Inside Asian Gaming

May 2012 | INSIDE ASIAN GAMING 35 Feature plus facilities pop up regularly in Macau, NagaWorld spent in total so far about $230 million on its complex. Given the fact that the country is essentially just starting out after the horrors of the 1970s and the troubles of the 1980s, the government is keen to do business and has gained a reputation as one of the easiest to deal with in the region. Visas are simple and granted on arrival, and for some countries not required at all, while red tape is minimal. As an early mover and committed investor, NagaWorld received good terms from Phnom Penh. It has a 70-year gaming license, through 2065, and a 41-year gaming monopoly, ending 2035, for activities within a 200 kilometer radius of the capital. The company also has a concessionary tax rate. It pays a lump sum that rises by a scheduled amount every year. “We pay a monthly fixed tax of US$370,000, and that covers everything: corporate tax, gaming taxes and even the GST. That is only about 2% of revenue,” says Philip Lee, chief financial officer and executive director, NagaCorp.“If you compare that with 39% in Macau and 16 or 17% in Singapore, we have a huge cost advantage.” But more importantly, Cambodia is quite a good place to situate a casino. The country of just 14 million attracts 3 million visitors a year and those numbers are increasing rapidly. In the first quarter of 2012, arrivals were up 28% year-on-year, compared with the 15% growth of 2011. By 2020, forecasts put Chinese visitors numbers at 1 million. Many of these so-called footfalls find their way to NagaWorld, which is conveniently located downtown next to the National Assembly and the Foreign Ministry. Vietnam is a particularly interesting source market for visitors. As in China, the lack of casinos in the country prompts its residents to travel to neighboring jurisdictions to get their gaming fix (while MGM Grand Ho Tram is set to become Vietnam’s first casino resort when it opens next year, the casino portion will be, by law, strictly off limits to local players, as are the slot clubs currently located at hotels around the country). About 18%of visitors to Cambodia, more than from any other country, come from Vietnam and arrival numbers from Vietnam are growing almost 37% a year. Many of them come by bus from Ho Chi Minh City, less than 6 hours away, to try their luck on NagaWorld’s main gaming floors. About 40% of the casino’s mass market visitors are Vietnamese. “The Vietnam market is really starting to underscore their [NagaWorld’s] mass market momentum,” says Michael Beer, an analyst at Citi. For much of the rest of the region, including Indonesia, Singapore, Malaysia, Korea and China, NagaWorld has to a great extent succeededby targetingmid-rangeVIP players. Rather than going for the obvious whales, it works to attract a somewhat more modest level of player. To get them, it offers a relatively high commission of 1.7% (for overseas visitors)—compared with Macau’s 1.25%—and also extras not normally available to the sub-high-end player visiting Macau or Singapore. “Out of China, if you’re a HK$1 million check-in player in Macau, you are not a big VIP player, so you don’t get all the frills,” says NagaCorp’s Philip Lee. “You get the basic VIP treatment. We feel that that’s a niche market we can serve because of our cost structure. Garden Casino main floor Club suite