to visit inside their own country, millions likely would stay home to visit Hainan instead — at least for a time.

Zeng Xianyun, a Hainan Island hotel owner, said the issue goes beyond tourism and VIP gamblers. Zeng argues a fresh start on Hainan Island would allow China to create a gambling destination tooled for Chinese businessmen. Mr. Zeng, whose Phoenix Island artificial archipelago hosts luxury hotels, apartments, and a cruise ship terminal, said that the time is right for China’s investors to build a purely Chinese gambling destination.

Mr. Zeng said, “We need to take the issue seriously instead of avoiding it. We can’t let this big cake be eaten all by foreign capital.”

Zeng Xianyun’s Opinion on Chinese Casinos

The Hainan leisure and cruise ship magnate refers to the way Macau’s casino industry was set up. When Macau began to lure casino investments from 2001 to 2004, the former Portuguese colony had been transferred to China only in 1999. Macau had its native casino industry, but the former colony was a backwater. Stanley Ho had a gambling monopoly and the casinos that existed were small by today’s standards.

Thus, Macau officials encouraged foreign investments. Three American casino companies — Las Vegas Sands Corporation, MGM Resorts, and Wynn Resorts — were given casino licenses. So were three Hong Kong businesses: Lui family’s Galaxy Entertainment, Stanley Ho’s SJM Holdings, and Lawrence Ho’s Melco Crown (Stanley Ho’s son). While the Hong Kong-owned casinos were successful, it was the Venetian Macua which came to dominate the gaming landscape. MGM Macau and Wynn Macau also became the highest-grossing casinos in those Las Vegas casino company’s empires.

2022 Casino Licensing Decisions

Since then, all three US casino companies have built multi-billion dollar mega-resorts on the Cotai Peninsula: Parisian Macau, MGM Cotai, and Wynn Palace. Those operations stand to make many billions of dollars in the coming years. But now the Chinese casino operators have seen the Americans for ten years and have their own ideas how to run successful Chinese casinos.

The Hainan Island proposal should have the executives who run LVS, MGM Resorts, and Wynn Resorts a bit nervous. In 2022, the casinos licenses for all of the Macau’s casinos come up for review. Despite their huge investments, those operators could find themselves without a gaming license in 4 years’ time. If Hainan Island’s hotel magnates are building billion-dollar casino resorts by then, it might make that decision more palatable for those collecting 39% taxes on Macau casino revenues.