MONACO, AND :

GAMING RESORTS OF THE PAST, PRESENT AND FUTURE

A Thesis

Presented to the

Faculty of

California State Polytechnic University, Pomona

In Partial Fulfillment

Of the Requirements for the Degree

Master of Science

In

Hospitality Management

By

Daniel Horowitz

2015

SIGNATURE PAGE Signature Page

THESIS: , LAS VEGAS AND MACAU: GAMING RESORTS OF THE PAST, PRESENT AND FUTURE

AUTHOR: Daniel Horowitz

DATE SUBMITTED: Spring 2015

The Collins College of Hospitality Management

Dr. Jerald W. Chesser Thesis Committee Chair ______Hospitality Management

Dr. Edward A. Merritt ______Hospitality Management

Dr. Myong Jae Lee ______Hospitality Management

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ABSTRACT Abstract Monaco, Las Vegas and Macau are the most significant gaming resort destinations in the world. Each location has a unique history and distinctive set of products and services tailored to the demographics of its clientele. All three destinations commensurately compete for continued financial success and global preeminence in a rapidly changing gaming resort industry. This thesis examines the history, literature, finances and atmosphere of Monaco, Las Vegas and Macau and provides valuable insights into the relationships that exist between each destination and their influence on the global hospitality industry at large. While it is commonplace to believe that Monaco is the profitable venue of the past, Las Vegas is the significant environment of the present and Macau is the trendsetting location of the future, this thesis argues that the Las Vegas model is in fact the most viable framework for the future of the gaming resort industry worldwide.

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TABLE OF CONTENTS

Signature Page ...... ii

Abstract ...... iii

List of Tables ...... vi

List of Figures ...... vii

Chapter 1: Introduction ...... 1 ...... 2 Regional and Political History ...... 2 Gaming and Resort History ...... 3 Las Vegas ...... 6 Regional and Political History ...... 6 Gaming and Resort History ...... 7 Macau ...... 12 Regional and Political History ...... 12 Gaming and Resort History ...... 14

Chapter 2: Hypothesis ...... 17

Chapter 3: Literature Review ...... 19 Descriptive ...... 19 Determinative ...... 22 All Three Destinations in a Single Unique Research Article ...... 32

Chapter 4: Methodology ...... 35 Research Questions ...... 35 Constructionist Interviews ...... 36 Financial and Statistical Data Analysis...... 38 Ethnography and Participant Observation ...... 40

Chapter 5: Findings and Results ...... 43 Constructionist Interviews ...... 43 Monaco ...... 43 Las Vegas ...... 46 Macau ...... 50 Financial and Statistical Data Analysis...... 61

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Number of Visitors and Occupancy ...... 61 Gaming, Non-gaming and Total Revenue ...... 66 Average Revenue per Customer ...... 76

Chapter 6: Discussion, Implications and Conclusions ...... 78 Research Question #1: What particular products and services do resorts in Monaco, Las Vegas and Macau capitalize upon as their specific strengths? ...... 79 Monaco ...... 79 Las Vegas ...... 83 Macau ...... 87 Synopsis of Answer to Research Question #1 ...... 92 Research Question #2: What business models and strategies do resorts in each destination adopt in order to appeal to existing gaming and hospitality trends? ...... 92 Industry Trends and Forecasts ...... 92 Expansion of Market Supply ...... 94 Synopsis of Answer to Research Question #2 ...... 98 Research Question #3: How can resorts in each destination build upon the skills and successes of their counterparts on the other sides of the world? ...... 98 Respondent Viewpoints ...... 99 Synopsis of Answer to Research Question #3 ...... 108 Research Question #4: How can the global hospitality industry benefit from the models and frameworks of Monaco, Las Vegas or Macau? ...... 108 Environmental Sustainability ...... 109 Synopsis of Answer to Research Question #4 ...... 112

Chapter 7: Thesis Hypothesis Revisited ...... 113

References ...... 115

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LIST OF TABLES List of Tables Table 1 Gambler Behavior by Nationality of Player ...... 28 Table 2 Number of Visitors and Occupancy Percentage ...... 61 Table 3 Number of Visitors Descriptive Statistics and SPSS Regression ...... 63 Table 4 Occupancy Descriptive Statistics and SPSS Regression ...... 65 Table 5 Segmented Gaming Revenue of Gaming Resort Destinations ...... 66 Table 6 Segmented Non-gaming Revenue of Gaming Resort Destinations ...... 67 Table 7 Total Revenue of Gaming Resort Destinations ...... 69 Table 8 Gaming Revenue Descriptive Statistics and SPSS Regression ...... 71 Table 9 Non-gaming Revenue Descriptive Statistics and SPSS Regression ...... 73 Table 10 Total Revenue Descriptive Statistics and SPSS Regression ...... 75 Table 11 Average Revenue per Customer for Gaming Resort Destinations ...... 76 Table 12 Synopsis of Answer to Research Question #3 ...... 108

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LIST OF FIGURES List of Figures Figure 1 Boomerang Effect ...... 18 Figure 2 Classification of and Resorts ...... 20 Figure 3 Number of Visitors to Gaming Resort Destinations...... 62 Figure 4 Occupancy Percentage for Gaming Resort Destinations...... 64 Figure 5 Distribution of Gaming Revenue for Gaming Resort Destinations...... 67 Figure 6 Distribution of Non-gaming Revenue for Gaming Resort Destinations ...... 68 Figure 7 Distribution of Total Revenue for Gaming Resort Destinations ...... 69 Figure 8 Gaming Revenue of Gaming Resort Destinations...... 70 Figure 9 Non-gaming Revenue of Gaming Resort Destinations ...... 72 Figure 10 Total Revenue of Gaming Resort Destinations ...... 74 Figure 11 Average Revenue per Customer for Gaming Resort Destinations ...... 77 Figure 12 Photograph of the Monaco Skyline ...... 95 Figure 13 Photograph of the Las Vegas Skyline ...... 95 Figure 14 Photograph of the Macau Skyline ...... 96

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CHAPTER 1

INTRODUCTION Chapter 1: Introduction Monte Carlo, Principality of Monaco. Las Vegas, , United States of

America. Macau, Special Administrative Region, People’s Republic of . Despite being separated by thousands of miles and enormous cultural differences, these three destinations have a vast amount in common. Over the past two centuries each of these locations has emerged as a preeminent gaming resort destination. In fact it is impossible to consider these destinations without referencing the prevalence of and its impact on and their economies at large. Additionally, Monaco, Las Vegas and

Macau have evolved into renowned and profitable centers for several sectors of the hospitality industry beyond gaming. These include , dining, nightlife, shopping, entertainment and conventions. Yet despite their strong successes in both gaming and hospitality, these destinations, and the businesses therein, must continue to expand and evolve in order to maintain their positions as stimulating and dynamic venues. They must actively compete on the world stage for continued prominence in hospitality, tourism and gaming.

Though geographically and culturally disjoint, Monaco, Las Vegas and Macau have all experienced the introduction and dynamic growth of gambling in the past two centuries. However their respective journeys towards legalized gaming have been quite different. Indeed these destinations remain very distinct entities with their own business, gaming and service models as well as specific sectors in the hospitality industry upon which they choose to focus. As a result, gaming resorts in each geographical region must continuously reevaluate and reinvent themselves in order to appeal to their specific dynamic markets and clientele. Indeed the differences that exist between Monaco, Las

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Vegas and Macau are precisely due to the gaming resort industries in each region adapting to the unique historical, economic and tourism environments that are largely independent of each other.

There has been widespread historical literature and scholarly research into the gaming resort industry for each of these destinations. Some sources emphasize standard theories and others attempt to introduce new methods. However there is a noticeable void in the comparative analysis of the similarities and differences that exist between each of these three premier gaming resort destinations. This thesis suggests that it would be particularly valuable for the worldwide gaming resort industry to examine and extrapolate upon the commonalities, or the absence thereof, that exist between Monaco,

Las Vegas and Macau. Triangulating these three gaming resort destinations will prove to be beneficial to the gaming and hospitality industries in each location as well as the global hospitality industry at large.

Monte Carlo Regional and Political History

The Principality of Monaco has always occupied a crossroad of European cultures and traditions. Today it is also one of its elite high-class tourist destinations. It is virtually unique in catering to traditional wealthy and royal patrons. In this context

Monaco represents a glimpse into a former world of gaming resorts where service and formality are more important than volume and revenue growth.

Over the centuries Phoenicians, Greeks, Romans and Saracens each took their turns in colonizing and being evicted from this tiny coastal strip along the .

The year 1297 marked the beginning of the rule of the , a Guelph

Genoese family that has nominally held sovereignty ever since. In 1612 Honore II

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established himself as the first “Prince of Monaco,” a title that has survived the country’s subsequent turmoil and strife. He secured recognition of Monegasque sovereignty from

Spain in 1633 and later from in 1641. Over the years the region came under the of the Italian ( in 1815) and

France (Treaty of in 1860). The Monegasque Revolution of 1911 lead to the First

Constitution of the Principality that created three distinct branches of government.

Except for short periods of Italian and German occupation during World War II, a member of the Grimaldi family has held onto the nominal titular power that first began with Prince Honore II.

Prince Rainier III was perhaps the most dynamic leader of the country. He helped establish Monaco as a center of international business and a luxury tourist destination.

He also improved the infrastructure, expanded the harbor to accommodate large yachts belonging to the world’s elite tourists, achieved UN membership in 1993 and dramatically improved the economy. His marriage to actress in 1956 focused the world’s attention on this tiny principality. His son, Prince Albert II succeeded his father in 2005 and is currently one of the wealthiest royals in the world.

Gaming and Resort History

When the cities of and Roquebrune seceded from Monaco in 1848, this reduced the already small country to one-twentieth of its original area. In order to salvage and recoup some of the country’s lost revenue due to the split, Princess Maria

Caroline Gibert de Lametz, the wife of Prince Florestan I, took it upon herself to search for other endeavors that the small country could pursue. After failed ventures in plant alcohol distillation, garment production and perfume manufacturing, in 1853 Caroline

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began considering a very risky alternative for that time: a spa and gambling resort.

Unlike exporting goods to other locations, a resort is dependent upon tourism and individuals venturing to that specific site. However in the case of Monaco, the site could only be reached by steep and narrow roads through the surrounding mountains or by boat through the . This plan moved towards completion through a concession to build a spa resort given by Florestan I near the end of his life. Originally

Caroline had sought the expertise of François Blanc, the mastermind of the wildly successful Kursaal in Bad Homberg, Germany. Blanc refused, concerned with possibility of other casinos opening in the region and driving business away from his establishment in Bad Homberg. Nevertheless her idea moved forward and Monaco’s first casino opened in 1856. After changing locations several times, the opened at its present location in 1863.

After a number of failed operators, takeovers and very poor success for the Monte

Carlo Casino, Francois Blanc began to reconsider his initial refusal primarily because of the aftermath of the Austro-Prussian War (1866). The existence of a casino in Monaco and the beginnings of its entrance into wealthy elitism is largely attributable to Blanc.

But unlike other areas of the world where gaming is pursued by private entrepreneurs in a primarily open market, the Monegasque government had strongly campaigned for the presence of a casino in its principality. Blanc started SBM (Fr. Société des Bains de Mer,

Eng. Society of Sea Bathers), which until this day owns the Monte Carlo Casino. In 1863

Blanc finally agreed to remodel and operate it. Francois Blanc’s estate would remain the largest shareholder of SBM until 1914 when the Government of Monaco took over as its majority shareholder. Additionally Blanc remodeled the adjacent Hotel de Paris with the

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goal of creating one of the premier accommodations in Europe. Further improvements in transportation with the construction of a railroad as well as the acquisition of charter boats allowed Blanc to nearly double the number of Monaco’s visitors to 120,000 within four years (Schwartz, 2006).

The Monte Carlo Casino assumed its current architectural facade in 1875 when

Charles Garnier, the architect of the Paris opera house , brought his talents to Monaco and opened the adjoining Salle Garnier opera house. The Monte Carlo

Casino, Hotel de Paris, Salle Garnier and adjacent Cafe de Paris jointly comprise the image of Monaco from which it is most well known throughout the world.

Nevertheless the Monte Carlo Casino and Hotel de Paris are not the only gaming venues in Monaco. In the late 20th century several smaller casinos opened throughout the country. Cafe de Paris Casino, connected to its eponymous restaurant, and the Monte

Carlo Bay Casino, inside the Monte Carlo Bay Hotel and Resort, only have machine gaming. Sun Casino, inside the oceanfront Fairmont Monte Carlo, includes both machine gaming and table , similar to the country’s main casino.

Hotel facilities have expanded to include another Parisian-themed venue Hotel

Hermitage Monte Carlo, resorts such as the Monte Carlo Resort and the Monte

Carlo Bay Hotel and Resort, and international chains such as the Fairmont Monte Carlo and Le Meridian Monte Carlo. Legendary 3- Star chef Alain Ducasse opened

Le Louis XV restaurant in the Hotel de Paris in 1987; it is one of the most sought after dining venues Europe. Many modern bars and lounges have recently opened, including

Buddha Bar and Jimmy Z Place, both adjacent to the Monte Carlo Casino. They have begun attracting world famous performers and a young, vibrant and fashionable

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clientele, which is a stark departure from the traditional old world that Monaco once epitomized.

Las Vegas Regional and Political History

Las Vegas traces its relatively passive origins back to a sleepy way station along a

19th century Mexican trading route. This is in sharp contrast to the early political histories of Monaco -- fierce interfamilial strife between the Guelphs and the Ghibellines

-- and Macau -- struggles for strategic supremacy between China and . Although native-Americans -- notably the Paiute Indian tribe -- had lived in the for centuries because of its abundance of water, a Mexican merchant named Antonio

Armijo established a permanent presence there in 1829 as a means of supplying the trading route between Mexico and Los Angeles.

In 1844 United States military officer John C. Fremont led a group of scouts into the region in preparation for a war with Mexico over the territory. The Mexican-

American War during 1846-1848 resulted in the defeat of the Mexican forces and annexation of the region by the United States.

Subsequent religious -- Mormons in 1881 -- and agricultural -- Octavius Gass in

1895 -- communities were eventually abandoned. The first settlement to firmly take hold was started in 1902 by the San Pedro, Los Angeles and Salt Lake Railroads. On land purchased from the Gass estate, the railroad companies began a massive construction project to facilitate the completion of the railroad line tying and Utah. The project was spearheaded through the efforts of Montana Senator William Andrews Clark after whom Clark County, Nevada is named. On May 15, 1905 Las Vegas was officially incorporated into a city.

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If the private railroad project was Las Vegas’ initial economic boom, then the federal construction of the then world’s largest dam along the Colorado River

“cemented” the city’s existence and identity. On September 7, 1929 President Herbert

Hoover signed the appropriations bill to build the enormous power-generating Boulder

Dam, later to be renamed Hoover Dam. The subsequent influx in predominantly male construction workers ballooned the Las Vegas population from 5,000 to 25,000 people.

Local business owners immediately realized the potential profit from new ventures, for example saloons, burlesque theaters and casinos that could be established to entertain this new workforce. With the completion of the dam project in 1935 Las Vegas became electrified, both literally and figuratively.

The uninterrupted growth of Las Vegas into the late 20th century and subsequent large business interests in its economy spawned large outlying suburbs such as

Henderson and Summerlin. This growth continued until the early 21st century when a global recession brought an abrupt end to the region’s prosperity. Its effect on Las Vegas was particularly devastating because the city’s economic rise was so meteoric. However very recent history has seen a complete turnaround and, like the ball on the wheel, only the unknown future will offer a definitive direction for the city’s fortune.

Gaming and Resort History

Gambling was present in California not long after it joined the Union in 1850.

When gold miners in this state began traveling eastward towards the Sierra Nevada

Mountain Range they brought social gaming along with them to Nevada. However in his first address to the newly created territorial legislature in 1861, Nevada territorial governor James Nye delivered a powerful message against gambling:

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Of all the seductive vices extant, I regard that of gambling as the worst. It holds out allurements hard to resist. (Schwartz, 2006)

As a result the legislature enacted punishments for gambling that ranged from a fine of between $500 and $50001 to a prison sentence of between six months and two years.

Therefore when Nevada joined the union in 1864 as the 36th state gambling was already illegal there. However police refused to enforce a law that would be unpopular and loathed by the locals, and there were enough influential supporters that gaming was soon decriminalized by the state legislature in 1869 -- despite the opposition by first state governor Henry Blasdel. Over the next several decades, minor changes in the gaming laws of Nevada would be enacted to include a minimum age of 21 and the ability for a proprietor to turn away a customer -- primarily for gambling addictions and bad debt. In

1903 horse race bookmaking became legal in Nevada, and slot machines were introduced on the casino floor in 1905.2 While other states refused to sanction boxing matches,

Nevada welcomed them and soon became the preeminent venue in the world for the sport following the first African-American heavyweight champion Jack Johnson defending his title and defeating the Caucasian former champion Jim Jeffries on 4 July 1910 in

Goldfield in what would become known as the “Battle of the Century.”

The amount of time between the settling of Las Vegas and the emergence of gambling therein is shortest among the other gaming resort destinations. The land

1 The Consumer Price Index used to calculate inflation was introduced in January 1913 at 9.8% (United States Department of Labor, Bureau of Labor and Statistics, 2015). Therefore one cannot give an accurate present day dollar values for these penalties. Nevertheless for the reader’s interest it can be noted that in 1913 these penalties would be approximately between $12,000 and $120,000 in present day dollars. Despite the lack of statistical data, one can assume that the equivalent present day dollar amount would be higher for the 1860s equivalent. 2 It is interesting to point out that slot machines were initially required to be hidden from street view, which is a stark contrast with casinos decades later that place slot machines at the entrances themselves in order to entice customers to gamble.

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auction for the town was on May 15, 1905 and within a few weeks tents were pitched in the commercialized Block 16 that included saloons, liquor sales, prostitution and gambling venues (Ainlay Jr. & Gabaldon, 2003). The Arizona Club casino and saloon was the most famous of these establishments.

A confluence of state and federal leniencies further increased revenue for the Las

Vegas region, despite the fact that gaming was officially illegal, albeit decriminalized.

However in 1931 the Nevada legislature envisioned a potential windfall and lifted its official ban on gambling in the region. Two years later the federal government passed the twenty-first amendment that repealed Prohibition. With gambling and alcohol now readily available, Las Vegas was rapidly on the way to its “Sin City” reputation.

The era of large hotel construction was ushered in with the opening of the El

Rancho Vegas on April 3, 1942, which is the first resort to be built on Las Vegas

Boulevard also known as “The Strip.” It did not take long for unseemly individuals to realize the lucrative potential of the Las Vegas gaming industry. Gangsters such as

Benjamin “Bugsy” Siegel and Meyer Lansky -- members of the infamous Murder, Inc. -- built the Flamingo Hotel in 1946. It represented the first overt involvement of organized crime in the city’s principal industry. Nevertheless, many consider the mafia era of Las

Vegas to be one of its best as guests experienced a heightened personalized treatment as well as witnessed some of the country’s best performers including The Rat Pack -- Frank

Sinatra, Dean Martin and Sammy Davis Jr. -- Elvis Pressley, Liberace and others.

American businessman and airplane manufacturer arrived in Las

Vegas and checked into the on November 27, 1966. At the time the criminal

Syndicate -- lead by Jimmy Hoffa -- and teamster Moe Dalitz -- the Syndicate’s

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representative -- owned the resort. Hughes had reserved the top two floors for a ten-night stay; however he never departed at the end of his reservation. With Christmas and New

Year’s Day approaching Dalitz attempted to kick the billionaire out of his hotel. One of the Teamster’s aides is quoted as telling Hughes, “If you want a place to sleep you’d damned well better buy the hotel” (Schwartz, 2006). Hughes did precisely that and purchased the Desert Inn for $13.25 million. This single event, and the subsequent influence Howard Hughes would have, signaled one of the most significant episodes in

Las Vegas history: the once mafia-laden town would now be transformed into a city of legitimate corporate business.

Entrepreneur arrived in Las Vegas in 1967. No other individual can be credited more for revolutionizing Las Vegas into its modern form with the world’s largest resorts and with its fantasy lifestyle. After initial investments in the Frontier

Hotel and Casino and the , he moved to Atlantic City and opened the Golden Nugget there. A decade later he returned to Las Vegas and opened

The Mirage Las Vegas on November 22, 1989. This was the most extravagant Las Vegas gaming resort at the time and included an erupting volcano at the entrance, a rainforest lobby, the first show in Las Vegas, a Siegfried and Roy white tiger and dolphin habitat, and over 3,000 guestrooms. Nearly every subsequent resort built in Las

Vegas would follow this megaresort model developed by Wynn. In 1993, Wynn parlayed his success and opened the pirate-themed Treasure Island Hotel and Casino. It included hourly shows in the evening that involved a pirate ship defeating a British

Royale Navy vessel. opened on October 15, 1998 and was unlike anything the world had ever seen with nearly 5,000 rooms. The 8-acre Bellagio Lake and Fountains --

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modeled after Lake Como in -- have water and music shows that included choreographed water blasts as high as 500 feet. The lobby had a 2,000 square foot Dale

Chihuly glass sculpture on its ceiling as well as the Bellagio Conservatory and Gardens.

Steve Wynn also included a fine art museum with his own personal rotating collection on display. Light, the first nightclub on The , was built inside the Bellagio and ushered in a new generation of nightlife and parties. Wynn continued his success with the opening of in 2005 and in 2008. These became the most lavish resorts to have ever been built in Las Vegas and perhaps the world. Wynn and Encore have taken the gaming resort to another level with their luxury offerings including award-winning rooms, spas, golf courses, restaurants, nightlife, retail, meeting rooms and live shows.

Las Vegas’ dominance and modern image can also be attributed to several other companies and individuals.

Sheldon Adelson and his Corporation are responsible for the largest resort in the world with the Venice-inspired Venetian Las Vegas in 1999 and

Palazzo Las Vegas in 2008.

Jay Sarno built in 1968 and the famous in 1969, which still remains one of the most iconic Las Vegas resorts. Over the years

Caesars Entertainment expanded their portfolio to include Harrah’s Las Vegas (1973),

Bally’s Las Vegas (1973), Rio All Suite Hotel and Casino (1990),

(1999), Planet Hollywood Resort and Casino (2007), (remodeled in 2014) and

The Cromwell (remodeled in 2014).

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MGM Resorts International along with its longtime investor and film media mogul is the largest gaming resort operator and holder of land in Las

Vegas. They now own and operate Bellagio, , Circus Circus Las Vegas, medieval-themed Excalibur Hotel and Casino (1990), its namesake MGM Grand Las

Vegas (1993), Egyptian-themed Las Vegas (1993), Monte Carlo Resort and

Casino (1996), New York New York Hotel and Casino (1997), Southeast Asian-themed

Mandalay Bay Resort and Casino (1999), CityCenter Las Vegas3 (2009) and Delano Las

Vegas (remodeled in 2014).

Macau Regional and Political History

Although Macau is one of the most recent venues to emerge on the gaming scene, its historical roots are the earliest of the three locations considered in this thesis. Indeed the political can be effectively traced back to the Chinese Qin Dynasty

(221-206 B.C.). Aside from brief periods in its history, Macau has essentially assumed an “ambiguos” political status where it existed as a de facto part of one country, China, while being administered by another, Portugal. Macau’s origins were not as a resort destination but rather as a port and center of international trade.

The first contact that China had with European trading occurred during the Yuan

Dynasty (1271-1368). During the subsequent (1368-1644) Macau developed as a fishing center. By the 1550s Portuguese merchants had settled in Macau and used its harbor as a basis for east-west trading. A significant moment in the status of

Macau occurred in 1557 when Portugal entered into a formal with the Ming

3 CityCenter Las Vegas is the largest privately funded building project in the history of the world valued at over $9 billion (Smith & Tilden, 2014).

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Dynasty to lease Macau. The rent under this lease was continually paid for over three hundred years until 1863.

In 1583 the Portuguese in Macau established a quasi-political administration with loose Chinese approval but few actual powers. Relations remained relatively smooth until 1631 when the Chinese expressed contempt for the Portuguese presence and sought to restrict commerce in the region. This is somewhat ironic when compared to contemporary Chinese development of Macau as a massive center of Asian gaming.

The 1644 Manchu overthrow of the Ming Dynasty did not greatly affect Macau’s unique status. Under the subsequent lengthy (1644-1911) Macau steadily and quietly flourished as a gateway for east-west trade with China. The victory of the

English over Chinese forces in the First Opium War (1839-1842) led to the Treaty of

Nanking that established British jurisdiction over neighboring Kong. This emboldened Portugal to seek to extend its own control over Macau. The Sino-Portuguese

Treaty of Amity and Commerce in 1887 established Macau as a colony of Portugal. In return the administrators of Macau agreed to allow their port to become a center of illegal opium smuggling and thus a lucrative source of revenue for the Chinese.

The Qing Dynasty ended in 1911 with the establishment of the Republic of China under Sun Yat-sen, although this had only minor effects on Macau. However the onset of

World War II brought Japanese attacks on the colony and the subsequent establishment of Macau as a Japanese . As the United States entered the Pacific front it also attacked Macau to prevent the territory from becoming a supply base for fuel for the

Japanese fleet.

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Shortly after World War II the People’s Republic of China came to power under

Mao Zedong and sought to formally annex Macau. However little attempt was made to act on their demands. Internal conflicts in Macau like the Guanzha Incident in 1952 and the December 3 Incident in 1966 were bloody but did not lead to any formal change in the administration of Macau. The critical turning point for Portuguese sovereignty over

Macau came in 1974 with the non-violent in Portugal that overthrew Prime Minister Marcello Caetano. Shortly after this China and Portugal entered into a formal diplomatic relationship and ultimately reached an accord in 1979 on the future of Macau. The Sino-Portuguese Joint Declaration of the Basic Law of Macau

(1987) was modeled on a similar agreement between China and Great Britain three years earlier involving . The agreement celebrated the notion of “one country, two systems” and called for a high degree of autonomy for Macau through the year 2049.

Under this treaty Macau was ceded to China on December 20, 1999 as a Special

Administrative Region (SAR) and brought a formal close to the last European colony in

Asia.

Gaming and Resort History

Macau’s emergence as one of the major contenders on the global stage of the gaming resort industry is a much more recent phenomenon than its European and

American counterparts. Nevertheless the actual history of and China per se has very deep historic roots. Archaeological evidence of gambling instruments, such as dice, chess and has been dated in China to over 4,000 years ago

(McMillen, 1996). However despite being so prevalent throughout Chinese history and so ingrained in Chinese culture, whenever gambling would increase in popularity the

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Chinese ruling party would step in to prohibit or punish the action. Other than Macau, gambling has always been illegal throughout the rest of China and remains illegal to this day. Until the early 1300s the punishment for either gambling or operating a of chance could be a fine or imprisonment. However during the Ming dynasty, anti- gambling sentiments increased to the point that the penalty would either be chopping off a person’s hands or death, depending on the violator’s nature or intention.

Historically Macau has had a very different attitude towards gaming than China.

This has helped the region develop over time into one of the premier gaming resort destination unlike its neighbor. The first successful venture at legalized gambling in

Macau was a established in January 1847 by the Macanese-Portuguese government in order to raise money and combat the negative economic effects of Hong

Kong being established as a competitive British trading post nearly five years earlier.

Two years later Macau’s governor João Maria Ferreira do Amaral began offering official licenses to gambling houses in order to further develop the region’s economy. However it was mainly the actions taken by China and Hong Kong that furthered Macau’s gaming growth to a greater extent than Macau’s tolerance and legalization. In 1872 and 1876 respectively, Hong Kong and neighboring mainland province made gambling illegal and took stringent action to shut down all underground gambling houses. As a result gambling operators and gamblers relocated to Macau and consequently brought massive expansion to its casino industry.

As mentioned above, many operators were given gaming licenses in Macau.

However in 1930 the system changed to the policy of only a single operator being granted a license. The license was put up for auction in 1930, 1937 and 1960. STDM

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(Port. Sociedade de Turismo e Diversōes de Macau, Eng. Society of Tourism and

Entertainment of Macau), owned by Hong Kong businessman ,4 won the auction in 1960 and would be the only company to have a gaming license in Macau for the next four decades until December 31, 2001.

SJM, the casino subsidiary of STDM, built Hotel Lisboa in 1967, Macau’s largest casino resort at that time. SJM further expanded its megaresort portfolio by building the

Grand Lisboa in 2008, the current tallest building in Macau. When gaming licenses were finally opened to other operators in 2001, five additional companies received concessions from the Macanese government. This made a total of three companies based in Hong

Kong and three companies based in the United States.

Galaxy Entertainment Group built StarWorld Macau in 2006 and in 2011. Melco International Development Limited built the complex in

2009.

Las Vegas Sands Corporation was the first American company to receive a gaming license in Macau. It developed Sands Macau in 2004, Venetian Macau in 2007 and Sands Central in 2011. built its Las Vegas namesake resorts

Wynn Macau in 2006 and Encore Macau in 2010 with further expansion now in progress for . MGM Resorts International partnered with the Ho family’s SJM to open MGM Macau in 2007.

4 Stanley Ho and some members of his very large family, comprised of four wives and seventeen children, remain the sole owner of STDM today. When he started the company he was a partner with Hong Kong businessman and politician , legendary gambler and Ho’s brother-in-law professional car racer .

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CHAPTER 2

HYPOTHESIS Chapter 2: Hypothesis Among the three venues considered in this thesis, Monaco has had gaming for the longest period of time. Macau is the most recent to enter this market and in the last several years has generated revenues far beyond any other location. However Las Vegas has been the most successful and renowned gaming resort destination in the world for the longest period of time. So despite the fact that “it is commonplace to believe that

Monaco is the profitable venue of the past, Las Vegas is the significant environment of the present and Macau is the trendsetting location of the future” (v. supra page iii), this thesis postulates that the Las Vegas hospitality, gaming, business and service models are the most viable framework for the future of the gaming resort industry worldwide. As a result hotels in this sector around the world as well as the global hospitality business -- as a whole -- can achieve heightened successes by implementing the procedures and characteristics that define Las Vegas gaming resorts.

The hypothesis of this thesis is based upon the study of Galaviz (2012). He introduces a very novel concept called the “boomerang effect.” A boomerang is a flat L- shaped toy usually made of wood or plastic. When thrown in the air correctly it can travel a long distance but then do something amazing by reversing its direction and ultimately returning back to the thrower. Metahporically this image refers to “throwing” the Las Vegas model of the gaming resort industry to other locations around the world.

Figure 1. Boomerang effect.

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When the Las Vegas model was initially exported to other gaming resort destinations such as Macau and other smaller venues, it was anticipated that the boomerang would ultimately “return” to Las Vegas in terms of increased notoreity and revenue. In general it was expected that other locations would complement Las Vegas within the global hospitality and gaming markets but not replace it. The global financial crisis which began in 2008 and hit Las Vegas exceptionally hard caused many to question the gaming resort industry’s future viability. Hence it seemed as if the boomerang was not returning to Las Vegas, but rather Macau would eventually emerge as the future of the gaming resort industry. However it is the hypothesis of this thesis that Las Vegas is, in fact, the primary gaming resort destination of the future. Therefore according to Galaviz:

…the boomerang will eventually fly back (from Asia and elsewhere) to benefit Las Vegas -- and this will happen much sooner than expected. When it does, it will trigger the next phase of Las Vegas’ economic growth, in which the city will become even more of a global hub for the world’s casino gaming industry. (Galaviz, 2012)

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CHAPTER 3

LITERATURE REVIEW Chapter 3: Literature Review As its name suggests, a gaming resort is structured around gambling being the most fundamental amenity provided. This is certainly obvious when the casino is the most profitable part of its revenue. Yet even in cases of resorts in which other sectors provide greater profits, the gaming aspect remains the most integral component and the

“glue” that holds all its other products and services together. Rushmore, O’Neill, &

Rushmore Jr. (2012) provide the most comprehensive definition of a “casino hotel”:

Casino hotels combine a transient hotel with a full casino facility. The guest rooms, restaurants, lounges, and other hotel amenities are usually designed to attract guests to the casino and keep them on the property. The rooms are actually an amenity to the casino. Casino hotels seek to attract individuals and groups of leisure travelers who enjoy gambling. The operation of a casino hotel requires very specialized expertise, not only in marketing the product to the gambler user but also in controlling the actual gaming activities. (Rushmore, O'Neill, & Rushmore Jr., 2012)

The literature that has been examined in the research for this thesis regarding the gaming resorts of Monaco, Las Vegas and Macau has been divided into three sections: descriptive, determinative, and a singular article that looks at all three destinations. The descriptive literature reports and details various facets of the gaming destinations and resorts. The determinative literature sets forth motivating factors that have influenced the gaming destinations and resorts. The final section is solely devoted to the study of Lu

(2005) which is the only publication discovered that discusses all three of the destinations included in this thesis.

Descriptive

The impact of a gaming resort upon local tourism is based upon the quality of the resort and the type of visitors it attracts (Israeli & Mehrez, 2000). Zagoršek & Jaklic

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(2009) has classified various types of casinos and resorts as well as their corresponding visitors. Figure 2 summarizes their findings:

• Stand-alone Casino has no Local visitors casino tourism impact • Urban casino

• Stand-alone Casino/Resort Casino is the Distance day casino has moderate main visitors • Urban casino attraction tourism impact • Border casino

Visitors Resort has spend at least • Gaming significant Casino/Resort one night at resort tourism destination impact

Visitors spend Casino is an • Stand-alone Casino/Resort at least one additional casino has moderate night at attraction tourism impact destination • Gaming resort

Figure 2. Classification of casinos and resorts. Adapted from (Zagoršek & Jaklic, 2009).

The bold portions of this chart characterize the major gaming resort destinations around the world. When visitors spend at least one night at a destination and such location incorporates products beyond gambling such as restaurants, entertainment, retail and other leisure and business services, then such a resort has a significant effect on tourism in the region. This is precisely the case with Monaco, Las Vegas and Macau and a few other locations around the world. According to Dioko & Su (2012), this category exists when the destination’s image itself has been defined by the fact that it is a major gaming tourist attraction:

Las Vegas…Monaco and Macau tend to be the quintessential examples of destinations in which the image of legalized gaming has become essentially intertwined with their place character. (Dioko & So, 2012)

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For this reason, Monaco, Las Vegas and Macau belong in this category rather than along the branch “Casino is an additional attraction” because the public perception of these destinations is characterized by the fact that they are primarily associated with their casinos rather than the casinos being a by-product of the destination (Al, 2010).

Bryman (1999) introduced the term “Disneyization” to describe how the principles of Disney theme parks have become increasingly integrated into other aspects of American and international society. 5 He discovered four common trends among examples of Disneyization assimilation: (a) , (b) dedifferentiation of consumption, (c) merchandising and (d) emotional labor. Bryman formulates the phrase

“dedifferentiation of consumption” referring to the trend that different forms of consumptions, which normally remain separate, become interconnected and difficult to differentiate. Disneyland has rides, restaurants, retail stores and other attractions that are all seamlessly mixed together throughout the park. This trend extends to gaming resorts in which the casino, hotel, restaurants, nightlife, entertainment, retail, spas, pools and meeting space are all amalgamated throughout the entirety of the resort. Even “inside” and “outside” are dedifferentiated in many of the gaming resorts by introducing interior design elements comprised of outdoor components such as waterfalls, foliage and ceilings painted to resemble the sky.

Las Vegas is possibly a better illustration than the Disney theme park of Disneyization in the form of dedifferentiation…You may enter the Forum shops at Caesars on the moving walkway but the only exit is to walk through the casino…In the process, conventional distinctions between casinos, hotels, restaurants, shopping, and theme parks collapse. (Bryman, 1999)

5 This study was developed as a continuation of Ritzer (1993) who coined the term “McDonaldization” and thus the assimilation of American and international society by the principles of the fast-food restaurant industry.

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As a result, many refer to such destinations that employ themed dedifferentiation as

“fantasy cities” (Hannigan, 1998). Las Vegas was the first to implement fantasy as an architectural consideration, and several years later Macau chose to follow a similar path because consumers actually expected this element as an essential component and even the very model of the product (Luke, 2010). Consequently Macau has been labeled as the

“Las Vegas of Asia” or the “Las Vegas of the Orient” (Loi & Gon, 2010). Ultimately it may very well be that for gaming resorts “the space itself is equally important as the activity” (Atwood & Schwarz, 2010).

Determinative

Several studies have attempted to comprehend the appeal of gaming resort destinations for the many tourists they attract each year. There are two main theories that describe this tendency: visitors can either be “seeking profit” or “seeking entertainment”

(Eadington, 1999). Regarding the urge for seeking profit, American author and journalist

Clyde Brion Davis wrote:

The urge to gamble, to risk a little in hopes of gaining a good deal, the desire to get something for nothing, seems to be one of the most fundamental traits of human nature. (Li & Smith 1976)

According to Yu (1996) wealth and fame have traditionally been viewed by the Chinese people as collective representations of a person’s achievement. This is congruent with the culture’s reverence for ancestor worship since prestige and affluence are often inherited through successive generations. Today there is more competition than ever for acquiring wealth because of a continously increasing wealth gap in China. This phenomenon can account for the Chinese culture’s strong propensity towards gambling:

Gambling is seen as a shortcut to financial achievement for many Chinese. Chinese’s desire to win and gain quick wealth means that many would go for games that offer the highest perceived probability of winning. Hence, one would

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expect Chinese baccarat players to exhibit a strong desire to gamble to win despite taking high monetary risks. (Lam, 2007)

As mentioned above, the desire to achieve success through gambling permeates all cultures. However it has been discovered that this impulse exists to a greater degree in

Chinese society (Ozorio & Fong, 2004). The above observation comes from the work of

Lam who performed a forty-five hour study of baccarat players in Macau over a period of fifteen days. Baccarat is the most popular among Chinese gamblers, both in

Macau and abroad. In 2014, this game alone accounted for 90% of all gaming revenue in

Macau (Gaming Inspection and Coordination Bureau, 2014). When Lam observed baccarat gamblers in Macau he noticed distinctive traits regarding card-reading behavior, betting behavior and social behavior. However baccarat is arguably the most unlikely game in the entire casino for noteworthy behavior and actions. In fact it requires little or no skill whatsoever (Zhou, Tang, Sun, Huang, Rao, & Liang, 2012). Yet despite its straightforward and effortless rules, Lam observed that players would yell at each other about the cards dealt and take an extraordinarily long time turning over the cards always heavily bending them in the process. Some gamblers bet excessively on a player they consider to have “lucky hands” when turning over the dealt cards. Finally players kept a spreadsheet next to them on which they would record the hands being played. Gamblers believe these behaviors have an impact on the outcome of the game, when in truth they are simply illusions and superstitions:

One important finding of this study is that Chinese baccarat players seemed to exhibit a high illusion of control in their games. This was observed from their card reading and betting behaviors…Hence, one might infer that Chinese baccarat players’ high illusion of control could have attributed to their observed high rate (and amount) of gambling. (Lam, 2007)

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Lam concludes that the intensity surrounding baccarat in Macau is so extreme in order somehow “intimidate” the casino’s luck and shift the advantage to the player. Since

Macau’s clientele consists almost entirely of this form of Chinese gambler, it is a distinct example of the theory that the visitor appeal of gaming resort destinations is primarily for the goal of seeking profit. On the other hand, mini-baccarat has replaced traditional baccarat in Monaco and Las Vegas, with the exception of a few secluded private rooms in the latter destination that primarily cater to wealthy Chinese tourists. These two games are entirely identical with exactly the same odds. The only difference is the fact that in mini-baccarat the dealer always acts as the banker and turns over the cards instead of alternating between the players seated around the table as in traditional baccarat. Thus the cards need not be replaced after every hand and the game progresses much faster because the casino would prefer to run as many hands as possible -- and not take prolonged time flipping over the cards as in traditional baccarat -- in order to maximize its profit. Nevertheless the Chinese clientele prefers baccarat to mini-baccarat because they experience an added sense of control that they erroneously believe will shift the odds in their favor. As a result the products and services in Macau are designed according to this form of consumer motivation and behavior, which is deeply rooted in Chinese culture and society.

The other theory explaining the appeal of gaming characterizes it as an environment in which customers are seeking entertainment. In this regard, Eadington

(1999) writes:

Within the context of the modern casino, one can argue that the customer is purchasing a package of amenities centered on casino gaming activities. Indeed, in competitive destination resort casino markets -- such as Las Vegas, Atlantic City, and Mississippi -- casinos use loss leader or cross-subsidizing pricing

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strategies in restaurant, accommodation, parking, and entertainment offerings with the intent of inducing such customers to gamble in their facilities. (Eadington, 1999)

Resorts can expand their clientele base to generate other forms of revenue by offering products and amenities besides gambling. Once inside the casino it is likely that these customers will also contribute in some way to additional gaming revenue. This is the model that has existed in Las Vegas for decades. In fact the transition of Las Vegas from a pure gambling brand to a broader entertainment center was inevitable for the city’s survival (Douglass & Raento, 2004). Once the city redefined itself, it created a brand image synonymous with invention and innovation. In other words, Las Vegas established itself as a destination where one could have experiences that could never have been conceived in other destinations. Ritzer6 (1999) introduced the concepts of “means of consumption” and “cathedrals of consumption” to describe settings or locations where individuals visit in order to consume. The former term refers to settings in which consumption occurs in a largely mechanistic and unemotional . On the other hand, cathedrals of consumption incorporate behavioral elements of (a) rationalization and (b) enchantment. That is to a say these settings involve consumers rationalizing their visit as well as being enchanted by the location -- similar to an actual architectural cathedral with connotations of both religiosity and opulence. Over time these settings have become more commonplace and are also referred to as “new means of consumption.” In a subsequent study, Ritzer & Stillman (2001) extended this concept to gaming resorts of Las Vegas and postulated that they epitmozied this notion:

But the paradigm for the “new means of consumption” (or “cathedrals of consumption”) is less clear (Ritzer 1999). Strong cases can be made for the fully

6 This is the same individual who coined the term McDonaldization (v. supra footnote 5).

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enclosed shopping mall, the mega-mall (e.g. Mineapolis’s Mall of America), the superstore (e.g. Toys R Us), the cruise ship, and the theme park (e.g. Disney World). It is the thesis of this essay, however, that the strongest case can be made for the Las Vegas casino-hotel as the paradigmatic cathedral of consumption. (Ritzer & Stillman, 2001)

Their research first points out that Las Vegas is clearly a highly rationalized setting since it handles millions of visitors each year, many looking to escape mundane life for the vibrant spectacles and patricipatory experience that this location offers. The cathedrals of consumption enchantment aspect that takes place in Las Vegas can be divided into three further categories: (i) simulations, (ii) impolsion and (iii) manipulations of time and space. Consumers visit Las Vegas because it offers simulations or replicas of real world locations such as New York, Paris, Venice and . The implosion component is equivalent to the dedifferentiation of consumption concept discussed earlier in which the boundaries between dissimilar products are metaphorically “imploded” with amenities amalgamating into each other. Finally manipulations of time and space in the gaming resort transport individuals to other eras and locations, such as Ancient or

Ancient , as well as seek to create a false sense of time. Las Vegas hotels have eliminated clocks inside casinos and even offer equivalent services during the day and night, such as daytime pool parties implemented into nightlife with simming pools at nightclubs. Ritzer & Stillman ultimately deduce that the objective of Las Vegas gaming resorts is to continuously re-enchant its customers in order for them to see the destination as a complete entertainment experience. Al (2010) references the marketing strategies of the Las Vegas Convention and Visitors Authority as proof for this theory:

It led the Las Vegas Visitors and Convention Authority to describe Las Vegas as an “entertainment resort destination” rather than a “gaming resort destination” in their 1998-1999 marketing plan. Since The Strip had turned into a complete entertainment destination, with celebrity chef restaurants, Broadway-quality shows, and Rodeo Drive-like shopping, it was now able to compete for the

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upscale customer that would otherwise go on far-away vacations, to Europe, for instance. (Al, 2010)

Kale & Spence (2009) ultimately examine both motivation theories of Eadington

(1999) in the context of Las Vegas and Macau in order to decipher whether consumers visit these gaming resort destinations in order to seek profit or seek entertainment:

Increasingly, visitors to Las Vegas are lured not simply by gambling, but more so by entertainment, fine restaurants, shopping and convention facilities. Success in the non-gaming arena allows casino operators in Las Vegas to better capitalize on the city’s increasing appeal as a resort destination for the wider audience of people who do not gamble. The reality is very different in present day Macau. The average gambler is still a day-tripper from Hong Kong or from nearby Chinese cities in the . The typical Asian gambler, particularly in Macau, exhibits little interest in entertainment, even when shows are staged free of cost for patrons right on the casino floor. Some casino visitors are so frugal that they often bring their own food and most do not rent hotel rooms. (Kale & Spence, 2009)

They ultimately conclude that there is a stark contrast between Las Vegas and Macau and how each customer base determines the products and amenities that the gaming resorts provide in each destination.

Kim, Prideaux, & Kim (2002) has taken a unique perspective on the gaming resort indsutry by focusing closely on the nationality of clientele that the hotels and casinos attract. The IMSEE Monaco Statistics, Las Vegas Convention and Visitors

Authority, Nevada Gaming Commission, DSEC SAR Statistics and Census Service, Gaming Inspection and Coordination Bureau Macau SAR and

Macau Government Tourist Office each publish reports that describe visitor tendencies and purchases with regard to hotels, gaming, conventions and entertainment. The Kim,

Prideaux, & Kim study, on the other hand, focuses upon visitor ethnicity and culture as indicators of consumer behavior. But instead of polling guests individually, this research has taken a different approach by providing questionairres to casino employees. This

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study was performed at the Paradise Casino inside the Sheraton Grande Walkerhill in

Seoul, South Korea, which is the largest casino in South Korea -- although its 2,500 square feet of gaming space is much smaller than the casinos in three gaming destinations studied in this thesis. The results are based upon 230 employee surveys and 28 characteristics that arise from their perception of guest tendencies. Examples include whether gamblers come to the gaming tables in a group or individually, whether they play quietly or disruptively, their tendency to tip a waitress, their preference for soft drinks or alcoholic drinks, and even if they extinguish their cigarettes at the table -- indicated by the frequency of employees changing the ashtrays. The five categories of cultures are: Japanese, Korean residents living abroad,7 Chinese (Mainland, Hong Kong and ), Western (United States and Europe) and Minority (Sri Lanka, Philippines,

Bangladesh, Thailand and Malaysia). Table 1 is a summary of the results from the survey:

Table 1

Gambler Behavior by Nationality of Player

Highest or higher tendencies Lowest or lower tendencies

• Asks for explanation of game • Exhibits disruptive behavior • Plays alone • Gather in groups • Follows dealer advice • Requests promotional gift • Exchanges organized cash at desk • Recounts exchanged chips regularly Japanese • Organizes chips • Recounts won chips customers • Tips dealer upon winning • Holds chips in hand or pocket • Leaves chips if briefly leaving table • Takes time when betting • Stays at table for a long time • Purchases drinks from bar • Tips waitress • Prefers soft drinks • Prefers alcoholic drinks • Leaves seat untidy

7 Domestic Korean nationals are not allowed to gamble inside any casino in South Korea except Kangwon Land Resort and Casino in Gangwon-do.

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Highest or higher tendencies Lowest or lower tendencies

• Complains regularly to dealer • Recounts exchanged chips regularly • Leaves chips if briefly leaving table • Gathers in groups • Tips dealer upon winning • Purchases drinks from bar Korean residents • Varies amount bet with play • Prefers soft drinks living abroad • Stays at table for a long time • Asks for explanation of game • Tips waitress • Follows dealer advice • Prefers alcoholic drinks • Smokes heavily • Exhibits disruptive behavior • Challenges new game • Gathers in groups • Plays alone • Observes other players gambling • Follows dealer advice • Sits at a table with no game playing • Exchanges organized cash at desk • Requests promotional gift • Tips dealer upon winning • Recounts exchanged chips regularly • Leaves chips if briefly leaving table Chinese • Recounts won chips • Tips waitress customers • Takes time when betting • Prefers alcoholic drinks • Varies amount bet with play • Holds chips in hands or pocket • Purchases drinks from bar • Leaves seat untidy • Smokes heavily • Leaves cigarette unextinguished • Challenges new game • Observes other players gambling • Plays alone • Sits at a table with no game playing • Follows dealer advice • Requests promotional gift • Exchanges cash only once • Takes time when betting Western • Complains regularly to dealer customers • Holds chip in hands or pocket • Recounts won chips • Varies amount bet with play • Leaves seat untidy • Smokes heavily • Leaves cigarette unextinguished • Challenges new game • Asks for explanation of game • Plays alone • Exchanges organized cash at desk Minority • Exchanges cash only once • Tips dealer upon winning customers • Complains regularly to dealer • Leaves chips if briefly leaving table • Stays at table for a long time • Tips dealer upon leaving table • Prefers alcoholic drinks

Over the last several decades, cultural and cross-cultural studies have been performed throughout many sectors of society to determine the relationship between marketing and tourism. The study of Kim, Prideaux, & Kim attempts to apply similar

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methods to casino gaming by showing that players’ nationality very much determines the type of product offered by a casino if the venue is in fact trying to attract those specific cultures. If a particular destination caters to several types of visitors as Las Vegas does, then it must offer products and services that are diversified and tailored to each of them.

Some authors have developed theories in attempt to explain why the actual locations themselves have been conducive to the development and further proliferation of gaming resort industry. One such study performed by Luke (2010) postulates that the neighboring regions adjacent to Las Vegas and Macau have propelled development in these areas. He has formulated the term “casinopolitanism” to label these cities:

Neither of these sites [Las Vegas or Macau] is known for its cosmopolitan sophistication, but socio-economic networks of the global gaming, resort, shopping, and entertainment industries are using the theme park motifs rooted in huge new casino properties to generate a simulated cosmopolitan allure, which could be characterized as “casinopolitanism.” (Luke, 2010)

Cities such as London, New York, Tokyo or Buenos Aires would be considered cosmopolitan. However Las Vegas and Macau, which themselves are not intrinsically cosmopolitan centers of business, politics, culture or society, are considered

“casinopolitans” because of their continued gaming resort construction and expansion.

The question that remains is why these cities have developed into and been defined as gambling centers as opposed to other locations around the world which have legalized gaming. Luke claims that casinopolitanism develops near a very specific area with a very specific type of neoliberalism as its foundation. In its original political context, neoliberalism widely refers to the theory that human well-being can be better achieved through the emancipation of entrepreneurial skills as well as freedom towards the path of free markets, rights and ideologies (Harvey, 2005). In the context of Luke’s research on the gaming resort destinations of Las Vegas and Macau, neoliberal expression is reflected

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in the form of film, specifically the major film industries of neighboring Los Angeles and

Hong Kong. The casinopolitans of Las Vegas and Macau and the movie driven cosmopolitans of Los Angeles and Hong Kong have fortified each other’s growth and success. Los Angeles and Hong Kong through their lucrative and influential film businesses have developed movies for decades with messages that strive to become vehicles for social change and reformation. The gaming resort settings in Las Vegas and

Macau, which as mentioned earlier have incorporated questionable and contentious activities such as gambling, drinking, prostitution and other indulgences, are ideal venues for the nearby film industries and the associated social commentaries they create:

Like the frothy chaos of fast global exchange, the basic industries of Las Vegas and Macau depend upon the unregulated growth of capitalist markets elsewhere as well as the willingness of risk-taking entrepreneurs to continuously reinvent the intensity and scope of the casinopolitan experience at these cities’ cores. Fortunately for them, the feed-back and feed-forward loops into the Hollywood and Hong Kong film, TV, music, and design scenes have made this semiotic recharging cycle comparatively easy to do, while at the same time pushing the envelope of the sin industrial culture out to new even more titillating levels of attraction. Los Angeles now needs Las Vegas as much as Vegas needs LA, and the same links arguably bind Macau and Hong Kong. (Luke, 2010)

Thus according to Luke, the success of the gaming resort industry in Las Vegas and

Macau is inextricably linked to the movie industry in neighboring Los Angeles and Hong

Kong. There are many other markets with some form of legalized gaming: such as forty- six American states, Mexico, Canada, forty-three countries in Europe, twenty-seven countries in Asia, thirty-five countries in Africa, eighteen countries in the Caribbean and seventeen countries in Central and South America (Casino City, 2015). This theory postulates that because these other markets do not have a nearby liberal film industry they have not expanded into major casinopolitans. Consequently, the research by Luke is a

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very plausible explanation for why Las Vegas and Macau have specifically developed into major gaming resort destinations.

All Three Destinations in a Single Unique Research Article

In the process of researching for this thesis, the only literature found that encompasses all three gaming resort destinations of Monaco, Las Vegas and Macau in a single article or book is the study of Lu (2005) entitled Emic Interpretations of Global

Gaming Destinations: Travel Blog Stories about Experiencing Macau, Las Vegas and

Monaco:

The three main subjects this chapter discusses include Macau, Las Vegas and Monaco, which are three major “Gambling Meccas” around the world. They are similar in terms of the business model and basic service provided, but distinctiveness exists on the iconic brand each of them exhibits and cultural experience tourists can obtain through their stay in these cities. (Lu, 2005)

This study utilizes “netnography” developed by Kozinets (2002) which is a form of ethnography that involves exploring the internet for online communities and studying them in-depth -- as opposed to a more traditional method of visiting a place and studying its inhabitants through observation or field work:

“Netnography,” or ethnography of the Internet, is a new qualitative research methodology that adapts ethnographic research techniques to the study of cultures and communities emerging through computer-mediated communication. (Kozinets, 2002)

The type of netnography performed in this research is the examination of the online communities of travel review websites or blogs, and Lu specifically focuses upon reviews of the three gambling meccas of Monaco, Las Vegas and Macau. This methodology also employs “balance theory,” which was developed by Heider (1958). This theory states that whenever individuals are in a state of inbalance they strive towards and seek out a balanced state. This applies to many aspects of human behavior and recently has been

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applied to consumer behavior (Woodside & Chebat, 2001). In this regard, Lu has presented two travel reviews per destination -- one positive and one negative. The motivation behind offering both is that when an individual wishes to plan a visit to a destination, he or she will search for both positive and negative reviews in order to achive a personal state of balance -- only positive reviews will cause a disparity towards optimism and only negative reviews will cause a disportationate amount of pessimism.

Once in a state of balance, an objective travel decision can be made that is congruent with individualized consumer behavior. Lu proceeds to include actual travel stories of six different individuals who had either a positive or negative experience on his or her trip to

Monaco, Las Vegas or Macau.

Through the analysis of travel blog stories about three cities -- Macau, Las Vegas and Monaco, some similarities and distinctiveness among the three cities come to the stage. The similarity lies in the fact that all of the three cities are well known for their being the “gambling meccas” of their country. One of the common themes they want to convey and highlight is the luxury and dissipated life tourists can get nowhere else. (Lu, 2005)

Ultimately each destination has a distinct image that its guest notices. Lu points to the fact that Macau has Portuguese and Chinese cultural heritages, Las Vegas includes replicas of world-famous architectural designs and an “anything goes” image of fantasy, and Monaco has and other athletic events. These features are intrinsic to each venue and vividly distinguish each from the other two. Each of these destinations may benefit from examining the operation of the other two, but they will most likely remain unique in character and flavor.

Lu’s research is unique by incorporating all three destinations of Monaco, Las

Vegas and Macau. However it examines these destinations and their gaming resorts solely in the context of consumer tourism decision-making processes. On the other hand,

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this thesis extends their relationships far beyond this stage by comparing and contrasting

Monaco, Las Vegas and Macau in many different ways including gaming, ethnicity, economics, tourism and hospitality. In such a manner this thesis establishes several new pathways for comparing all three destinations and points to future directions of research for examining commonalities with the worldwide gaming resort industry.

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CHAPTER 4

METHODOLOGY Chapter 4: Methodology While vast amounts of research has been performed regarding Monaco, Las

Vegas and Macau and their respective hospitality and gaming businesses, what has been written regarding the intersection of all three is almost non-existent. Previous literature has examined each individual destination and one destination in comparison with a second, however the global comparison of all three is substantially missing. The lack of literature pertaining to all three locations is peculiar because of the fact that the very destinations of Monaco, Las Vegas and Monaco are synonymous with the gaming that each offers.

Research Questions

In order to best evaluate the gaming resort industries in Monaco, Las Vegas and

Macau and their crossovers in the context of this thesis, the following four questions have been developed:

Research Question #1: What particular products and services do resorts in Monaco, Las Vegas and Macau capitalize upon as their specific strengths?

Research Question #2: What business models and strategies do resorts in each destination adopt in order to appeal to existing gaming and hospitality trends?

Research Question #3: How can resorts in each destination build upon the skills and successes of their counterparts on the other sides of the world?

Research Question #4: How can the global hospitality industry benefit from the models and frameworks of Monaco, Las Vegas or Macau?

In order to fully answer these questions and thereby provide complete and succinct insights regarding the gaming resorts of these destinations, multiple methodologies must be utilized. The following three methodologies have been implemented in the process of researching and writing this thesis:

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 Constructionist Interviews

 Financial and Statistical Data Analysis

 Ethnography and Participant Observation

Constructionist Interviews

It is crucial to obtain a corporate perspective of the gaming resort business. As mentioned previously, this industry has developed into a major component of hospitality management within the past few decades. Since change and adaptations have become so common in the products and services provided by gaming resorts, the business perspective must be congruent with the changing desires of its customers (Pizam, 2010).8

As a result interviews with key people within a hospitality organization will give a very well founded understanding of the business from leadership and ensuing consumer perspectives. 9 This thesis employs a methodology of corporate interviews as a component of the data collection process in the hopes of better understanding the individual gaming resorts in Monaco, Las Vegas and Macau as well as their similarities and differences. This entails meeting with resort executives, local tourism officials and university professors and hearing their personal insights regarding the hospitality, gaming, business and service models in their respective locations as well as their individual perceptions of their counterparts on the other sides of the world. Baker (1982) explains the value of interviews in a research setting:

8 Pizam offers the example of the gambling sector including non-gaming resorts, such as the Four Seasons Las Vegas inside the , as an example of the continuous adaptation of gaming resorts to consumer desires. This was the first non-gaming hotel facility at the time in 1999. Since then several others have been built including the Four Seasons Macau and a Mandarin Oriental in both Las Vegas and Macau. 9 It should be noted that this research methodology utilizes interviews and dialogue with executives as opposed to conversation or survey with consumers. Casino resort establishments have very strict rules that would prohibit polling its guests.

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When we talk about the world we live in, we engage in the activity of giving it a particular character. Inevitably, we assign features and phenomena to it and make it out to work in a particular way. When we talk with someone else about the world, we take into account who the other is, what the other person could be presumed to know, “where” that other is in relation to ourself in the world we talk about. (Baker, 1982)

Silverman (2015) has examined sociology theory from the 1960s until present and has delineated three categories of interviews and interview responses: (a) positivism, (b) naturalism and (c) constructionism. These classifications reflect three distinct ways to interpret and catalog interview data. Positivism implies that the interview will provide reliable and valid facts regarding the research setting. Naturalism postulates that the data is based upon the interviewee’s experiences in such a setting. Constructionism entails the formulation and application of meaning and motivation for that environment. It is easy to see that as a conversation progresses these distinctions can be blurred and the interview can take the form of all three categories. It is the job of the interviewer to formulate questions in a way that obtains responses pertinent to the specific research topic and issues being studied.

During visits to Monaco, Las Vegas and Macau the author met with the following individuals:

Monaco

 Executive Director of the Monaco Government Tourist and Convention Authority

Las Vegas

 Senior Director of Strategic Research & Analytics at the Las Convention and

Visitors Authority

 Human Resource Training Specialist at Las Vegas Sands

 Vice President of Finance at the

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 Vice President of Food and Beverage at the M Resort

 Vice President of Casino Operations at the M Resort

Macau

 Deputy Director of the Gaming Inspection and Coordination Bureau, Macau SAR

 Senior Executive of the Research & Planning Division at the Macau Government

Tourist Office

 Director of Human Resources Training & Development for Sands China

 Professor at the Institute for Tourism Studies

 Managing Partner of IGamiX Management & Consulting Ltd.

The four research questions listed above, which form the basis of this thesis’ evaluation, were asked of each interviewee in order to acquire their own perspective on the gaming resort industry. Afterward their responses were compared. In this regard, the interview methodology carried out was primarily constructionist based. These individuals were specifically solicited for their perspective because they hold positions of influence from which they can indeed offer intuition on the meaning and motivation for each particular gaming resort destination as well as how and why each has developed in its own unique way.

Financial and Statistical Data Analysis

Over the last several decades, the gaming resort industry has undergone a shift towards greater government oversight and regulation. As a result there is a large amount of statistical information regarding the economic past history and future forecasts of the gaming and hospitality industries in Monaco, Las Vegas and Macau, as well as detailed financial reports of the individual resort units. Many resorts, tourism agencies, financial

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establishments and university institutes have subsequently analyzed this data and given quantitative statistical designs and recommendations.

The financial and statistical data for each of these locations varies in the amount of information available. For example, the level of specificity of average bet per roll of roulette can be found for casinos in Las Vegas and Macau but not for Monaco. It would certainly be interesting to examine such information in its own right. However this thesis is primarily concerned with the comparison of the products, services, models and frameworks of Monaco, Las Vegas and Macau. Consequently the data analyzed is limited to figures available for every destination:

 Number of visitors

 Occupancy percentage

 Gaming revenue by game-type

 Non-gaming revenue by department

 Total gaming revenue

 Total non-gaming revenue

 Total revenue

 Average revenue per customer

Many statistical tests such as t-tests and ANOVA attempt to uncover relationships and correlations within data that is confined to a single research experiment or setting.

Therefore these statistical tests may be valuable when examining the gaming resort industries of Monaco, Las Vegas and Macau independently. However in order to comparisons between these three venues, more advanced methods must be utilized.

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Best-fit regression lines will be developed for the above statistical sets that can be compared between these locations. The following is a conventional approach to regression:

Regression analysis is a statistical technique for investigating and modeling the relationship between variables. Applications of regression are numerous and occur in almost every field, including engineering, the physical and chemical sciences, economics, management, life and biological sciences, and the social sciences… y = β0 + β1x + ε is called a linear regression model. (Montgomery, Peck, & Vining, 2012)

Through the use of regression curves 10 it is possible to quantitatively compare the financial data from all three locations and the gaming resorts therein. Interpretations of these regression models will yield comparisons of rate of growth, average value and further useful conclusions.

Ethnography and Participant Observation

Ethnography is an exceedingly valuable research methodology that can be applied to the gaming resort industries in Monaco, Las Vegas and Macau as well as most aspects of the hospitality industry. Brewer (2000) offers a functional definition of ethnography:

Ethnography is the study of people in naturally occurring settings or “field” by methods of data collection, which capture their social meaning and ordinary activities, involving the researcher participating directly in the setting, if not also the activities, in order to collect data in a systematic manner but without meaning being imposed on them externally. (Brewer, 2000)

Monaco, Las Vegas and Macau are each equidistant from each other destination with approximately six thousand miles in between them. Consequently it is particularly difficult for many researchers to travel to and observe these locations. Nevertheless witnessing the local gaming resort facilities, consumer behavior and nearby surrounding

10 There are several types of regression model such as linear, curvilinear and nonlinear. Quadratic and cubic functions are examples of curvilinear regression models. Exponential, logarithmic and logistic functions are examples of nonlinear regression models.

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areas provides an unparalleled amount of additional information that one simply cannot gain from only reading associated literature and reports. Furthermore limiting oneself to existing information can possibly include previous authorship bias. If the facts are from an affiliated source such as a resort marketing department or destination tourism agency then the bias can very well be intentional in order to portray the entity in the most positive light. Even if the information is from an independent source such as financial reports or scholarly articles it is plausible that the author inadvertently inserted some bias.

In other words, only taking into consideration the writings of other individuals will certainly narrow the researcher’s field of view. In this regard, Leedy & Ormrod (2010) express the added value of performing an ethnographic study:

The researcher shifts focus from one thing to another as new and potentially significant objects and events present themselves. The primary advantage of conducting observations in this manner is flexibility: the researcher can take advantage of unforeseen data sources as they suffice. (Leedy & Ormrod, 2010)

By visiting and observing gaming resorts in Monaco, Las Vegas and Macau, the investigation for this thesis can examine issues that have been overlooked, influenced or may simply require a fresh perspective.

As a result research for this thesis included traveling to Monaco, Las Vegas and

Macau to observe as many aspects as possible of each gaming resort in these destinations.

The amount of time spent in Monaco and Macau were each one week and the amount of time spent in Las Vegas was several weeks spread out in one week intervals. Careful observations were recorded throughout the various sectors of the gaming resorts in all three destinations including hotels, gaming, dining, nightlife, shopping, entertainment, conventions and other services. Additionally the author has actually participated in many of these amenities in order to gain an understanding even beyond observation -- that of

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“participant observation.” Grills (1988) and Katz (1988) have emphasized the necessity of extending observational ethnography to also include active participant observation.

They conclude that researchers must also “feel” the consumers’ point of view (DeWalt &

DeWalt, 2011). In the context of this thesis participant observation includes occupying hotel rooms, gambling in casinos, eating at restaurants, watching live shows, visiting nightclubs, attending conventions and several other activities.

The information gathered through this ethnography study will complement the implications and conclusions derived from the results of the constructionist interviews and financial and statistical data methodologies.

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CHAPTER 5

FINDINGS AND RESULTS Chapter 5: Findings and Results Constructionist Interviews

This section outlines live interviews performed with individuals who hold positions of influence in the gaming and hospitality industries in Monaco, Las Vegas and

Macau. The passages listed here are paraphrases of conversations that took place with each individual. It is important to note that their words only reflect their own personal viewpoints and not the opinions of the organizations that they work for.

Monaco

Guillaume Rose MONACO Executive Director of the Monaco Government Tourist and Convention Authority

Destination image

 Monaco’s strength defined by its products and services is a European way of living, a

high level of gastronomy, elegance and luxury.

 Customers will rent an apartment or hotel in Monaco and think to themselves, “Wow

I have made it in life. I can afford Monte Carlo.” You cannot get this experience

anywhere else.

 This destination is unique because it has two lives. Monte Carlo refers to the gaming

and entertainment, while Monaco refers to museums and history. The revenue from

the casinos covers much of the country’s civic costs and permits cheaper prices for

other services.

 Safety is a key attraction of Monaco. People can walk confidently with a lot of

money in their pockets. There are five hundred security cameras spread throughout

the city.

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 As a small country. Monaco has the ability to adapt to quickly changing trends.

Gaming

 Casino games are based on design and mathematics, but there is also the magical

element to them.

 The atmosphere and experience inside the Monte Carlo Casino is more like a temple

than a casino. For some visitors it means not changing anything. Nevertheless the

option of hosting the European Tour allows the casino to also cater to an

evolving market.

 When the Monte Carlo Casino opened in 1863 they removed the “00” in its roulette

games. Kaiser Wilhelm II paid 400,000 golden marks for a formula that was thought

able to beat this new version of roulette. He lost all this money; war broke out two

years later.

 The VIP gambler comes with €1 million to play. The VVIP (very very important)

market will wager €48 million in a single visit. This latter group of high rollers

accounts for 60-65% of Monte Carlo’s gaming revenue.

 A VVIP customer will come with his wife and several mistresses. A challenge for the

hotel staff is keeping track of each woman but still greeting them respectfully as Mrs.

So-and-so.

 If a VIP gambler wants a table at Le Louis XV [Alain Ducasse’s three-Michelin star

restaurant] in the Hotel de Paris he can make one phone call and a table will be set up

for him immediately.

 Avid gamblers come to Monte Carlo in order to have fun and experience danger. The

in Monaco can do anything he wants and is not really at any financial risk;

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he wants the danger. A man who has lost a €1 million credit line, an additional

€600,000, and can barely escape with €700,000 in his pocket has had the time of his

life.

 There is almost a sense of elegance in losing that does not exist in other places like

Las Vegas or Macau.

 Monegasque citizens are not allowed to gamble but may walk inside the casino.

Minors under 18, priests, soldiers and the Crown Prince and Princess of Monaco are

not even allowed to enter the casino.

 65-75% of slot players are women and 75-80% of table gamblers are men. Some

VVIP men also play slots.

 The mass market of Monte Carlo is comprised of retired people from , Cannes,

Menton, Lyon, Paris and Milan. There is also a mass market from cruise ships that

dock in Monaco as part of their itineraries. These individuals do not play but prefer

slot machines. However Monte Carlo does not want the mass market. If the casinos

were to attract too many individuals from the mass market then the VVIP’s would

leave.

Entertainment

 The main non-gaming attractions of Monaco are its hotels, spas, television and

cinema industries, grand prix and soccer.

 Monaco can do more to attract entertainment. The Russian ballet was brought in but

was not popular.

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Relationship with other destinations

 Monaco created Las Vegas. It was the first to cut individual income taxes. Las

Vegas had to build its legends in the middle of the desert. Monaco already had its

legends that people could follow.

 Monaco could learn how to serve its customers better by making gambling

transparent and traceable as is done in Las Vegas. The attitude in Monte Carlo in the

1990s was “Oh, he looks like he gambles.” But evaluation of patrons had already

been computerized in the 1980s in Las Vegas.

 The country is looking to expand its tourism attraction to India. Until recently

Monaco had not had any exposure there. A very elaborate Indian wedding was held

in Monaco in 2011, and since then exposure in India has doubled.

Las Vegas

Kevin Bagger LAS VEGAS Senior Director of Strategic Research & Analytics at Las Vegas Convention and Visitors Authority

Destination image

 Las Vegas is an ideal tourist destination. There is a certain mystique in its being

isolated in the desert. It has historical significance being that it was the only legal

gaming destination in the United States until Atlantic City. There are over 300 days

of sunshine, and there are very effective and aggressive marketing campaigns

employed by the hotels.

 The United States was one of the only countries that did not have a national tourism

advertisement agency until the recently created Brand USA. This organization is

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implementing Las Vegas Convention and Visitors Authority marketing strategies

because they have been so successful attracting visitors to Las Vegas.

 Tourism has been the mainstay of the Las Vegas economy from its beginning. It is

also a city of opportunity, where people can work their way up the corporate ladder,

and entrepreneurism, where people can take risks towards achieving success. It is

quintessentially American.

 Las Vegas hotel operators saw the writing on the wall for relying solely upon gaming

in other parts of the country. They became more flexible with their products and

decided to take risks with other potential revenue generators.

 When Steve Wynn opened the Mirage in 1989 there was explosive growth in Las

Vegas. The resort was no longer based on the old model of Las Vegas in which

deficits in other departments of the hotel would be covered by the casino. Instead

rooms, food and beverage and entertainment became profitable components of the

resort.

 There is an overstated misconception that Las Vegas changed its marketing strategy

to cater to families. Rather the more accurate depiction is that Las Vegas decided to

add families to the hotel marketing mix. In the early 1990s MGM had a theme park,

Luxor had thrill rides and Treasure Island had its own family oriented theme.

 The essence of what is sold in Las Vegas is “Adult Freedom.” You cannot find this

in any other city in the country. This required a tremendous amount of brand

research. Las Vegas is able to provide Adult Freedom because it is adaptable to

individual preferences. For some it can be getting rid of their diet for a few days,

while for others it can be betting at the table.

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 Las Vegas has a price point for everyone because there is something for everyone. It

all goes back to the idea of Adult Freedom. “What happens in Vegas, stays in Vegas”

can apply to all varieties of tourists.

Relationship with other destinations

 Monaco, Las Vegas and Macau all offer completely different amenities. In general

each does not want to tamper with their current image.

Arleen Horna LAS VEGAS Human Resource Training Specialist at Las Vegas Sands

Destination image

 The most significant product that Las Vegas offers is its commitment to

sustainability. There is no other destination in the world that goes to such great

lengths in being healthy for the environment. The water filtration system found on

the Venetian and Palazzo properties alone rivals the systems of most cities.

Jon Johnson LAS VEGAS Vice President of Finance at the M Resort, Las Vegas

Gaming

 Gambling used to be 100% of the revenue in Las Vegas. Today only half of its

revenue is generated from gaming.

 Over time revenue in Las Vegas has shifted from table games to slots.

Relationship with other destinations

 The global hospitality industry has not yet gained respect for the gaming industry.

 The M Resort excels better than any other location at fast and friendly service.

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Anthony Layton Matthews LAS VEGAS Vice President of Food and Beverage at the M Resort, Las Vegas

Destination image

 Las Vegas has more four and five star hotels than any other city in the world. The

city’s older buildings will continuously need remodeling and Las Vegas has the

ability to do such.

 The appeal of Las Vegas is the sheer number of its amenities. For example at some

hotels there are ten different types of soap.

Food and beverage

 Buffets have almost defined a vacation in Las Vegas and a visit must include going to

at least one of them.

 The future Las Vegas food and beverage concept will be eating healthy for under $20.

The food and beverage industry will begin to suffer if it is not healthy.

Salinda Conklin LAS VEGAS Vice President of Casino Operations at the M Resort, Las Vegas

Gaming

 Las Vegas excels because it has a wide variety of gambling options that can appeal to

everyone. You do not need to be a heavy gambler in order to experience this

location.

 It is hard to mess up from a gaming perspective, and it is very easy to fix if something

bad happens.

 Local casinos, like the M Resort, mainly cater to locals that wish to avoid The Strip.

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Macau

Anthony Leong MACAU Deputy Director of the Gaming Inspection and Coordination Bureau, Macau SAR

Destination image

 The Macau Model is primarily based on VIP business focus. 70% of its gaming

revenue comes from VIP’s. Macau is appealing for this type clientele because there

are some financial loopholes for VIP’s to circumvent stringent laws.

 The has developed a policy that future building projects

must answer the question “Is this good for Macau?”

 The gaming industry has brought tremendous revenue to Macau. Each year the

government gives an MOP$8000 (8000 Macanese patacas) stipend to each of its

citizens. There is a strong education system and good welfare benefits for senior

Macanese citizens. There is only 1.5% unemployment [one of the lowest rates in the

world].

Gaming

 Macanese citizens are requesting that their government be more forceful about

concession companies implementing responsible gaming.

 There has been between 20% and 50% revenue growth rate for the past several years

in Macau. However Macanese citizens are becoming concerned that the growth rate

is too great. While expansion has benefited the economy, locals are now running out

of space on the small island, and inflation is impacting local goods sold.

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 Macau is a free market in which companies can operate with some independence.

Nevertheless the gaming industry is overseen by the Macanese government, and they

receive 3% of the profit.

Diversification

 The Macanese government has requested that future casino building products be

constructed with 90% of its space devoted to non-gaming facilities in order to

diversify its economy.

 If the gaming industry were to collapse it would be devastating to the Macanese

economy. 80% of Macau’s gross domestic product (GDP) comes from gaming

resorts white the other 20% comes mainly from manufacturing.

 The Macanese government encourages the six casino companies to promote to other

markets besides China. However these companies do not want to change their model

because of the large number of visitors and revenue that this market generates. The

Chinese market is huge but still developing. Some individuals are rich, but most of

the country is poor.

Relationship with other destinations

 In the past the Chinese central government did not want its citizens to travel to the

Hong Kong and Macau Special Administrative Regions (SAR). However when the

economy deteriorated in these SAR’s, opened up the borders.

 There are over 10,000 migrant workers in Macau. Casino dealers however must be

Macanese. Local citizens are concerned about too many immigrants since

neighboring Hong Kong has a very high tax and unemployment rate for its citizens.

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 Macau could learn more about implementing the “experience” that takes place in Las

Vegas.

Shirley Sousa MACAU Senior Executive of the Research & Planning Division at the Macau Government Tourist Office

Gaming

 Chinese gamblers do not dismiss the math, however it is intrinsic to their culture that

they can actually beat the house and that luck is on their side. In many ways it is seen

as a competition between the player and the house.

 Gambling is more than just an economic proposition or transaction; it is also a

psychological endeavor.

 Sands recouped their initial investment within two years of opening in Macau.

 The recession did not affect the hospitality industry in Macau that much. However

the government lowered taxes for travel agencies.

 In 2019, concession company licenses will be reviewed.

 Money laundering is certainly possible in Macau today.

Diversification

 If Macau does not diversify its market it will come crashing down like a house of

cards.

 There are several cultural events that bring visitors to Macau including the Macau

Trade Show, the , the Macau Food Festival and the International

Fireworks Festival. Macau also has a summer Olympics team.

 The Macanese government would like to increase international visitors and lessen the

number of people from Mainland China, but they cannot say “Do not come.” If the

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Macau Airport had more flights then it would have more international long-haul

visitors. Currently only 422,000 people arrive in Macau by plane. The airport has

nineteen airlines and flies to only thirty-five destinations. However there are no

resources readily available to expand the airport.

 The Macanese government knows that the Chinese government wants Macau to be a

major quality destination. Resorts are working on other incentives and have begun

selling packages that include transportation, rooms and events.

Relationship with China

 Macau was ceded back to China in 1999. The most significant real estate

development in Macau began in the 1990s and still continues to present day. In 2002

gaming was opened to multiple concession companies. In 2003 the individual visit

scheme was initiated in which neighboring Chinese could visit Macau twice a month.

Since then it has been reduced to once every three months with a maximum stay of

seven days.

 If the Chinese central government restricts the flow of people and money, then this

could seriously affect Macau. However the Chinese central government wants to

show Taiwan, Tibet and other provinces that it is good to be a part of China and that

they will be prosperous if they do not break away.

 China is the goose that lays the golden egg for Macau.

 Hong Kong has had some backlash and negative reactions from the Chinese central

government. Hong Kong would like to return to the earlier colonial days.

 Macau has very poor transportation. Hundreds of thousands of Chinese visitors

simply walk across the Chinese boarder. There are plans to build a 14-mile light rail

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to Macau that will transport 14,200 people per hour. Additionally an 18-mile bridge

is planned that will transport people between the three locations of Guangdong, Hong

Kong and Macau.

 There is a capacity problem in Macau. When there are too many visitors, the

residents get annoyed. The Chinese visitors will buy all the milk products and leave

none for the locals. Additionally hospitals are saturated and Macanese cannot get

access to effective health care. The GDP of Macau is one of the highest in the world.

But what good is it if families are under stress and they are priced out of the housing

market?

 China will increase the land available to Macau for non-gaming enterprises by leasing

Hengqin Island in order to alleviate Macau’s growth pressures.

 There have been cases of embezzlement on the part of Chinese tour operators who

will say that one needs to pay to enter a hotel or must buy jewelry from certain

merchants. The Chinese government has started enacting tourism laws making group

tour itineraries stricter.

Relationship with other destinations

 Macau has consular delegates in Mainland China, Taiwan and Portugal. It has

representatives in , France, Germany, Hong Kong, India, , Japan,

Korea, Malaysia, New Zealand, Russia, Singapore, Thailand, United Kingdom and

United States.

 Monaco is a playground for the rich but they cannot price out the Chinese because the

Chinese are getting significantly richer. Macau, unlike Monaco, still retains

affordable pricing.

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 The unique themes of Las Vegas to some extent are already present in Macau, for

example diversification and business tourism. Macau will become the biggest

competition to Las Vegas for meetings and conventions. Also Manny Pacquiao has

started boxing in Macau and he is also very much a part of the Las Vegas experience.

 The young and rich from California come to Las Vegas for pool parties, celebrity

DJ’s and celebrity chefs. It is unclear how long that will last because it is unknown

how long the technology boom will continue.

 Las Vegas could learn how to deal with the increase of Chinese tourists and the type

of hospitality they expect to receive. The Chinese population has suffered for

decades but now they have money to spend.

Jeremy Busfeld MACAU Director of Human Resources Training & Development for Sands China

Destination image

 Macau has not even tapped into the entire market that it could. Half of the world’s

population lives within five hours of Macau by air.

 In four years it is unlikely there will be any further development in Macau and

employment expansion will end. The last planned development is scheduled to open

in 2019 on , a new island leased from China, but no gambling will be

allowed there.

 The Sands branding is not as internationally recognized so it built its reputation in

Macau on other major brands like Hilton, Sheraton and Holiday Inn.

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Gaming

 Some gamblers will not even drink alcohol while playing because they do not want to

get up from the table to go to the toilet.

 Any advertising for something more than a casino still generates additional revenue to

the casino.

 Junkets are used by the casinos as liability because China cannot prosecute

crimes related to gaming since they do not legally recognize gaming there.

 Gaming licenses were given to outside casino operators in 2001 with a twenty-year

expiration. These companies are confident that the Macanese government will renew

their licenses.

Diversification

 Both Macau’s and China’s governments are clear they want Macau to diversify its

economy.

Rooms, retail and entertainment

 Retail revenue in Macau is second to its gaming revenue. This city has some of the

best retail outlets in the world in terms of sales per square foot.

 The Chinese patrons want to gamble and shop, but they also want a place that has

international acclaim.

 Everybody first thought that 3,000 Sands hotel rooms would be too much. But now

Sands has expanded to 9,000 rooms with a 90% occupancy rate that has essentially

stayed at that level.

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 Sands is one of the only companies to truly diversify its businesses in Macau. The

arena it built is not a lucrative investment but complements the entire image since it

attracts major artists such as Manny Pacquiao and the Rolling Stones.

Human resources

 There is a human resources bubble in terms of getting qualified individuals to work in

Macau. However there is no business bubble; operations could go on indefinitely

from a business perspective.

 To be a quality destination, Macau needs qualified people working. In the future

Macau will have more qualified individuals because Macanese have begun studying

abroad in other parts of the world.

 Sands is the largest employer in Macau, even more than the Macanese government.

More than 70% of staff at Sands resorts are locals with an average recruiting of 100

people per week. Sands is trying to get locals trained to move up the ladder and to

stay longer at its properties. In 10-15 years nearly all senior positions will be held by

locals.

Relationship with other destinations

 Macau has started tapping into the Indian market. Although the Bollywood Awards

are held here, Indians are not big gamblers.

 From a human resources perspective, employees in Macau do not start at level zero,

they start below level zero, and then are taught not to perform at level zero. In Las

Vegas if an employee does not smile one can terminate him or her and another 50-

100 people are available. Once beyond level zero in Macau they can be taught the

resort operations.

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 The Macau service standards are not up to the quality of service offered in Las Vegas

because of the cultural disparities.

 The casinos in Macau have strict regulations against money laundering because there

are a number of regulatory bodies in China, Nevada and [for Sands in] Philadelphia

that oversee their operations.

Dom Dioko MACAU Professor at Institute for Tourism Studies

Destination image

 Macau is an accident in history and probably would have been stamped out by the

Chinese Cultural Revolution if the Macanese economy were not so poor at the time.

 The Macau model is based on VIP and junket gambling.

 Chinese gamblers appreciate elaborate facilities that they can walk through but are

not interested in the experiences. This phenomenon is referred to as “hyperreality.”

Gaming

 Gambling has always operated at the fringes of acceptable society.

 In 2001 the Macanese government wanted to liberalize gambling and provided

licenses to other operators.

 The Macanese government does not have any direct control on gambling. They use

other indirect tactics in order to implement its gaming policies.

Diversification

 Macau is the only place in China where gambling is legal. However the Chinese

central government wants the Macanese economy to be more diversified in order to

remove corruption through money laundering and increase other forms of hospitality

competition.

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 There has been a recent push for more meetings, incentives, conventions and events

(MICE) business in Macau in order to compete with Las Vegas, which is a city built

for these businesses.

 City of Dreams attempted to introduce Cirque du Soleil shows but failed. These

shows are all about gymnastics, but this is nothing new for the Chinese culture.

Relationship with other destinations

 Monaco exists for the upper class and the well-dressed who travel there primarily

because of its luxury amenities and the fact that it is a tax haven.

 Most Las Vegas operators in Macau built facilities that are similar to the playgrounds

they built in Las Vegas because they only had the Las Vegas clientele in mind when

transporting their business to Asia.

 Macau mainly attracts visitors from China because good fortune and good luck

superstitions seem to be in the psyche of the Chinese. The Grand Lisboa has a large

number of artifacts and symbolism that are meant to bring good luck to its clientele.

Ben Lee MACAU Managing Partner of IGamiX Management & Consulting Ltd.

Diversification

 The Macanese government and casino operators will say that they are looking to

diversify resorts beyond gaming. But why would they? It is their most profitable

sector by far. In truth they are only interested in gaming. The shops, restaurants,

entertainment and meeting space exist just to please a few individuals who have

demanded these facilities.

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Junket gaming

 The most profitable component of casinos in Macau is junket gamblers. These are

individuals who come to Macau to gamble, but the casino simply acts as a facility for

behind-the-scenes gambling that takes place with the junket company.

 One will see a game with gamblers sitting at the table and then two layers of people

betting on top of these gamblers. Behind all those people is a woman with a

clipboard keeping track of all the bets made and hands dealt for one of the players.

That player has deposited separate funds to an account with the junket company that

she represents. Every bet made at the table will have an identical bet with the junket

company with a three to five times multiplier into an offshore account that the

company maintains for the player.

 The reason for players betting more with the junket as opposed to the casino is that

the junket can offer a better player advantage than the casino will ever provide. The

gaming revenue for Macau in 2013 was about $50 billion, but it is estimated that this

number should be about $150 billion. Money bet with the junket never gets reported.

 This form of junket gambling is illegal in the United States. If the Macau casino is

run by an American corporation, the Nevada Gaming Commission would probably

close their American properties as well. Hence MGM, Wynn and Sands try to stop

this type of junket activity from taking place in their Macanese properties.

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Financial and Statistical Data Analysis

This section incorporates data that was compiled from several sources relating to the gaming resort destinations of Monaco, Las Vegas and Macau. In many cases the data needed to be manually computed in order to be presented in a way that allows each location to be compared with the others. This data was subsequently inserted into

Microsoft Excel in order to produce the corresponding graphs. Finally IBM SPSS was used to produce statistical results and mathematical regression models.

It should be noted that foreign currency exchange rates fluctuate daily. All of the following tables dealing with money are all listed in US$. In order to account for fluctuations in the exchange rates of US dollars with euros and Macau patacas in the least complicated way possible, the average value of all exchange rates between 2003 and

2014 was applied for each year during this period:

US$1.00 = €0.76 ⇔ €1.00 = US$1.30 US$1.00 = MOP$7.81 ⇔ MOP$1.00 = US$0.13

Number of Visitors and Occupancy

Table 2

Number of Visitors and Occupancy Percentage

Note. Number of visitors in Monaco retrieved from (IMSEE Monaco Statistics, 20xx) and occupancy percentage in Monaco retrieved from (Société des Bains de Mer, 20xx); number of visitors and occupancy

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percentage in Las Vegas retrieved from (Las Vegas Convention and Visitors Authority, 20xx); number of visitors and occupancy percentage in Macau retrieved from (DSEC Government of Macau SAR Statistics and Census Service, 20xx). Data for the number of visitors to Monaco11 could not be found for 2013 and 2014, therefore an estimated figure of 300,000 (designated by e for “estimated”) is given for each year.

This table shows the number of visitors to Monaco, Las Vegas and Macau and the hotel occupancy percentage in each location between 2003 and 2014. There is a noticeable drop in 2009 for each location due to the global financial crisis of 2008; numbers started to improve by either 2011 or 2012. The 41.13 million visitors to Las Vegas in 2014 is the highest number in the city’s history.

Figure 3. Number of visitors to gaming resort destinations. Data from Table 2.

This graph shows the number of visitors data from Table 2 between 2003 and 2014.

Monaco’s small size and limited access by two roads or by cruise ship accounts for the

11 IMSEE Monaco Statistics only includes overnight guests in its number of visitors statistics because of their notable economic impact. Between 2003 and 2014 an approximate yearly average of 2,400,000 arrivals (and 2,400,000 departures) by bus was calculated and an approximate yearly average of 220,000 arrivals by cruise ship tendering was calculated.

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relatively low number of visitors. In 2003 the Chinese central government and Macanese government agreed to expand travel between the two regions allowing Chinese citizens to visit the gaming destination twice per month. In 2008 the number of visitations was reduced to once every three months, with a maximum stay of seven days. Since then the number of visitors to Macau decreased until 2010 and has subsequently increased much less rapidly. Las Vegas continues to be one of the most visited cities in the world.

Table 3

Number of Visitors Descriptive Statistics and SPSS Regression

Note. SPSS output based upon data from Table 2.

The descriptive statistics of this data show that between 2003 and 2014 the average number of visitors to Monaco was 289,000 per year, the average number of visitors to

Las Vegas was 38.352 million per year and the average number of visitors to Macau was

24.740 million per year. The standard deviation of number of visitors during this time for

Monaco was 28,000, for Las Vegas was 1.577 million and for Macau was 6.121 million.

Using the linear regression model it is deduced that the number of visitors to Monaco is increasing by 3,000 on average per year, the number of visitors to Las Vegas is

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increasing by 292,000 on average per year, and the number of visitors to Macau is increasing by 1.461 million on average per year.

Figure 4. Occupancy percentage for gaming resort destinations. Data from Table 2.

This graph shows the hotel occupancy percentage data from Table 2 between 2003 and

2014. Macau’s recovery following the recession in 2008 produced numbers significantly higher than its occupancy rate prior to this event. However Monaco and Las Vegas have not yet achieved occupancy levels that existed prior to the financial crisis. In 2014, Las

Vegas’ occupancy was only 0.3% higher than that of Macau.

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Table 4

Hotel Occupancy Descriptive Statistics and SPSS Regression

Note. SPSS output based upon data from Table 2.

The descriptive statistics of this data show that between 2003 and 2014 the average occupancy percentage for Monaco was 59.08%, for Las Vegas was 88.50% and for

Macau was 77.00%. The standard deviation of occupancy rate during this time for

Monaco was 4.122%, for Las Vegas was 3.778% and for Macau was 6.836%. Using the linear regression model it is deduced that the occupancy for Monaco is decreasing 0.5% on average per year, the occupancy for Las Vegas is decreasing 0.8% on average per year, and the occupancy for Macau is increasing 1.7% on average per year.

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Gaming, Non-gaming and Total Revenue

Table 5

Segmented Gaming Revenue of Gaming Resort Destinations (in million US$)

Note. Table games and machine games data for Monaco retrieved from (IMSEE Monaco Statistics, 20xx), Table games and machine games for Las Vegas developed by combining Las Vegas Strip and data from (UNLV Center for Gaming Research, 2015); Table games and machine games data for Macau retrieved from (Gaming Inspection and Coordination Bureau, 20xx).

This table shows gaming revenue segmented into table games revenue and machine games revenue between 2003 and 2014. Macau’s revenue in each category has grown substantially from 2003 to 2008. This reflects the fact after December 31, 2001 gaming licenses were expanded from one to six companies. Since then construction growth has been almost exponential (v. supra page 14ff). Machine game revenue dipped for Las

Vegas in 2008 following the recession but resumed increasing again in 2010. It was not until 2014 that revenue for Monaco returned to previous levels; machine gaming for Monaco has yet to recover.

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  Table Games  Machine Games

Figure 5. Distribution of gaming revenue for gaming resort destinations (2010-2014 average). Data computed from Table 5. These numbers vary each year, therefore an average of the values between 2010 -- after some recovery following the global financial crisis -- and 2014 were used.

This figure shows the distribution of gaming revenue divided between table games machine games. Machine game revenue is slightly greater in Monaco than its table game revenue. Gaming revenue is distributed fairly evenly between table games and machine games in Las Vegas. Table game revenue is almost twenty-three times machine game revenue in Macau.

Table 6

Segmented Non-gaming Revenue of Gaming Resort Destinations (in million US$)

Note. Rooms, food and beverage, and other data for Monaco retrieved from (IMSEE Monaco Statistics, 20xx); Rooms, food and beverage, and other data for Las Vegas developed by combining Las Vegas Strip

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and Downtown Las Vegas data from (UNLV Center for Gaming Research, 2015); Rooms, food and beverage, and other data for Macau rigorously calculated from (DSEC Government of Macau SAR Statistics and Census Service, 20xx).

This table includes non-gaming revenue segmented into the rooms department, food and beverage department, and other departments -- which combines shopping, entertainment, meetings, events and spas -- between 2003 and 2014. The latter items have been major components of Las Vegas gaming resorts since the building of Mirage in 1989 (v. supra page 7ff) but have only recently been emphasized in Monaco and Macau. Approximately one third of Las Vegas’ food and beverage revenue comes from alcohol sales. Almost the entirety of Macau’s other revenue comes from shopping.

  Rooms  Food and Beverage   Other

Figure 6. Distribution of non-gaming revenue for gaming resort destinations (2010-2014 average). Data computed from Table 6. These numbers vary each year, therefore an average of the values between 2010 -- after some recovery following the global financial crisis -- and 2014 were used.

This figure shows the distribution of non-gaming revenue divided between rooms, food and beverage, and other departments. Half of the non-gaming revenue in Monaco comes from food and beverage, and nearly half of the non-gaming revenue in Macau comes

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from the other departments. Non-gaming revenue in Las Vegas is divided almost evenly between these categories.

Table 7

Total Revenue of Gaming Resort Destinations (in million US$)

Note. Compiled from Table 5 and Table 6.

This table shows the combined gaming revenue, non-gaming revenue and total revenue at gaming resorts in Monaco, Las Vegas and Macau between of 2003 and 2014. This data from Table 7 will be used extensively in the following tables and figures.

  Gaming  Non-gaming

Figure 7. Distribution of total revenue for gaming resort destinations (2010-2014 average). Data computed from Table 7. These numbers vary each year, therefore an average of the values between 2010 -- after some recovery following the global financial crisis -- and 2014 were used.

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This figure shows the distribution of gaming resort total revenue divided between gaming revenue and non-gaming revenue. Revenue is distributed fairly evenly between gaming revenue and non-gaming revenue in Monaco; non-gaming revenue is 19.2% greater in

Las Vegas than its gaming revenue; gaming revenue is almost six times non-gaming revenue in Macau.

Figure 8. Gaming revenue of gaming resort destinations. Data from Table 7.

This graph shows the gaming revenue data from Table 7 between 2003 and 2014.

Macau’s gaming revenue has grown almost exponentially following the expansion of gaming licenses to multiple companies on December 31, 2001, the subsequent massive construction projects, and transportation between Mainland China and Macau becoming more open and liberalized. Las Vegas had slow increases in gaming revenue prior to the global financial crisis. After the recession its numbers have been increasing but not to

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their previous level. Monaco’s gaming revenue is relatively constant compared to the other two destinations.

Table 8

Gaming Revenue Descriptive Statistics and SPSS Regression

Note. SPSS output based upon data from Table 7.

The descriptive statistics of this data show that between 2003 and 2014 the average gaming revenue of Monaco was $286.27 million per year, for Las Vegas was $6.509 billion per year and for Macau was $21.195 billion per year. The standard deviation of gaming revenue during this period for Monaco was $32.02 million, for Las Vegas was

$565.51 million and for Macau was $16.410 billion. Using the linear regression model it is deduced that the gaming revenue of Monaco is decreasing $4 million on average per year, the gaming revenue of Las Vegas is increasing $60 million on average per year and the gaming revenue of Macau is increasing $4.371 billion on average per year.

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Figure 9. Non-gaming revenue of gaming resort destinations. Data from Table 7.

This graph shows the non-gaming revenue data from Table 7 between 2003 and 2014.

The global financial crisis in 2008 is clearly noticeable in the non-gaming revenue of Las

Vegas and Macau. It hit its lowest amounts in 2010 in each of these locations but has since climbed past its pre-recession numbers. As indicated in Table 7, this is the most profitable sector for resorts in Las Vegas. Monaco’s non-gaming revenue has increased steadily to its highest value in 2014.

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Table 9

Non-gaming Revenue Descriptive Statistics and SPSS Regression

Note. SPSS output based upon data from Table 7.

The descriptive statistics of this data show that between 2003 and 2014 the average non- gaming revenue of Monaco was $209.77 million per year, for Las Vegas was $9.040 billion per year and for Macau was $5.013 billion per year. The standard deviation of non-gaming revenue during this period for Monaco was $55.81 million, for Las Vegas was $1.312 billion and for Macau was $1.739 billion. Using the linear regression model it is deduced that the non-gaming revenue of Monaco is increasing $14 million on average per year, the non-gaming revenue of Las Vegas is increasing $288 million on average per year and the non-gaming revenue of Macau is increasing $445 million on average per year.

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Figure 10. Total revenue of gaming resort destinations. Data from Table 7.

This graph shows the total revenue data from Table 7 between 2003 and 2014. Monaco’s total revenue has been fairly constant between these years. In 2008, the total revenue of

Macau at $20.3 billion passed the total revenue of Las Vegas at $16.6 billion. Since then

Macau’s total revenue has grown almost exponentially. Las Vegas’ total revenue in 2014 at $17.6 billion was both the highest since the global financial crisis as well as the highest in its history. The drop in Macau from $54.1 billion to $53.4 billion from 2013 to 2014 is due to the Chinese central government pledging to crack down on corruption and money laundering.

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Table 10

Total Revenue Descriptive Statistics and SPSS Regression

Note. SPSS output based upon data from Table 7.

The descriptive statistics of this data show that between 2003 and 2014 the total revenue of Monaco was $478 million per year, for Las Vegas was $15.549 billion per year and for

Macau was $26.208 billion per year. The standard deviation of total revenue during this period for Monaco was $57.88 million, for Las Vegas was $1.791 billion and for Macau was $17.915 billion. Using the linear regression model it is deduced that the total revenue of Monaco is increasing $10 million on average per year, the total revenue of

Las Vegas is increasing $348 million on average per year and the total revenue of Macau is increasing $4.816 billion on average per year.

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Average Revenue per Customer

Table 11

Average Revenue per Customer for Gaming Resort Destinations (in US$)

Note. Calculated from Table 2 and Table 7.

This table shows the average revenue per customer for gaming resort destinations between 2003 and 2014. These numbers refer to the amount retained by resorts per customer, but not necessarily the amount spent by each customer. The discrepancy between these quantities arises in the casino where a player will spend an amount but can win some of it back. This phenomenon is known as the house advantage. It should be noted that the standard deviations of these values will be very large for each destination because of the vast differences in spending habits between the mass markets and the VIP markets.

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Figure 11. Average revenue per customer for gaming resort destinations (2010-2014 average). Data from Table 11. Instead of a line graph of real values between 2003 and 2014 as similar to the previous graphs, a bar graph of the average value between 2010 and 2014 has been chosen because (a) it displays and compares these nine quantities in a much simpler way and (b) the average revenue per customer oscillates between some years and therefore it is not possible to obtain a statistically significant linear regression model.

This graph shows the average revenue per customer data from Table 11. The average customer in Macau’s casino lost over 1.5 times the average in Monaco, while the average

Monaco consumer spent almost four times as much in the non-gaming departments than customers in Macau. However in total Monaco’s average customer outspent Macau’s average customer by $122.39. Las Vegas’ average customer was the most frugal among visitors to all these destinations.

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CHAPTER 6

DISCUSSION, IMPLICATIONS AND CONCLUSIONS Chapter 6: Discussion, Implications and Conclusions Having presented the results of the research for this thesis in the previous chapter, it is now possible to reexamine the gaming resort destinations of Monaco, Las Vegas and

Macau in light of these findings. As mentioned earlier, in order to better comprehend these venues four questions have been developed that investigate the gaming and hospitality industries in each independent location, in comparison to each other location and in the context of the global hospitality industry at large:

 What particular products and services do resorts in Monaco, Las Vegas and

Macau capitalize upon as their specific strengths?

 What business models and strategies do resorts in each destination adopt in order

to appeal to existing gaming and hospitality trends?

 How can resorts in each destination build upon the skills and successes of their

counterparts on the other sides of the world?

 How can the global hospitality industry benefit from the models and frameworks

of Monaco, Las Vegas or Macau?

As mentioned earlier, the hypothesis of this thesis is:

The Las Vegas hospitality, gaming, business and service models are the most viable framework for the future of the gaming resort industry worldwide. As a result hotels in this sector around the world as well as the global hospitality business -- as a whole -- can achieve heightened successes by implementing the procedures and characteristics that define Las Vegas gaming resorts. (v. supra page 17ff)

Utilizing historical accounts and previous research presented in the introduction and literature review chapters, as well as the results from the research methodology of this

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thesis, it can be determined whether this hypothesis best answers these questions or whether there exists a more ideal alternative solution.

Research Question #1: What particular products and services do resorts in

Monaco, Las Vegas and Macau capitalize upon as their specific strengths?

Monaco

While researching the historical background and scholarly literature of major gaming resort destinations around the world it was discovered that, of these three venues,

Monaco had the least amount written about it. This seemed strange at first given the fact that among them Monaco is the oldest venue with legalized gambling. However after conducting constructionist interviews, financial and statistical data analysis, and ethnography and participant observations for all three locations, Monaco still remains the most obscure and esoteric. Guillaume Rose at the Monaco Government Tourist and

Convention Authority elaborates upon Monaco’s allure:

Customers will rent an apartment or hotel in Monaco and think to themselves, “Wow I have made it in life. I can afford Monte Carlo.” You cannot get this experience anywhere else.

Affording Monaco and Monte Carlo is a notably substantial endeavor. The second smallest country in the world at only 0.78 square miles12 has more expensive real estate than any other city in the world at approximately $6,500 per square foot (Knight Frank

Research for Citi Private Bank, 2012). Traveling to Monaco is also an expensive activity given the fact that its hotels have had the highest average daily rate of any city in the world at approximately $330 per night (Hotels.com, 2014).

12 The smallest country in the world is Vatican City at 0.17 square miles.

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The extravagance and exhibition of wealth in Monaco are in fact its defining characteristics. This is not a tangible product or service and thus the enigmatic reputation of this venue’s gaming activities have been obscured by cultural norms. Nevertheless

Monaco’s premium and costly nature has very much driven and defined this destination’s gaming and hospitality amenities. The ethnographic research performed in Monaco precisely demonstrates this phenomenon at several different locations. Just south of the

Monte Carlo Casino and down the Hill is Port Hercule harbor, which has a 700-berth capacity accommodating both daily and monthly docking at very high costs.

During the observational period there were nearly 150 boats docked, and in 2012 the harbor berthed a total of 1,197 yachts (IMSEE Monaco Statistics, 2013). Guillaume Rose describes Monaco’s mainstay clientele:

The VIP gambler comes with €1 million to play. The VVIP (very very important) market will wager €48 million in a single visit. This latter group of high rollers accounts for 60-65% of Monte Carlo’s gaming revenue…A VVIP customer will come with his wife and several mistresses. A challenge for the hotel staff is keeping track of each woman but still greeting them respectfully as Mrs. So-and- so.

The opulence and display of affluence in Monaco extend beyond its shores into the Monte Carlo Casino, its most famous attraction and the very facility that has defined the country’s economy (v. supra page 3). The following are excerpts from Table 2, Table

7 and Table 11:

Excerpt from Table 2 Number of Visitors and Occupancy Percentage

Excerpt from Table 7 Total Revenue of Gaming Resort Destinations (in million US$)

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Excerpt from Table 11 Average Revenue per Customer for Gaming Resort Destination Tourists (in US$)

The comparison of these tables is surprising and enlightening regarding the nature of

Monaco’s clientele. The total revenue in Macau for 2014 was almost one hundred times the total revenue in Monaco. On the surface it would therefore seem that Monaco does not really belong in the same category of major gaming resort destinations. However the average Monaco consumer spent $228.59 more than the average customer in Macau and over five times the average Las Vegas consumer. Naturally the wide discrepancy in total revenue among these three destinations arises from the thirty and forty billion annual visitors to Macau and Las Vegas, respectively, and only approximately 300,000 for

Monaco. With fewer customers, smaller spaces and yet greater average expenditures, the behavior and practices of gamblers in Monaco are more noticeable and pronounced.

Activities in Monaco’s smaller casinos are relatively unexciting compared to the

Monte Carlo Casino13 which had intense action played with very high stakes. This casino has both public and private gaming rooms. The public salon includes slots, , blackjack, and American roulette with both “0” and “00.” The private room has an entry fee of €10 and includes mini-baccarat, blackjack and European roulette with only a single

“0.” Guillaume Rose chronicles a typical occurrence at the Monte Carlo Casino:

Avid gamblers come to Monte Carlo in order to have fun and experience danger. The high roller in Monaco can do anything he wants and is not really at any financial risk; he wants the danger. A man who has lost a €1 million credit line,

13 As mentioned above, Cafe de Paris casino, connected to its eponymous restaurant, and the Monte Carlo Bay Casino, inside the Monte Carlo Bay Hotel and Resort, have only machine gaming. Sun Casino, inside the beachfront Fairmont Monte Carlo, includes both machine gaming and table games, similar to the country’s main casino. Sun Casino’s table games were all empty during the observational period, as opposed to the tables in the Monte Carlo Casino that each had several customers.

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an additional €600,000, and can barely escape with €700,000 in his pocket has had the time of his life.

After performing this interview, this precise scenario took place while observing customers at the Monte Carlo Casino. Most gamblers in the private salon were wagering an excess of €10,000 -- or $13,000 -- at any of the mini-baccarat, blackjack or European roulette tables. However there was one European roulette table sectioned off with one older man gambling while his wife and many others in the room watched. If baccarat requires little or no skill then roulette is a very close second (Zhou, Tang, Sun, Huang,

Rao, & Liang, 2012). Yet at one point during the session the individual laid out his entire chip stockpile of €1.3 million -- or $1.69 million -- around the roulette table choosing each number and combination methodically.14 After the roll was complete and the ball landed on a number, the dealer picked up every chip on the table. In other words, this man lost €1.3 million on one single roll. He then sighed out loud and stormed off towards the rear corridor of the private salon. Despite the magnitude of amount of money discarded, most people in the salon were not fazed and they continued with their own activities. However this gentleman returned within five minutes with a €60,000 -- or

$78,000 -- stack of chips. After three rolls, he started to celebrate: he had now recouped approximately €600,000 -- or $780,000. He gathered the remainder of his chips and returned to the corridor, which houses the casino’s private bank, where he had obtained the second round of chips. This gentleman was ecstatic because of the fact that he only lost €700,000 -- or $910,000. Guillaume Rose explains:

14 It should be noted that the house advantage is essentially the same for every single bet in roulette -- 5.26% for American roulette and 2.70% for European roulette. Therefore while this particular gambler in Monaco was carefully and methodically laying out his bets, he could have simply thrown his chips in the air and allowed them to land randomly, and he still would have exactly the same chances of winning as his current, slower strategy.

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There is almost a sense of elegance in losing that does not exist in other places like Las Vegas or Macau.

The restaurants and entertainment venues of Monaco had very different environments than its casinos. While the crowds inside the gaming areas were older individuals, the rest of the small country was crowded with much younger people. There were young children strolling with their parents in the parks and at the Jardin Animalier municipal zoo, teenagers were lying on the sidewalks jutting into the ocean at

Beach doing elaborate flips into the water, and the restaurants and Buddha Bar nightclub were packed with well-dressed young men and women. During major events such as the

Monaco Grand Prix, Monaco Yacht Show, International Fireworks Festival and Tennis

Grand Masters, the country reinvents itself as primarily an entertainment venue.

Las Vegas

Las Vegas is the most famous gaming resort destination in the world. Its very name is synonymous with both the gaming industry -- with gambling being engrained throughout its historical past (v. supra page 7) -- and the global hospitality industry -- evidenced by the fact that Las Vegas has more hotel rooms than any other city in the world with over 150,000 (Las Vegas Convention and Visitors Authority, 2015). The following is an excerpt from Table 2:

Excerpt from Table 2 Number of Visitors and Occupancy Percentage

This data implies that over 130,000 rooms on average were occupied at any given time during 2014. This number still remains the highest in the world, just above Orlando with over 118,000 available rooms (Cvent Supplier Network, 2014). With so many rooms in

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Las Vegas there is a broad spectrum in average daily room rates ranging from around $20 at the Circus Circus to over $20,000 for the two-story sky villa at the Palms -- formerly known as the Hugh Hefner Sky Villa. Kevin Bagger at the Las Vegas Convention and

Visitors Authority explains Las Vegas’ attraction:

Las Vegas has a price point for everyone because there is something for everyone…“What happens in Vegas, stays in Vegas” can apply to all varieties of tourists.

Unlike Monaco, which is intended for the affluent, and Macau, which caters almost exclusively to Chinese clientele, Las Vegas is accessible to all types of visitors and offers amenities for each market segment.

Upscale gaming resorts like the Wynn and Encore still provide affordable dining options such as the pan-Asian restaurant Wazuzu that offers a luxurious setting with a twenty-seven foot dragon sculpture made of ninety thousand crystals, and yet the average price per menu item is $17. Budget hotels like the downtown even offer some of the finest dining options in all of Las Vegas such as the steakhouse Hugo’s

Cellar where the average price per entrée is $57 -- even higher than the steakhouse Prime at the Bellagio -- and over 250 bottles of wine with a sommelier that is rumored to be one of only four individuals in the world that is both a Master Sommelier and a Master of

Wine. In this regard Las Vegas is truly an “integrated resort” destination which is often used in conjunction with “gaming resort” in order to emphasize the extensive variety of facilities mixed together. Kevin Bagger defines the implicit product that Las Vegas promotes:

The essence of what is sold in Las Vegas is “Adult Freedom.” You cannot find this in any other city in the country. This required a tremendous amount of brand research. Las Vegas is able to provide Adult Freedom because it is adaptable to individual preferences. For some it can be getting rid of their diet for a few days, while for others it can be betting at the blackjack table.

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This concept of Adult Freedom can be supported by the financial and statistical research of this thesis. The following are excerpts from Figure 5 and Figure 6:

  Table Games  Rooms  Machine Games  Food and Beverage  Other

Excerpt from Figure 5. Excerpt from Figure 6. Distribution of gaming revenue for Distribution of non-gaming revenue for gaming resorts. gaming resorts.

The data for these two categories is striking because of its symmetry. In other words, the gaming revenue for Las Vegas gaming resorts is divided almost in half between table games and machine games, and the city’s non-gaming revenue is trisected into similar thirds between rooms, food and beverage, and other departments -- which as mentioned earlier includes shopping, entertainment, meetings, events and spas. These numbers reflect both the architectural and consumer composition of Las Vegas’ gaming and hotel facilities. Gaming resorts have utilized a systematized dimensional layout (Penner,

Adams, & Robson, 2013) that has evolved greatly over time (Friedman, 2000). During the ethnographic analysis of gaming resorts in Las Vegas it became clear that each hotel had similarly proportioned facilities. Additionally, and arguably more significant, the customers appeared to congregate in areas in conjunction with the facilities’ dimensions.

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In other words, the ratio of people to square feet was consistent between resort facilities.

For example the ratio of patrons gambling inside the Caesars Palace casino (166,000 square feet) is very similar to the number of people eating inside its Bacchanal Buffet

(25,000 square feet). This observation can be supported mathematically. Caesars Palace has 3,600 rooms and the buffet can seat 600 people. Computing the ratio for each facility yields:

Casino Square Footage = 166000 = 46.11 Rooms 3600

Buffet Square Footage = 25000 = 41.66 Seats 600

These ratios are indeed similar and they are analogous to the observation of customers in these locations -- a phenomenon that is absent in Monaco or Macau.

The obvious exceptions to the equivalence of the architectural and consumer ratios are Las Vegas’ dayclubs and nightclubs. They are very overcrowded prompting people to bump into each other throughout the day and evening. Nevertheless the combination of high markup on alcohol sales, low overhead on club operation, and young and eager party-going visitors to Las Vegas motivates resorts to pack this space with people as much as possible. In fact nightlife business has become a mainstay of Las

Vegas gaming resorts and is one of the areas of the hotel that receives the most frequent building renovation. Anthony Layton Matthews with the M Resort describes one of the unparalleled characteristics of Las Vegas:

Las Vegas has more four and five star hotels than any other city in the world. The city’s older buildings will continuously need remodeling and Las Vegas has the ability to do such.

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The following are excerpts from Table 2 and Table 11:

Excerpt from Table 2 Number of Visitors and Occupancy Percentage

Excerpt from Table 11 Average Revenue per Customer for Gaming Resort Destinations (in US$)

The number of visitors to Las Vegas in 2014 at over 41 billion people eclipses the number of tourists to both Macau and Monaco. However the amount spent per person in

Las Vegas is dwarfed by these other two locations. The discrepancy in this data is supported by the tendency for Las Vegas is to remodel itself or implode an old building to make way for new construction projects. The Las Vegas clientele travels to this destination to witness the spectacle it offers, and they will regularly return in order to experience the city’s evolution in an attempt to be continuously re-enchanted by Las

Vegas’ unique image (Ritzer & Stillman, 2001; v. supra page 5ff).

Macau

The successful products and services of Macau are unmistakable. Having observed the gaming resorts in this destination, spoken with hospitality and gaming officials and examined its financial and statistical data, it is clear that Macau is almost entirely interested in gaming.

The rate of construction expansion coupled with neighboring Chinese residents’ propensity to gamble has fueled this venue’s emergence as a premier gaming destination, but not the most prestigious gaming resort destination. In other words, Macau gaming resort operators have built very elaborate megaresorts, but personal observations of all

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these areas indicate that their clientele avoids nearly every non-gaming facility and instead congregates exclusively inside the casinos at almost all hours of the day and night. Jeremy Busfeld at Sands China elaborates upon this phenomenon and gives an extreme example:

Some gamblers will not even drink alcohol while playing because they do not want to get up from the table to go to the toilet.

There is perceivable truth to this statement that has been verified while performing an ethnography in Macau. One of the most common casino sights in Las Vegas is a cocktail waitress walking around the casino and serving drinks to gamblers. This service has been conspicuously replaced in Macau by older women pushing carts of hot tea and cups of noodle soup. The Chinese are avid tea drinkers and the world’s largest producers of tea.

Macau customers will drink the tea as it will not subsequently increase urine volume to the level that alcohol does (Epstein, 1997). This is consistent with the previous research of Kim, Prideaux, & Kim which discovered that Chinese gamblers have the lowest tendencies to consume alcohol at the table (v. supra page 28). Additionally the financial data from Macau regarding food and beverage revenue is indicative of this phenomenon.

The following are excerpts from Table 2, Table 6 and Table 11:

Excerpt from Table 2 Number of Visitors and Occupancy Percentage

Excerpt from Table 6 Segmented Non-gaming Revenue (in million US$)

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Excerpt from Table 11 Average Revenue per Customer for Gaming Resort Destinations (in US$)

The relationship between these figures is striking since they imply that in 2014 the average customer in Macau only spent $47.36 on food and beverage, which as mentioned in Figure 6 is an average of 19.7% of Macau’s non-gaming revenue. According to the

Macau Government DSEC Centre of Statistics and Census Service, the average length of stay for visitors to Macau in 2014 was 1.4 days (DSEC Government of Macau SAR

Statistics and Census Service, 2014). The amount spent on food and beverage is a stark contrast for a market in which the average Macau gambler wagers $1,449.54 during the same thirty-four hour period. Hence the discrepancy in Figure 7:

  Gaming  Non-gaming

Figure 7. Distribution of total revenue for gaming resorts (2010-2014 average).

This data supports the observation that visitors to Macau spend the majority of their time in the casinos. Macau casinos are crowded at most times during the day and overcrowded at night when players will line up three layers deep behind seated gamblers adding bets on top of their wagers. Additionally there was a clear racial delination

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between gaming and non-gaming facilities. During the ethnographic period, the casino areas in Macau were almost entirely occupied by Chinese visitors. On the other hand, restaurants and lounges only had Caucasian and Indian customers -- with the exception of a few young Asian female prostitutes dining together at upscale restaurants. Dom Dioko at the Institute for Tourism Studies expounds upon this discrepancy:

Chinese gamblers appreciate elaborate facilities that they can walk through but are not interested in the experiences. This phenomenon is referred to as “hyperreality.”

The most crowded casino games in Macau are baccarat and sic bo, and they are likewise the most profitable (Gaming Inspection and Coordination Bureau, 2014). The minimum bet at most tables was on average MOP$1000 -- or $128 -- and yet individuals generally were wagering amounts per hand much higher than this. The Chinese gamblers would communicate amongst each other by yelling while placing bets and during the gameplay; they would not speak to the dealers because the players spoke Mandarin and the dealers spoke .15 As soon as the cards were flipped or the roll was made, these individuals became absolutely silent. They gave no indication whatsoever whether they had won or lost. Shirley Sousa at the Macau Government Tourist Office explains:

Chinese gamblers do not dismiss the math, however it is intrinsic to their culture that they can actually beat the house and that luck is on their side. In many ways it is seen as a competition between the player and the house.

As mentioned above, the Macau casinos were overcrowded in the evenings when twice as many bettors would gather behind those sitting at the table and place bets on top of those actually playing in the game. Each resort had these enormous crowds although the

Venetian probably had the largest. Nearly all gamblers at the table were male; on some

15 This is indicated by the fact that gamblers come from Mainland China where Mandarin is the official language and dealers are required to be citizens of Macau where Cantonese is the official language.

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occasions there would be a young Chinese woman standing in the back of the crowd.

This woman was a representative of a junket company, a strange and interesting phenomenon that will be explained in detail below (v. infra page 101).

While the casino is undoubtedly the primary focus of gaming resorts in Macau, there were some anomalies between the observational results and the financial data in the other departments of non-gaming revenue. The follow is an excerpt of Table 6:

Excerpt from Table 6 Segmented Non-gaming Revenue (in million US$)

As mentioned above, the other departments of the hotel include shopping, entertainment, meetings, events and spas. The $4.12 billion other non-gaming revenue spent by visitors to Macau eclipses the amounts in the other two destinations for this category. The majority of this revenue in Macau comes from retail shopping, which ranks second in revenue behind gaming (DSEC Government of Macau SAR Statistics and Census

Service, 2014). Indeed there are enormous luxury shopping malls in nearly every resort in Macau with high-end international clothing, shoes and jewelry. Resort complexes such as Galaxy Macau, City of Dreams, Sands Cotai and Venetian connect their component hotels using retail space.16 These spaces dwarf their Monaco and Las Vegas counterparts. However while performing ethnographic research in Macau it was noted that the stores were generally void of any customers. These stores sold very expensive items and had several employees but were not selling any products. Correlating Macau’s

16 Galaxy Macau consists of Banyan Tree, Galaxy Hotel and Hotel Okura. City of Dreams is comprised of Crown Towers, Hard Rock and Grand Hyatt. Sands Cotai is made up of Conrad, Holiday Inn and Sheraton. Venetian includes both the Venetian and Four Seasons.

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substantial shopping revenue with the individuals who make purchases at these retail locations and the times they go shopping remains enigmatic.

After noting the absence of Chinese customers in restaurants, lounges and shops, it was anticipated that the entertainment aspect of the Macau resorts would be comparably empty. However the largest resident show in Macau, The House of Dancing

Water17 at City of Dreams with two thousand seats, was surprisingly packed with almost entirely Chinese clientele. Nevertheless, compared to nearly fifty resident shows in Las

Vegas, Macau seems unconcerned with being an entertainment resort destination (Al,

2010).

Synopsis of Answer to Research Question #1

The products that each destination capitalizes upon as its strength are as follows:

Monaco promotes extravagance and the exhibition of wealth, Las Vegas sells diversified services that appeal to the entire range of its visitors, and Macau, despite having carried facilities, focuses solely upon gambling.

Research Question #2: What business models and strategies do resorts in each

destination adopt in order to appeal to existing gaming and hospitality trends?

Industry Trends and Forecasts

Monaco, Las Vegas and Macau have evolved throughout history, continuously reshaping themselves to the point that the composition of these destinations at any given time is dramatically different from their landscape only a few years prior -- as described in detail in the introductory chapter of this thesis (v. supra page 1ff). As consumer

17 This acrobatic and water show was developed by Las Vegas creative director Franco Dragone who is responsible for Mystère and O with Cirque du Soleil and Le Rêve independently. The Macau production centers around the world’s largest water stage -- similar to O and Rêve -- with 3.7 million gallons and has a distinctly Asian theme.

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preferences change in each location gaming resorts adapt and modify their business and service strategies in order to appeal to changes in demand. Indeed further historical investigations of the evolution of the gaming resort industry have been performed even beyond the extent of the details described in the introduction (cf. Schwartz, 2006).

The data collection period for this thesis was primarily during 2014. In order to augment the previous literature and earlier history, it is necessary to closely examine the prior forecasts and projections leading up to this year. Thus the endeavor of analyzing how gaming resort destinations adjust their business models and strategies in order to adhere to hospitality and gaming trends is accomplished by discerning whether the data collected for this thesis during 2014 from the constructionist interviews, financial and statistical data analysis, and ethnography and participant observations is consistent with the industry’s previously proposed outlook and direction.

Gaming industry reports issued by major financial institutions between 2011 and

2013 have all indicated the importance of curbing market supply in gaming resort destinations. Deutsche Bank’s Global Markets Research report Z-MAN’s Gaming

Almanac 2011 explained the negative impact of room supply saturation for Las Vegas in

2011:

Downside risks…include cannibalization from excess supply in Las Vegas, which may exert downward pressure on room rates. (Zarnett & Rajagopalan, 2011)

Nevertheless this was the same year that the Cosmopolitan (3,000 rooms) opened as well as one year after the CityCenter complex opened with Aria (4,000 rooms), (1,500 rooms), Mandarin Oriental (400 rooms and 230 condos), Veer (330 condos) and Crystals shopping mall (500,000 square feet). Gaming Market Overview -- April 2012 published

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by Bank of America Merrill Lynch recommended no additional supply in Las Vegas and the subsequent benefit this would have for existing hotels:

Given the financial crisis, the severity of the recent recession and the impact it had on Las Vegas operators we don’t expect any meaningful supply growth in the city for the foreseeable future, other than the introduction of 1,622 refurbished rooms at the Sahara sometime in the first half of 2014. The benign supply outlook should meaningfully benefit existing operators in Las Vegas in our view. (Kayler & Garcia, 2012)

The Gaming, Lodging and Leisure Industry Primer for 2013 from ’s

Securities Research & Analytics division predicted that continued success for Macau in the immediate future is partially ascribed to no current additions to supply:

We see 2014 as another potentially solid year for the market as it will see no meaningful supply growth until 2015 and the competitive environment appears rational. (Simkins, Chalken, & Solomon, 2013)

Expansion of Market Supply

The most noticeable and pronounced aspect of every gaming resort destination researched for this thesis was the number of prominent buildings condensed into a small space. Monaco is only 0.78 square miles and lies in between Mont Agel (3,700 feet above sea level) and the Mediterranean Sea. More than half of the top thirty hotels in the world in terms of most number of rooms lie on a 4-mile stretch of .

Megaresorts in Macau lie on the south coast of the and Island in an approximately 3.2 square mile space. As soon as one leaves these concentrated areas, the skyline completely changes and becomes relatively unremarkable.

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Figure 11. Photograph of the Monaco skyline (Horowitz, 2014).

Figure 12. Photograph of the Las Vegas skyline (Horowitz, 2014).

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Figure 13. Photograph of the Macau skyline (Mimihitam, 2013).

Yet despite being confined to such small areas, further construction and expansion still continues in all three destinations. Monaco has an extensive history of reclaiming land from the Mediterranean Sea, a practice that has escalated since the latter half of the

20th century. While performing an ethnography in this location, construction could be seen extending out from Fontvieille, the most southern part of Monaco, where there are plans to build additional luxury hotel properties. The most recent addition to Las Vegas occurred in September 2014 when the SLS Las Vegas opened on the northern end of The

Strip. Additionally there are two vacant lots across The Strip from Wynn and Encore, which will be the upcoming sites of and .

However the most noticeable construction was taking place in Macau where six separate projects were occurring on , the 2.9 square mile island south of Taipa. The tower cranes in the Macau skyline were almost as prominent as its resorts.

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Therefore it appears that each destination has the intention of continuing to dramatically increase its market supply for the future despite industry forecasts indicating they should do otherwise. Consequently these gaming resort destinations’ business model of continued expansion is contrary to the existing gaming and hospitality trends.

With this in mind, Figure 9 is revisited:

Figure 9. Non-gaming revenue of gaming resort destinations.

The global financial crisis beginning in 2008 was unnerving for gaming resort destinations around the world. Casinos had always been considered recession proof

(Cargill, 1979), but despite this long-tested theory the industry suffered substantially during this particular recession. Its non-gaming facilities, certainly regarded as indulgences during this period, saw their revenues decrease by 16.32% in Monaco,

15.24% in Las Vegas and 26.66% in Macau. Opening new resorts and adding to the market supply when demand hit a low point would seemingly be an imprudent business

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strategy during such circumstances. Nevertheless gaming resorts in these destinations did not significantly alter any of their operations or facilities -- except for lowering their room rates. Ultimately remaining committed to the business model of continued market supply expansion, despite ominous gaming and hospitality trends, has eventually yielded gaming resorts’ largest revenues.

Synopsis of Answer to Research Question #2

A central business model of gaming resort companies in Monaco, Las Vegas and

Macau is continued expansion of their market supply by building additional properties.

This strategy has remained their model despite existing gaming and hospitality trends.

Research Question #3: How can resorts in each destination build upon the skills

and successes of their counterparts on the other sides of the world?

While researching previous literature for this thesis only a single article was discovered that considered all three gaming destinations of Monaco, Las Vegas and

Macau (v. supra page 32). It mentions that similarities and differences exist between each location:

….Macau, Las Vegas and Monaco…are three major “Gambling Meccas” around the world. They are similar in terms of the business model and basic service provided, but distinctiveness exists on the iconic brand each of them exhibits and cultural experience tourists can obtain through their stay in these cities. (Lu, 2005)

The answers to Research Question #1 and Research Question #2 indeed reflect this standpoint. Regarding the products and services provided, every gaming resort destination has the very facilities that define this category of hospitality venue including casinos, hotels, restaurants, lounges, entertainment theaters and event space (Rushmore,

O'Neill, & Rushmore Jr., 2012). Additionally it has been shown that every gaming resort destination has essentially the same business model of market supply expansion.

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However the iconic brand each of them offers remains clear and distinct because each venue caters to very different clientele. As such the public perception of each destination is both that it is a major gambling mecca and that each location is distinctively tailored to its particular type of clientele:

Monaco promotes extravagance and the exhibition of wealth, Las Vegas sells diversified services that appeal to the entire range of its visitors, and Macau, despite having varied facilities, focuses solely upon gambling. (v. supra page 92).

Research Question #3 seeks to look closely at these destinations’ differences to determine whether crossovers can potentially exist between their distinctiveness and whether the unique skills and successes of one destination can potentially be beneficial to another.

Respondent Viewpoints

The constructionist interviews for this thesis were performed with individuals in

Monaco, Las Vegas and Macau who hold positions of influence in the gaming and hospitality industries. In addition to speaking about the businesses and operations in their respective locations, they also offered their viewpoints on how one destination might improve by implementing practices of another destination. The following are the implications of this research:

Improvement for Monaco. Guillaume Rose at the Monaco Government Tourist and Convention Authority explained that Monaco could strengthen itself by implementing player rating and tracking systems:

Monaco could learn how to serve its customers better by making gambling transparent and traceable as is done in Las Vegas. The attitude in Monte Carlo in the 1990s was “Oh, he looks like he gambles.” But evaluation of patrons had already been computerized in the 1980s in Las Vegas.

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Player rating systems are one of the most crucial management tools of a gaming resort.

They monitor the average gambler from the resort’s loyalty program all the way to the property’s biggest whales, a term used to describe gamblers who wager astounding sums of cash ranging between $100,000 and $250,000 per bet, which generally the casino limit.18 A player rating system is often computed by the following formula (Hannum &

Cabot, 2001):

Earning Potential = Hold Percentage × Player Drop

= Average Bet × Hours Played × Hands per Hour × House Advantage

Although this is a simple and straightforward formula, observing and computing many of these numbers can be difficult. However this is one of the foremost skills of the

Las Vegas gaming industry. Gaming resorts in this location began automating this system in the mid-1980s; and in the early 2000s they started to introduce radio frequency identification (RFID) embedded inside high-value chips that records the identity of the gambler, every type of bet made, the amount of each wager, and the time when the game was being played.19 The fact that Monaco does not have a reliable player rating system implies that there is a lack of congruency between the complimentaries -- or comps -- it offers and its guests’ betting tendencies. Comps could possibly be wasted on individuals that may look like and give off the vibe of a whale but in fact will never be a significant source of the resort’s profits. Alternatively if a gambler is wagering large sums of money

18 It is believed that Australian billionaire Kerry Packer, the biggest whale in gaming history, would regularly make $500,000 bets. Whale Hunt in the Desert: Secrets of a Vegas Superhost (Castleman, 2009) chronicles Steve Cyr who became the most successful host in Las Vegas history by bringing in the most amount of money and whales, including Kerry Packer. 19 There is a tradeoff between each variable in the earning potential formula, though primarily between the hours played and the average bet. For example a gambler who plays for one hour consistently betting $100 each hand has the same earning potential as a gambler who plays for four hours betting $25 each hand. However RFID chips will not account for the latter player.

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but remains unnoticed, then that play will go unrewarded and the individual may consider it as a deficiency in the venue’s hospitality. Additionally, Guillaume Rose took great pleasure in describing one of the advantages of the Monte Carlo Casino:

If a VIP gambler wants a table at Le Louis XV [Alain Ducasse’s three-Michelin star restaurant] in the Hotel de Paris he can make one phone call and a table will be set up for him immediately.

However beverage and food are the lowest forms of comps and are even provided to guests outside the VIP market in Las Vegas.20 It is evident that Monaco’s gaming resort industry would benefit from implementing a more advanced player rating system that is commonplace in Las Vegas.

Improvement for Las Vegas. Shirley Sousa at the Macau Government Tourist

Office points out the growth of the Chinese market:

Las Vegas could learn how to deal with the increase of Chinese tourists and the type of hospitality they expect to receive. The Chinese population has suffered for decades but now they have money to spend.

The SPSS linear regression data from Table 8 indicates that between 2003 and 2014 the gaming revenue in Macau has been increasing at an average rate of $4.371 billion per year. This number is in vivid contrast to gaming revenue in Las Vegas increasing at an average rate of $60 million per year. As mentioned earlier, the Chinese culture is historically predisposed to gambling (Lam, 2007), and casinos in Macau are almost totally comprised of Chinese customers who do not frequent other areas of the resorts (v. supra page 87). If Chinese gamblers were to see Las Vegas as the ideal gaming

20 Additionally Las Vegas customers do not need to travel to Monaco to experience the cuisine of Alain Ducasse -- his restaurant Mix on the top floor of Delano arguably has the single best view of The Las Vegas Strip for any restaurant (v. supra Figure 13).

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destination for their market segment then Las Vegas’ gaming revenue could very well exhibit growth much greater than its current $60 million rise per year.

However while performing an ethnography in Las Vegas it became clear that this destination is already catering heavily towards this demographic. The Bellagio

Conservatory and Palazzo Waterfall Atriums were completely redesigned during the weeks surrounding the , and several other hotels hung Chinese lanterns throughout their properties. The majority of table games in high-limit rooms are baccarat, which as mentioned earlier is the most popular game and highest source of revenue in Macau. Additionally, the Venetian’s by-invitation-only Paiza Club has

Mandarin Chinese channels on every television and chopsticks at every dining table.

However these facilities do not operate at capacity except during the holidays when

Chinese visitors come to Las Vegas; in contrast to Macau which has on average 90,000 visitors from Mainland China on any given day (DSEC Government of Macau SAR

Statistics and Census Service, 2014).

Anthony Leong with the Gaming Inspection and Coordination Bureau, Macau

SAR explains a financial motivation for the large Chinese VIP market:

The Macau Model is primarily based on VIP business focus. 70% of its gaming revenue comes from VIP’s. The market is appealing for this type clientele because there are some financial loopholes for VIP’s to circumvent stringent laws.

The financial loopholes he refers to pertain to junket gambling. In its most basic and restrained form a junket company receives a commission from gaming resorts to transport

VIP customers to their locations and gamble at their casinos (Kale & Spence, 2009).

However the controversial and more common with junketeers in Macau refers to a phenomenon also called “ghost betting” (Zender, 2011). Ben Lee at IGamiX

Management & Consulting Ltd. elucidates upon this practice in detail:

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One will see a game with gamblers sitting at the table and then two layers of people betting on top of these gamblers. Behind all those people is a woman with a clipboard keeping track of all the bets made and hands dealt for one of the players. That player has deposited separate funds into an account with the junket company that she represents. Every bet made at the table will have an identical bet with the junket company with a three to five times multiplier in an offshore account that the company maintains for the player. The reason for players betting more with the junket as opposed to the casino is that the junket can offer a better player advantage than the casino will ever provide. The gaming revenue for Macau in 2013 was about $50 billion, but it is estimated that this number should be about $150 billion. Money bet with the junket never gets reported. This form of junket gambling is illegal in the United States. If the Macau casino is run by an American corporation, the Nevada Gaming Commission would probably close their American properties as well. Hence MGM, Wynn and Sands try to stop this type of junket activity from taking place in their Macanese properties.

As indicated above, when a hotel’s earning potential from a player increases, gaming resorts start offering comps; these are provided in the following progression: (a) beverage, (b) food, (c) rooms and (d) private airline transportation on rare occasions. A resort will try to gain a competitive edge by attempting to surpass and overshadow the comps of its competitors in order to induce customers to gamble at its own casino. On very exceptional occasions they will negotiate lower house advantages and improved odds for big whales by slightly altering the game’s rules. This is the biggest possible incentive for VIP customers because it means that their chances of winning21 are slightly higher than playing by the standard rules. Nevertheless gaming resorts do not make a habit of this practice because, while it increases gaming revenue by enticing those with deep pockets, it significantly lowers their profit margin. However introducing this practice with a junket company functionally creates another casino that has no operational costs, gaming licensing fees or tax responsibilities. Hence the junket can afford to offer such an incentive.

21 Or more accurately not losing.

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The Chinese Ministry of Public Security sent a delegation to Macau on November

20, 2014 that initiated a government-led effort to eliminate junket gaming. On December

17, 2014 it was disclosed that Chinese President Xi Jingping himself gave the order to crack down on Macau’s junket operations and associated money laundering (Fraser,

2014). With this in mind, Figure 10 is revisited:

Figure 10. Total revenue of gaming resort destinations

Between 2013 and 2014 Macau experienced its first ever drop in revenue since the expansion of its gaming industry on December 31, 2001. This decline can be traced to the increased effort of the Chinese government to eliminate financial corruption.

Macau’s total revenue in 2015 is projected to decrease an additional 22% to an estimated

$41.7 billion (Fitch Ratings, 2015).

It is clear that the Las Vegas gaming resort industry would greatly benefit by further expanding its reach into the Chinese VIP gambling market, which has been the

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singular source of success for Macau and its prodigious revenue. However since the

Chinese VIP clientele currently favor junket gambling that is also illegal in the United

States22, it is difficult to ascertain the feasibility of this scenario.

Improvement for Macau. Jeremy Busfeld at Sands China identifies a deficiency for the hospitality and gaming industries in Macau:

The Macau service standards are not up to the quality of service offered in Las Vegas because of the cultural disparities.

Parasuraman, Zeithaml, & Berry (1985) introduced the “gap model” of service quality which attempts to define quality service by the process of closing or eliminating potential gaps -- i.e. failures. -- while delivering services to a customer. This model includes five gaps:

1. Knowledge Gap exists between consumer expectations and management

perception of consumer expectations.

2. Design Gap exists between management perception of consumer expectations and

translation of management perceptions into sevice quality specifications

3. Performance Gap exists between translation of management perceptions into

service quality specifications and service delivery.

4. Communication Gap exists between service delivery and external communication

to consumers.

5. Customer Satisfaction Gap exists between consumer perception arising from the

external communication to consumers and consumer expectations.

22 The U.S.-China Economic and Security Review Commission in its 2013 Report to Congress emphasized the illegality of any U.S. gambling corporation being associated with junket gaming operations and their accompanying money laundering practices.

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This model is cyclical and repetitious since the Customer Satisfaction Gap ends where the Knowledge Gap starts, with consumer expectations. Consumer expectations are influenced by (a) past experiences, (b) personal needs and (c) word of mouth communication. Parasuraman, Zeithaml, & Berry explain that when no mistakes are made between each of these steps then the service will meet consumer expectations ultimately result in customer satisfaction. Kevin Bagger at the Las Vegas Convention and Visitors Authority points to Las Vegas’ successful marketing campaigns:

The United States was one of the only countries that did not have a national tourism advertisement agency until the recently created Brand USA. This organization is implementing Las Vegas Convention and Visitors Authority marketing strategies because they have been so successful attracting visitors to Las Vegas.

As mentioned earlier, the marketing strategy for Las Vegas is based on the concept of

Adult Freedom and “What happens in Vegas, stays in Vegas.” There are thirty commercials listed on the Las Vegas Convention and Visitors Authority YouTube

Channel each suggesting how anything can happen in Las Vegas. Many of the products and services that exist in this destination cannot be found anywhere else in the world.

Nevertheless, these advertising campaigns go further by claiming that even the impossible is attainable in Las Vegas. As a result customer expectations are initially set to very high standards. If Las Vegas does not deliver a product equivalent to these expectations then there would be a significant gap and failure in service equality.

However for many visitors, Las Vegas provides the very outlandish experiences these advertisements claim to exist in this destination. One particular commercial shows five young men running around different areas of The Las Vegas Strip with a big trophy yelling “Champion! Champion!” (Las Vegas Convention and Visitors Bureau, 2014). As the evening progresses they start attracting more followers and attention. They dance

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with this trophy in the Caesars Palace lobby, ride on a double decker bus on The Las

Vegas Strip, have their pictures taken, attain entry into Tao nightclub at Venetian where a go-go dancer starts dancing with the trophy, and finally go out onto the Venetian balcony overlooking the Grand Canals where a crowd of hundreds of people gather and cheer this group of guys and their trophy. The advertisement then cuts to them drunkenly walking down a hotel corridor that includes a table on which one bouquet of calla lilies is neatly resting in its vase and another bouquet lies disheveled on the table. The last guy walks by with the trophy, picks up the flowers, puts them in trophy and sets it back on the table.

Thus this “trophy” was just a flower vase they had taken from the hotel; however they turned it into an entire experience -- which most likely would never happen in real life.

However while personally observing gaming resorts in Las Vegas something very similar actually happened one evening. While exiting the Via Bellagio Shops out onto Las

Vegas Boulevard, an inebriated customer grabbed a small flower and walked towards the center of the Bellagio Fountains. He then started taking pictures with his four friends in front of the fountains. Afterwards he put the flowerpot down on the sidewalk and they continued walking down The Strip. Although the true story was not as fantastic as the advertisement, the essence of the commercial actually occurred in real life. For this visitor Las Vegas delivered a service congruent with the customer’s heightened expectations.

If Las Vegas is able to amplify customer expectations to such improbable levels and yet still deliver a product that meets these expectations then it can undoubtedly provide services that are even more realistic. Macau could benefit from a more visionary advertising campaign that exhibits what is possible when visiting this location.

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Additionally Macau could further strive to meet and exceed their customers’ expectations by eliminating any potential service gaps. Ultimately this will result in much higher service quality and guest satisfaction.

Synopsis of Answer to Research Question #3

The following table summarizes how each gaming resort destination can build upon the skills and successes of its counterparts. The cells marked with × signify that the results and findings of the research for this thesis did not suggest any substantial implementations of that destination to the others:

Table 12

Synopsis of answer to Research Question #3

Research Question #4: How can the global hospitality industry benefit from the

models and frameworks of Monaco, Las Vegas or Macau?

Gaming resorts have significantly evolved since the early days of small gambling halls. Many of these resorts are now the largest hotels in the world. While performing

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ethnographic observations in Monaco, Las Vegas and Macau it was discovered that gaming resorts in these destinations have diversified facilities beyond the casino to encompass hotel rooms, restaurants, buffets, lounges, nightclubs, theaters, golf courses, spas, retail stores, meeting rooms, event space and even residences. In this regard, gaming resorts have evolved and expanded to become the most multifaceted mixed-use development of any hospitality venue (Penner, Adams, & Robson, 2013). Consequently it would seem that some characteristics of gaming resorts could be implemented on the global scale for the hospitality industry at large. However Jon Johnson at the M Resort commented:

The global hospitality industry has not yet gained respect for the gaming industry.

Environmental Sustainability

While interviewing various experts of the gaming and hospitality industries in each location, most individuals did not mention anything specific regarding crossovers between the gaming resort industry and the global hospitality industry. However Arleen

Horna at Las Vegas Sands pointed out a special area that is generally overlooked:

The most significant product that Las Vegas offers is its commitment to sustainability. There is no other destination in the world that goes to such great lengths in being healthy for the environment. The water filtration system found on the Venetian and Palazzo properties alone rivals the systems of most cities.

In fact sustainability would most likely be the very last thing that comes to mind when considering gaming resorts. Upon closely examining resorts in each location a pronounced difference arose between each destination’s environmental footprint.

Monaco is arguably the most beautiful of the three destinations. Its location on the French Riviera dramatically compressed between Mont Agel and the Mediterranean

Sea provides stunning views from every vantage point. The country is mountainous but

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very small, resulting in everything being within walking distance. However it became clear that most people were not walking to get around the municipality. Instead they were driving around the area in cars that cost hundreds of thousands of dollars. As a result parking is understandably limited and many cars were lined up on the sidewalks.

Despite being adjacent to the ocean, which normally brings fresh and salty air, Monaco actually smelled foul from so much car exhaust. This observation alone was the most unexpected when visiting this destination.

China is notorious for having some of the worst air pollution in the world. Upon entering Macau this fact became instantaneously noticeable. Every day the sky was consistently dark and murky with smog that made breathing more burdensome than normal. Macanese resorts had large and elaborate pools that were almost completely empty. This is a stark contrast to pools and dayclubs in Las Vegas that are overcrowded during the summer and still popular even in the winter. Walking indoors however provided no respite from the poor Macanese air quality. Based on the number of visitors statistics and observations made in Macau, casinos in this destination may very well have the most concentration of tobacco smoke of any enclosed space. The notion of gaming resorts being designed so that guests are compelled to walk through the casino in order to arrive at any attraction also significantly applies in Macau. Therefore it is nearly impossible to avoid some form of contaminated air in this destination.

However observations made in Las Vegas were quite different. The desert air seemed significantly cleaner. Over the past several years has been curbed inside hotels and is prohibited in all facilities other than the casino. Wynn and Encore recently

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started displaying signs at various entrances informing customers of the hotels’ smoking policies.

Looking outside from one of the rooms at Mandalay Bay or Four Seasons, one will notice an array of over 21,000 solar panels covering the 870,000 square foot roof of the Mandalay Bay Events Center. This is the second largest rooftop solar power array in the world (NRG Energy, Inc., 2014).

One of the most famous aspects of Las Vegas is its lights, which can even be noticed by astronauts in space. In 2006 gaming resorts and city infrastructure agencies started converting its existing lights to LED bulbs, and new resorts built since then have incorporated LED bulbs from the start. Today nearly every light that shines in the Las

Vegas skyline is an energy efficient LED bulb (Rodgers, 2013).

The example given above regarding the water filtration system at the Venetian and Palazzo refers to its water cooling tower blowdown system that has the ability to reclaim waste water from its cooling units and return it back into the actual cooling unit -- as opposed to allowing it to as remain waste water. This effectively reduces the resorts’ water usage by approximately 40 million gallons per year (U.S. Green Building Council,

2009).

Las Vegas is home to five of the six largest hotels in the world with Leadership in

Energy & Environmental Design (LEED) certification. These include the Venetian, Aria,

Mandarin Oriental and Vdara all with LEED Gold and Palazzo with LEED Silver. These properties combine for over 27.5 million square feet of LEED certified space (U.S. Green

Building Council, 2011).

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In its 2013 Annual Report, the City of Las Vegas announced a commitment to achieve the single most ambitious sustainability project in American history:

The City has made significant progress impacting energy, water, and resource infrastructure and will be diligently working with our community partners to affect changes that will help support the continued success of Las Vegas and make it America’s first net zero city (City of Las Vegas, Nevada, 2013).

Net zero is used to describe a facility in which the amount of energy consumed equals the amount of renewable energy produced. Las Vegas certainly consumes a tremendous amount of energy due to the sheer enormity of its hospitality facilities. Additionally unlike a standard home, office building or school, these facilities are perpetually operating and therefore are always consuming electricity and water as well as generating waste (cf. Stipanuk, 2006 for a comprehensive examination of essential systems and waste management in the hospitality industry). Therefore in order for Las Vegas to become the first net zero city in the United States it proposes to introduce massive power facilities that will both recycle previous waste as well as uncover and capitalize upon more sustainable sources of energy and materials in equal proportion to the substantial amount of energy it consumes.

Synopsis of Answer to Research Question #4

The Las Vegas gaming resort industry and City of Las Vegas have implemented record measures for environmental sustainability. The ability to execute these projects in the world’s largest resorts in Las Vegas demonstrates that environmental sustainability projects can be adopted in hospitality venues throughout the world on both small and large scales.

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CHAPTER 7

THESIS HYPOTHESIS REVISITED Chapter 7: Thesis Hypothesis Revisited The gaming resort industry is no longer insular. Where at one time a specific venue uniquely commanded local tourism and clientele, the interconnectedness of the worldwide economy now impacts the gaming industry in remote corners of the world.

Gaming resorts are competing for both recognition and revenue from a global perspective. As such they must consider their past, present and future directions in order to survive and grow. The hypothesis proposed in the beginning of this thesis is:

The Las Vegas hospitality, gaming, business and service models are the most viable framework for the future of the gaming resort industry worldwide. As a result hotels in this sector around the world as well as the global hospitality business -- as a whole -- can achieve heightened successes by implementing the procedures and characteristics that define Las Vegas gaming resorts.

Monaco certainly is the most historical and elegant of the gaming resort destinations. Macau is the most successful gaming enterprise in history. However each looks to Las Vegas as the modern benchmark for gaming resort success. Las Vegas is the most tested, adaptable and capable gaming resort destination to enter the twenty-first century. And although Monaco and Las Vegas would certainly aspire to the higher revenues of Macau, the hospitality and gaming models of Macau are neither desirable nor practicable for these other two locations. Indeed Monaco is not interested in attracting a similar mass market since doing so would alienate and dissociate its current VIP customers. Las Vegas will not modify its gaming resort business by incorporating

Macau’s products and services because many of those practices are illegitimate, corrupt and illegal in the United States. Furthermore, Macau’s own future viability is arguable since the Chinese government itself is cracking down on the money laundering that occurs in Macau’s gaming industry. However the ability of Las Vegas to overcome

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historical blunders, underworld threats and economic recessions attests to its preeminence as the strongest contemporary gaming resort model. It has shown a resilience to build and adapt in diverse conditions and markets. Its strength as a gaming resort destination is uncontested and universal.

The diverse statistics and opinions collected in this thesis must ultimately be compared to the Las Vegas model to determine their functional legitimacy. Future research can eventually examine the efficacy of that model for other worldwide gaming destinations. As the global gaming resort industry continues to expand, Las Vegas provides the strongest leadership and imagination to an industry that is continually evolving. To ignore this model is to proceed arbitrarily into this most complex realm of hospitality. To build upon its strengths and successes is to provide crucial direction to the global gaming resort industry.

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