Inside Asian Gaming

inside asian gaming February 2015 6 EDITORIAL Inside Asian Gaming is an official media partner of: www.gamingstandards.com Inside Asian Gaming is published by Must Read Publications Ltd 5A FIT Center Avenida Comercial de Macau Macau Tel: (853) 8294 6755 For subscription enquiries, please email subs@asgam.com For advertising enquiries, please email ads@asgam.com or call: (853) 6680 9419 www.asgam.com ISSN 2070-7681 Publisher Kareem Jalal Director João Costeira Varela Editor James Rutherford Editor At Large Muhammad Cohen Business Development Manager Danilo Madeira Contributors Paul Doocey, John Grochowski, James Hodl, Matt Pollins, I. Nelson Rose Graphic Designer Rui Gomes Photography Ike, Gary Wong, James Leong, Wong Kei Cheong James Rutherford We crave your feedback. Please email your comments to James@asgam.com The Power of Potential S obering as 2014 was for Macau’s casinos, belief in the power of China’s consumers to transformmarkets is undimmed. All of East Asia is being reimagined on the strength of it. Deutsche Bank, for one, expects double-digit revenue growth to continue in Korea’s foreigners-only market—16% is their forecast for 2015—and they’re looking for a whopping 33% in the Philippines with the ramp-up of Entertainment City. As the bank sees it, “Weakness in big markets means opportunities for mid-sized markets as Chinese gamblers travel farther to try new destinations.” Or just ask the brain trust at NagaWorld in Phnom Penh, which is deftly augmenting a robust low-roller business, around 40% of it from Vietnam, with one that’s becoming increasingly attractive to Chinese VIPs. The property has more than 30 junkets in its stable and last year designated around 40 new private tables to service them, along with two Airbus A320s to run charters intoMacau and mainland China from a dedicated terminal at PhnomPenh International. The property has been growing VIP revenue at annual rates exceeding 30% for the last four years, and the opening of the US$370 million Naga2 early in 2017 will kick that up a gear with another 50 private gaming suites (the property had seven at the end of 2013), more than 1,000 five-star hotel rooms in all, and more than 18,000 square meters of shopping. But then a friendly government makes all the difference, and NagaWorld enjoys a monopoly in Phnom Penh, with no limits on gaming capacity, and an absurdly low effective tax rate of 3.6%. Which is how it can afford to offer junket commissions in the range of 1.7%. (In Macau, remember, they used to pay 1.25%.) It’s a lesson they’ve yet to fully grasp across the border in Hanoi. About 240 kilometers south of Phnom Penh in the Gulf of Thailand, Vietnam has a large and beautiful island called Phu Quoc, where local authorities have been trying for years to entice a casino but have yet to find anyone willing to build one. Lonely Planet loves the place. There are 18 beaches Phu Quoc, a vast, protected national park, charming fishing villages populated with grinders of a famous variety of fish paste, but only two hotels of genuine urban tourist standards, few roads, little by way of commercial or retail or leisure facilities, almost no direct air service, and annual visitation is around one-fifth of what Phuket draws on the other side of the gulf. The government has designated Phu Quoc a special economic zone and knows a resort- scale casino would make a major impact, but with a national gaming tax rate amounting to 45%, a $4 billion investment threshold mandated by law and a ban on domestic play, there isn’t a tremendous incentive to invest. Arguably, there is no country in Southeast Asia more blessed than Vietnam with natural beauty or richer in culture and heritage. Yet tourism accounts for only about 4% of GDP—versus the 10% or more realized by other countries in the region—and although foreign visitation set a record last year of 7.8 million, the goal had been 8.2 million, and the increase year on year was a relatively unimpressive 4%. China was the largest international component by far with more than 1.9 million visitors, but as a growth market it plummeted from 33% year on year in 2013 to 2%. Of course, the political tensions of last summer didn’t help. Beijing’s construction of an oil rig in disputed waters touched off near riots across the country. Vietnam’s casinos have been dealing to Chinese players since the mid-’90s, and properties like Aristo International in the north and the Crowne Plaza down in Da Nang do a healthy trade relative to their size. But the country didn’t have anything on the scale of NagaWorld until the US$500 million Grand – Ho Tram opened on the south coast two summers ago, a gorgeous place to be sure, but it’s a drive of two hours or more fromHo Chi Minh City, and it has struggled. To its credit, VIP play is now generating upwards of 90% of total gaming revenue, according to investment brokerage CLSA, but it’s paying junket commissions as high as 1.8%, and it’s not easy making that work when the government is taking almost half off the top. But The Grand has been an inspiration in its way. Banyan Tree Holdings wants to build a casino at its Laguna Lang resort in the central province of Thua Thien-Hue. A developer in Da Nang is after permission to open casinos at two resort hotels it operates there. Not far away, in South Hoi An, reports are that no less than Chow Tai Fook and Macau junket giant Suncity have plans for breathing new life into the $4 billion VinaCapital megaresort that’s been stuck on the drawing board since Genting pulled out two years ago. Now if the public sector would only get out of the way.