IAG February 2015 - page 6

inside
asiangaming
February2015
6
EDITORIAL
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ThePowerofPotential
S
obering as 2014was forMacau’s casinos, belief in thepower of China’s consumers to
transformmarkets isundimmed.All ofEastAsia isbeing reimaginedon thestrengthof 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 thePhilippineswith the ramp-upof Entertainment City.
As thebanksees it, “Weakness inbigmarketsmeansopportunities formid-sizedmarketsas
Chinese gamblers travel farther to try newdestinations.”
Or just ask thebrain trust atNagaWorld inPhnomPenh,which isdeftlyaugmentinga 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 intoMacauandmainlandChina fromadedicated terminalatPhnomPenh International.
ThepropertyhasbeengrowingVIP revenueat annual ratesexceeding30% for the last four years,
and the openingof theUS$370millionNaga2 early in 2017will kick that up a gear with another
50private gaming suites (the property had seven at the end of 2013),more than 1,000 five-star
hotel rooms in all, andmore than 18,000 squaremeters of shopping.
But then a friendly governmentmakes all thedifference, andNagaWorld enjoys amonopoly
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%. (InMacau,
remember, they used topay 1.25%.)
It’s a lesson they’ve yet to fully grasp across the border inHanoi.
About 240kilometerssouthof PhnomPenh in theGulf of Thailand, Vietnamhasa largeand
beautiful island called PhuQuoc, where local authorities have been trying for years to entice a
casino but have yet to find anyonewilling to build one.
Lonely Planet
loves the place. There are
18 beaches PhuQuoc, a vast, protectednational park, charming fishing villages populatedwith
grindersof a famousvarietyof fishpaste, butonly twohotelsof genuineurban tourist standards,
few roads, little by way of commercial or retail or leisure facilities, almost no direct air service,
and annual visitation is aroundone-fifthof what Phuket draws on theother sideof the gulf.
The government has designated Phu Quoc a special economic zone and knows a resort-
scalecasinowouldmakeamajor impact, butwithanational gaming tax rateamounting to45%,
a $4 billion investment thresholdmandated 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
beautyor richer incultureandheritage. Yet tourismaccounts for onlyabout 4%ofGDP—versus
the 10%ormore realizedby other countries in the region—and although foreign visitation set a
record last year of 7.8million, the goal had been 8.2million, and the increase year on year was
a relatively unimpressive 4%. China was the largest international component by far withmore
than 1.9million visitors, but as a growthmarket it plummeted from 33% year on year in 2013 to
2%.Of course, thepolitical tensions of last summer didn’t help. Beijing’s constructionof anoil
rig indisputedwaters touchedoffnear riots across the country.
Vietnam’s casinos have beendealing toChinese players since themid-’90s, andproperties
likeAristo International in the north and theCrowne Plaza down inDaNang do a healthy trade
relative to their size. But the country didn’t have anything on the scale of NagaWorld until the
US$500million Grand – Ho Tram opened on the south coast two summers ago, a gorgeous
place tobesure, but it’sadriveof twohoursormore fromHoChiMinhCity, and ithasstruggled.
To its credit, VIPplay 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
easymaking that workwhen 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 inDa
Nang is after permission toopen casinos at two resort hotels it operates there. Not far away, in
SouthHoi An, reports are that no less thanChowTai Fook andMacau junket giant Suncity have
plans for breathing new life into the $4 billionVinaCapital megaresort that’s been stuck on the
drawingboard sinceGentingpulledout two years ago.
Now if thepublic sectorwouldonly get out of theway.
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