Inside Asian Gaming

inside asian gaming MAY 2015 22 International Travel Service (CITS) to bring mainland visitors to NagaWorld. According to a recent research report headlined “Gaga for Naga,” Union Gaming Research Macau says Bassaka Air will begin twice weekly service to Macau this month and flights to China are expected to begin in July. NagaWorld signed up another name familiar to mainland travelers, China Duty Free Group, for NagaCity Walk, the street-level and below-ground shopping mall linking to Naga2 that was designed by renowned casino architect Paul Steelman. China Duty Free will secure tenants for the 18,000 square meter retail area and operate its own outlet occupying at least 2,400 square meters. “From a strategic standpoint, we developed the relationship with China Duty Free with an eye on China,” Mr McNally explains. “Cambodia is very intent, as we are, in building relationships with China. We think we can be a beneficiary of these relationships.” Cambodia’s visitor arrivals from China grew 21% last year to 560,335, as overall arrivals grew 7% to 4.5 million, more than double the level five years before. That comes on top of Chinese arrivals surging 38.7% in 2013 to take second place behind Vietnam. In its annual report, NagaCorp writes that continued growth from China and other “gaming-centric countries is one of the drivers of our business growth.” To better accommodate Chinese visitors, NagaWorld aims to “Chinify” the resort, a drive that goes well beyond decorations for Chinese New Year and adding items to the breakfast buffet, according to Managing Director for Corporate Affairs Rob Cho. Since January last year, NagaWorld has offered Mandarin classes for staff with prize competitions for the top students. Overall, NagaWorld, which currently has 5,400 employees in Cambodia, will need more than 10,000 by the time Naga2 opens. “We have a unique value proposition in HR, a lot of middle management opportunities,” Mr Cho, a former Hong Kong banker, says. “We need 600 solid managers in three years. We have 300 and need to localize.” NagaWorld offers the opportunity to “leapfrog people in management experience.” To help bolster the hospitality sector workforce, NagaCorp created Naga Academy in 2012. Naga offers three- to six-month training programs in eleven areas, from food and beverage service to audiovisual to marketing and sales. Last year it trained nearly 1,000 interns. NagaCorp hired the majority and assisted the rest to find jobs elsewhere with a 100% success rate. Other bottlenecks are proving more difficult to resolve. The company had hoped to begin flights from China and Macau late last year, but red tape has delayed this key growth initiative. NagaCity Walk was due for completion at the end of last year, but has been set back by construction issues. The company now anticipates finishing construction in the third quarter, with a first-quarter opening next year. Meanwhile, NagaCorp’s staff costs last year increased 40% to $48.7 million, partly to keep NagaWorld line employees ahead of a near doubling of Cambodia’s minimum wage since 2013, but mainly due to beefing up executive talent, which may be underutilized at the moment due to project delays. NagaCorp remains confident “these promotional and operational strategies will bear fruit in the coming years as NagaWorld grows its market share in Asia,” and analysts largely agree, but meanwhile earnings are suffering. Last year, net profit fell 3% to $136 million, even though gaming revenue increased 17%. Excluding the $15 million entry fee paid in 2013 by one of NagaWorld’s three EGM revenue share operators, net profit increased 9%. Morgan Stanley, Union Gaming and Credit Suisse have trimmed 2015 estimates for NagaCorp shares, while maintaining positive ratings for the stock. Amid the short term obstacles, Union Gaming Research Macau writes, “NagaWorld continues to notably outperform its regional Asian counterparts. We also firmly believe that the company has and is putting the right things in place to continue to drive revenue across all of these segments over the next two years prior to the opening of Naga2.” And that may just be the beginning. With Cambodia’s visitor arrivals expected to reach 7.5 million by 2020, it doesn’t take long for company executives to mention Naga3 and Naga4. Editor at large Muhammad Cohen also blogs for Forbes on gaming throughout Asia and wrote “Hong Kong On Air,” a novel set during the 1997 handover about TV news, love, betrayal, high finance and cheap lingerie. Cover Story NagaWorld debuted dealer-assisted electronic multi-game terminals in 2011. The swinging NagaRock premium-mass area