New gaming entrants are gambling on whether a continuous stream of visitors from the Chinese mainland will pour into Macau. The opening of this market coincided with China’s decision to waive restrictions on travel out of the mainland, as well as a crackdown on illegal casinos within China’s own borders. So far, Macau has seen an influx of mainland Chinese visitors, particularly from the affluent southern region of the country. Large casino operators maintain databases of well-to-do gamblers, known as "whales," on every continent save Antarctica. Well aware that betting is a popular pastime among the Chinese, the casinos are locked in frenzied marketing campaigns aimed at the country’s growing legions of urban elites.

In the short run, Macau is likely to end up with more high-end integrated resorts than it can support. The casino operators will have to scramble to find qualified staff, as well as accommodations to house their employees. But Las Vegas and Atlantic City had their gold rushes and shakeouts too, and, over the long term, many gaming companies will win. For now, the U.S. operators have an advantage—or perhaps a disadvantage, depending on the caliber of customer—in that they have to comply with the terms of their Nevada or New Jersey licenses, even overseas. Macau’s regulatory structure is still evolving. For example, it is just now implementing antimoney-laundering laws in the casinos. The Chinese government encourages such laws to crack down on corruption from within its own ranks; Macau was, until recently, a place where officials might invest ill-gotten gains in secret underground banks and gaming ventures.

The gambling industry’s long-term agenda is to continue evolving toward mainstream entertainment.

Generally, a solid regulatory environment lays the foundation for a successful gambling industry. Macau is something of an exception, but investors must remember that Nevada spent 50 years developing its regulatory structure. Operators in Macau will emulate the family-oriented entertainment complexes that have swept into Las Vegas in recent decades.

Other parts of Asia are also opening up and developing not just a few casinos, but a swath of luxury entertainment complexes. Singapore legalized gambling just last year. (Spectrum Gaming Group performed background investigations on behalf of the Singapore government.) Genting International, a large Malaysian gaming company, and South Africa–based Kerzner International are among the international players that have already endured grueling license applications, investigations and hearings in the new Asian markets. Over the next five years, gaming companies will invest $27 billion in new properties in Macau and Singapore alone. Japan is rumored to be considering the legalization of casino gaming, and other jurisdictions, such as the UK, are modernizing their gaming laws to encourage new investment.

As gaming becomes more global, foreign companies grow more and more comfortable with American-style licensing processes. The rigorous application scheme in Singapore has proved to foreign companies that they can withstand such intense scrutiny. This should increase the comfort level—not to mention the licensability—of international companies, which could in turn lead to their potential entry into the domestic U.S. market.

Striking a Devil’s Bargain
The United States has not seen many foreign casino operators, but that could change as global players begin to notice that the country holds some tantalizing growth opportunities. The annual Harrah’s survey, which paints a portrait of the state of the U.S. gambler, indicates that about 25 percent of American adults visited a casino at least once in 2005, the most recent period surveyed. In markets where adults enjoy close proximity to casinos, such as Nevada, that 25 percent penetration rate rarely exceeds 40 percent.