A new Cambodian casino resort is likely to combine product innovation with the best of NagaWorld’s business model
A US$500 million integrated leisure and gaming resort complex is to be built in Siem Reap, Cambodia. The project is within easy reach of the famous tourist destination of Angkor Wat, a temple complex listed by UNESCO as a World Heritage site.
Nearly two thirds of Cambodia’s 1.5 million foreign visitors in 2007 passed through Siem Reap on the way to Angkor. To take advantage of the ‘brand recognition’ of the heritage site with tourists, the casino project will be known as Angkor Park Resort. It will be sited 20 kilometers north of Angkor Wat, just outside the designated National Heritage Zone.
The initiative follows the success of the mid-level, mid-cost casino resort model adopted by another operator and developer, NagaCorp, at its facility NagaWorld in Phnom Penh, the country’s capital.
As with NagaWorld, the Siem Reap project appears to have strong political support from the country’s prime minister Hun Sen and has been granted a monopoly licence in the area of the resort.
Other features reminiscent of NagaWorld’s business model are: no limit on the period of the licence; and no limitation on the number of casino tables and machines, betting amounts, types of games, operational hours, and related facilities.
Angkor Park Resort will be granted a ‘holiday’ from corporate income tax for a minimum of five years and will also enjoy a tax exemption on imported goods and raw materials for the construction phase.
As with NagaWorld, the Siem Reap scheme will focus on getting the casino built first so that it can act as a cash generator to support the capital cost of the project.
Cambodia does not impose a tax on gross gaming revenues of the sort found in Macau, Malaysia, South Korea and Singapore. Although no tax regime has yet been announced for Angkor Park Resort, if it follows the NagaWorld model it is likely to consist of a flat fee equivalent to around 1% to 1.5% of annual gross revenues.
The developers and gaming licence holders Intercity Group, a Korean construction and architecture business, appear generally to have given careful thought to the financial engineering for the project in the current credit shortage.
The casino portion of the scheme has been priced at US$130 million. Ground breaking for the casino is likely to start before the end of March, with the aim of opening gaming halls to the public by March 2010. Cambodia’s first stock exchange is scheduled to open in the fourth quarter of 2009, potentially providing a pool of enthusiastic local equity investors.
Between US$60 million and US$100 million of the first phase capital is likely to come from equity, say the developers. The remainder of the US$270 million price tag for phase one will mostly be covered by loans, sales of lots, rent and leases, plus cash flow generated from the early opening portion of the operation, says a spokesman for the developer.
Phase one will feature the casino with 300 tables; an 18-hole golf course; three hotels providing accommodation for up to 600 guests (one four-star, one five-star and one boutique), shops, a convention centre and a water park. Phase one in total is expected to take just under two years to build.
The second phase, scheduled to take 18 months and costing US$200 million, will feature a convention and performance centre, additional hotel rooms for up to 900 people, a theme park and condominiums. It should be ready by the first quarter of 2011.
Intercity Group, which reportedly first mooted the idea in 2006, acquired the gaming business licence for the new resort from the Cambodian government in December, according to the firm’s official spokesman, Ben Lee of IGamiX.
Mr Lee says the project also has the support of the regional government at a time when many international and domestic development projects have been cancelled or delayed due to the global economic downturn.
Cambodia’s prime minister Hun Sen is expected to preside over the ground breaking ceremony in the first quarter of this year.