Macau used to have two islands off its main peninsula, Taipa and Coloane; today it only has one. Cotai, the 2.9-kilometre stretch of reclaimed land that now joins the two into one larger landmass (expanding the former Portuguese enclave's land area by some 18 percent), is a frenzied construction zone that will soon be home to Asia's - and possibly the world's - biggest gambling destination.

But the first resort hotels of the Cotai Strip - the trademarked brainchild of Las Vegas casino mogul Sheldon Adelson - will not be ready until next year, and the area won't be fully up and running until the end of 2007. For the moment, Macau is in the preparatory first phase of its already impressive transformation.

Tourism, particularly casino gaming, is of course already Macau's lifeblood - an estimated 70 percent of government revenue comes from gambling alone. It will only continue to dominate the economy of the Special Administrative Region (SAR), which returned to Chinese sovereignty in 1999. Not counting the horse races in Hong Kong, Macau is the only place in China where it is legal to bet money. As a gambling destination, its proximity to the populous and thriving Pearl River Delta gives it a formidable advantage over any other potential competitor in Asia, and one that the post-handover administration is eager to exploit to the fullest.

Visions of Vegas

Aggressively developing the gaming industry is just the right move for Macau, according to Jennifer Welker, author of the recent book The New Macau. "Just like Las Vegas, which is a desert, Macau cannot offer a whole lot more itself, so obviously tourism and gaming is the best it has to offer," she says. If the Portuguese merely tolerated gambling, giving mogul Stanley Ho's Sociedade de Turismo e Divers?es de Macau (STDM) a monopoly over it in the early 1960s, the current administration is focusing with laser-like concentration on its strengths.

So far in SAR Chief Executive Edmund Ho's (no relation to Stanley) tenure, two key developments - the granting of casino concession licences to foreign companies in 2001, breaking the STDM monopoly and the issuing of tourist visas to individual travellers from the Chinese mainland in 2003 - have jump-started Macau's transition. More than a few eyebrows raised when its GDP spiked by 28 percent in 2004, as 16.7 million visitors arrived that year - 57 percent of them from the mainland - compared with 11.9 million in 2003. Adelson's Sands Macao hotel and casino, the territory's first foreign-owned casino, introduced the concept of the Las Vegas-style resort hotel to Macau in 2004, and within a year it was out-earning its sister hotel in Nevada - threefold.

Since the initial rush of the banner year 2004, Macau has cooled down somewhat (only 18.7 million visitors in 2005, or 41 times its population of 451,000), but only in anticipation of bigger things to come. Early September will see the opening of the Wynn Macau, the first foray into the new market of another Las Vegas fixture, Steve Wynn. All of the new players - Wynn, Adelson's Las Vegas Sands group, Galaxy Entertainment, Melco, MGM - have plans for multiple casinos in town.

While all eyes tend to look forward to the completion of the Cotai Strip, Markland Blaiklock, the executive director of hotel operations at the Wynn Macau, sees a near-term advantage in being in the established casino area on the Macau Peninsula early on. "We wouldn't want to be in Cotai in the first wave, because the second wave would make the whole area somewhat of a construction zone," he says. The general pattern appears to be: open a relatively small hotel in the current main casino area on the peninsula first, whet visitors' appetites while the Strip gets built, then open a much larger casino - or complex of casinos - in Cotai.

Not to be outdone by the newcomers, Stanley Ho is building the Grand Lisboa, across from the Wynn Macau and next door to the Lisboa, his flagship hotel and a long-time Macau landmark - and the company run by his son Lawrence Ho, Melco, is building the positively James Bondian City of Dreams hotel complex in Cotai, complete with an underwater casino. While the Ho dynasty's share of the gaming market will not be nearly as dominant as it has been in the past, it remains the main player in town and will by no means wither away.

Pressure from above

Not everyone is gung ho about gaming, however. Beijing, while pleased with Macau's economic performance as a model of how "One Country, Two Systems" can work, sometimes gives the impression that it does not care much for the fact that Macau's economy is primarily based on what many consider to be a vice. Though embarrassing stories of mainland officials losing large sums of ill-gotten money at the baccarat table are more and more a thing of the past, the central authorities continue to push for Macau to diversify its economy into other areas besides gaming.

As much as the central government would like to discourage gaming, though, the local administration is hopelessly attached to the tax revenue the casinos generate, says Fox Hu, a journalist who covers Macau for a Hong Kong newspaper. Any measures Beijing takes to put pressure on the gaming industry are ultimately unsuccessful, he says.

Pressure on organized crime, however, has seemed to have an effect. Macau has long had a reputation as a hotbed of triad activity - the mid-1990s in particular saw a surge of very public gangland shootings. Beijing strongly emphasized a stable transition and conducted anti-gang campaigns. Violent crime, especially murders, has dropped significantly since the handover, but there are still worries that it may go up again when times are not so good. "The gangs still exist, but they are just keeping quiet at the moment," says Hu.

Macau's tourism bureau practically never mentions casinos in its literature, preferring to focus on promoting the unique Macanese cultural heritage, which mixes southern Chinese and colonial Portuguese styles, and its well-preserved historical sites. The old area of town around the fa?ade of the destroyed St. Paul's cathedral, declared a UNESCO World Heritage site last year, and other places of interest like the A Ma Temple still draw mainland tour groups by the busload, but they produce little revenue, and not even very many oohs and ahs. "Compared with the huge cultural sites people are used to seeing in China, Macau's are very small, so a lot of tourists come away disappointed," Hu says. "But that's Macau - everything is small."

Sheer exhibitionism

In parallel with the gaming boom, the "MICE" (meetings, incentives, conferences and exhibitions) industry in Macau is also primed for a takeoff. Again, Welker says, this echoes the Las Vegas model. "Las Vegas didn't grow solely out of casinos - it also grew out of meetings. It's totally a MICE market situation, and it's the same situation in Macau."

As with the mega-casinos, however, the space for exhibitions isn't there yet, but it will be soon, as many of the new resort hotels open up. The Venetian Macau, another Sin City import courtesy of Adelson, will feature an enormous 120,000 square metres of floor space for conventions, putting it on a par with Hong Kong's convention centre when it opens in Cotai in the middle of next year. The government is warming up as well; the tourist bureau recently announced the opening of the Macau Business Tourism Centre, the first step towards the development of a full-fledged conventions bureau that would accompany the Cotai Strip's opening.

MICE events matter, above all, because they bring in flocks of overnight visitors, which Macau will need in greater numbers as it grows - the current average stay was a mere 1.18 days in 2005. With the number of hotel rooms expanding from 11,000 to over 30,000 during the next 18 months, those in the tourism industry would like to see that number double in coming years to keep up occupancy rates. A typical convention could bring in 25,000 or more attendees over a two- or three-day period.

But how will people get there? Although it has an international airport, the vast majority of Macau's visitors still arrive at the ferry terminal, stepping off the jetfoil from Hong Kong. Some come overland, crossing the border from Zhuhai. Macau International Airport serves primarily as a stopping point for flights between Taiwan and the mainland. Only about 800,000 of its passenger throughput of 6 million actually disembarked there last year, accounting for less than 5 percent of Macau's total visitors.

That may change as more business travellers begin to arrive. "Those types of customers aren't going to be willing to fly to Hong Kong and endure a ferry ride to Macau," says Joseph Lo, an executive at Viva Macau, an upstart local airline that plans to offer more direct flights to the SAR. "We think that there's a big gap to be filled in using the airport as an entryway to Macau." Viva Macau and another new self-labelled "low-cost" airline, Golden Dragon (owned by Stanley Ho's group), are poised to fill that gap. Golden Dragon is mainly focusing on operating flights to and from mainland China, while Viva Macau looks to open routes to other East Asian destinations such as Jakarta. Both are betting that the next phase of Macau's tourism and business travel explosion proceeds according to schedule. If it does - and the odds are in their favour - they could very well hit it big.