Macau: The Atlantic City of China?

NEW YORK (TheStreet) -- Macau is called many things, among them the "Sin City of Asia" and the "Monte Carlo of the Orient." But the "Atlantic City of China" is not a phrase usually associated with the supercharged growth of the gambling enclave.

Located an hour away from Hong Kong, the former Portuguese colony has dwarfed Las Vegas to become the largest gaming market in the world. For the first four months of the year, Macau reported gaming revenue of $13 billion, easily topping the $10 billion Las Vegas earned for all of 2010.

Clearly, the peninsula is nothing like Atlantic City ... at least right now. The New Jersey gambling hub has reported more than two years of declines in gaming revenue. Still, the "Las Vegas of the East" actually serves as a cautionary tale of sorts when considering the future of Macau.

Atlantic City offered great promise when it legalized gambling in 1976. The dream was grandiose: the resort town, revitalized by an influx of casinos, would become a glitzy jewel of oceanfront luxury.

For nearly two decades, Atlantic City and its infamous Boardwalk grew at break-neck speed. The reason: it was the only real market that offered a destination for legalized gaming on the East Coast.

>Macau Casino Map: Birds-Eye View

Like Atlantic City, Macau's intrinsic value lies in its monopoly of Chinese gambling, a popular pasttime in the country.

"What makes the concessions in Macau so valuable -- and the market so exciting -- has nothing to do with what happens in Macau," says Randall Fine of the Fine Point Group, a casino consulting and management firm. "It's [about] what is not happening outside it. Much like Atlantic City in the 1980s and 1990s, Macau is raking in money hand-over-fist because casino gambling is not legal on the Chinese mainland."

But if that were to change (and clearly the Chinese government has more control over that decision than is typically found in a gaming market) it could have a devastating effect on Macau.

"Convenience is the No. 1 driver of gaming location selection, and as casinos have sprouted up in Connecticut, Pennsylvania, Maryland, Delaware and New York, the need to make a visit to Atlantic City has declined," Fine says. "If the Chinese government allowed one or two casinos in each Chinese city of one million residents or more, the same would occur in Macau.