he city of just 550,000 now takes in more gaming revenue than Las Vegas and Atlantic City combined, thanks to the voracious gambling of Chinese visitors who have poured in from the mainland. But worries over corruption, problem-gambling and foreign companies grabbing the spoils from Chinese recent economic boom led Chinese authorities to stem the flow of visitors last summer.
The tougher visa restrictions caused a sharp drop in revenue growth sparking a slew of negative stories, plummeting casino stocks and a hiatus in the city's construction boom.
But some analysts are adamant fears about Macau's demise are premature.
"Macau has been used to more than 40 % growth - that cannot be sustainable and a slowdown is natural," said Zeng Zhonglu, a professor in gaming economies at Macau Polytechnic Institute. "My impression is that the economy generally is healthy."
Jonathan Galaviz, an analyst with Las Vegas-based consultancy Globalysis, said any disruption to economic growth will be temporary with Macau's performance short-term expected to fluctuate along with the Asian economy.
While gaming revenues dipped sharply over the second half of 2008, the city still raked in a total of us$ 13.5 billion for the year, a 31 % increase year-on-year. Revenues rose 46 % in 2007. Meanwhile, employment held steady in the three months to January and retail sales rose 34 % in 2008. Gaming is a central part of the economy.
During a recent visit, there were lengthy queues at the immigration counter and the city centre jewellery and watch stores were humming with shoppers.
The tables at the Grand Lisboa, the flagship casino of local tycoon Stanley Ho, were three deep with heavy-smoking Chinese gamblers playing their favorites game of Baccarat.
But it is in the hidden world of the VIP gaming rooms where the city has suffered.
VIP revenues have played a central role in the success of Macau's economy with top casinos tussling with each other to attract high-rollers. But many of the heaviest gamblers were Chinese government officials and the heads of state-owned companies, whose frittering away of public cash in Macau's private rooms has become a national scandal.
Unsurprisingly, official figures are not collated, but Zeng has combed through mainland media reports to establish a clearer picture. Of the 99 cases he uncovered, he said each official or businessman lost an average of us$ 2.9 million on the tables.
One official lost us$ 14.6 million in one day in 2007, while another had to be carried out of a Macau casino as he was too weak to walk after six days and nights of constant gambling. "The central government is highly concerned that so much money is disappearing in Macau," Zeng said. "It leads to bribes and the theft of public funds, all of which greatly damages the government's reputation."
Glenn McCartney, a tourism academic at Macau University and local businessman, said the city had to change its business focus from VIPs to a genuine mass-market entertainment, attracting visitors from across Asia. "I am very confident about Macau. The market is not anywhere near maturity level yet," he said.
"But Macau is not Las Vegas. If I was sitting in the marketing department of a casino firm, I would be asking what changes we have to make so we can attract more people from the mainland."