Inside Asian Gaming

inside asian gaming December 2014 14 Cover Story In this regard, Mr Perera is actively searching for gaming opportunities beyond Sri Lanka. Certainly his pockets are deep enough for that purpose. The 46-year-old’s empire boasts 23 listed entities that account for 8% of all companies traded on the Colombo Stock Exchange, as well as dozens of private ones. His reach extends to Thailand, Indonesia, Japan, even as far the UK, and his companies employ some 62,000 people. Obviously, gaming is only a small part of the portfolio at this point, last year accounting for about 4% of the revenues of his holding company, Vallibel One. “Maybe we’ll go up to 6% [with the opening of Queensbury], but we’re looking to acquire some international properties,” he says. “Not just in Asia, we’re open for the world.” His gaming team is built on a foundation of experienced, loyal casino managers and supervisors who during their tenures with him have often worked under highly challenging conditions. They’ve even managed to pull off the deft feat of getting Chinese and Indians to play comfortably together at the same tables despite the seemingly unbridgeable divide between their styles of gambling. The Indians are prone to drink and socialize at the tables, often smiling, even while losing, whereas for the Chinese gambling tends to be a deadly serious affair full of rituals which in baccarat include diligently looking for patterns in the outcomes of past hands that they believe can foretell the next winning hand. Interestingly, not only do the two groups mingle harmoniously at Mr Perera’s casinos, each appears to be influenced by the other. The Chinese seem more relaxed and chatty than in Macau, and the Indians—known more for playing roulette and blackjack—have cultivated a considerable interest in baccarat, including tracking outcomes in search of patterns. Getting Indians to gamble may not seem like much of an achievement—they’re a nation of passionate gamblers—but Macau’s experience proves there’s definitely an art to it. Indian visitors are flocking to Macau, mainly to The Venetian, which has established a high profile in the country through its hosting of Bollywood awards ceremonies that are televised in India and other targeted events and promotions. Despite their numbers, though, the city’s casinos have consistently failed to generate any significant gaming revenue out of them. And it’s not as if tiny Macau—unlike Sri Lanka—offers a wealth of things to see and do outside its casinos. It has given rise to the assumption among operators, generally speaking, that Indians just aren’t that interested in gambling. Mr Perera and his team know better. “We handle quite a big number of Indians already,” he points out. “We know how to deal with them. We can bring them to other places also.” Tax Hike Consequences The stiff entry levy recently imposed on locals seems a fair political compromise to placate Sri Lanka’s vocal anti-gambling forces, especially since the casinos are intended primarily to drive tourism. But with competition for Asia’s international VIP players heating up, higher taxes on gross revenue and profit could erode the country’s ability to compete for them The government of Sri Lanka announced in October it would significantly raise gaming levies effective 1st January. There’ll be an annual license fee of US$800,000 and 10% tax on gross gaming revenue (up from the previous 5%) in addition to a 40% tax on net profit. Furthermore, a $100 levy will be charged to all Sri Lankans entering the casinos, which considering the relatively low average wage in the country, works out to a much heavier burden than Singapore’s nearly equivalent entry levy on its locals—Singapore’s nominal GDP per capita is more than 17 times higher than Sri Lanka’s. Singapore’s two casinos combined draw 17,000 locals visits a day on average. In Sri Lanka, with a $100 levy in effect, locals visits wouldn’t reach anywhere near that level. Evidently, concerns about the social ills that might accompany the industry’s expansion appear to be greater among Sri Lanka’s politically influential Buddhist monks than they are among Lion City’s bureaucrats with their nanny-state tendencies. Thus, Sri Lanka’s relatively hefty entry levy seems a reasonable political compromise to get the industry moving forward. Mr Perera agrees with the implementation of the entry levy on locals, “Because although we need gaming, at the same time we want to discourage locals.” In any case, he says, “Only 3%-4% of our current business comes from locals, and without them we’re OK. As a social responsibility, we’re happy to proceed without locals.” However, he feels rather less sanguine about the other new gaming tax increases, “which work out to about 60% tax on profit. That’s quite heavy,” he remarks. Indeed, it could make it difficult to attract the junkets and the high-end clientele both the casinos and the government are after. VIPs might instead opt to go to other gaming destinations where lower gaming taxes enable higher levels of commissions, rebates and comps.