Inside Asian Gaming

inside asian gaming September 2015 40 a true integrated resort and put it on the regional map. Mr Arasi believes that, pound for pound, it can take on any IR in the region. “Famous Filipino hospitality is our secret sauce,” Mr Arasi says, focusing on service as a major advantage for Manila over other gaming destinations. He’s shown himself adept at people skills as well, a knack honed at Marina Bay Sands, where baristas still remember his double-shot soy latte order. For a company-wide pep rally on the eve of Sky Tower’s debut, Mr Arasi traded his usual three- piece suit and crisply starched white shirt for jeans and a golf shirt in Solaire’s signature orange. Part Steve Jobs, part gospel preacher, Mr Arasi told employees in a country known for exporting service workers, “Making it big won’t require going any further than where we are right now. We’ll make our dreams come true in this crown jewel we call Solaire.” On the financial side, the dream is not unfolding quite as planned. Despite securing the market lead in gaming revenue, Solaire’s first half EBITDA declined 20% to P3.6 billion and it reported losses for both quarters. Solaire blames accounting change accompanying the opening of Sky Tower, changing its financing costs from capital to current expenses. But Morgan Stanley Asia notes that operating expenses at Solaire remain higher than the competition at P31 million a day. It’s time for Tom Arasi, numbers guy, to sharpen his pencil. High hopes for Sri Lanka’s casino industry at the end of last year were dashed following the surprise result of the 8th January presidential election, which saw Mahinda Rajapaksa defeated by Mithripala Sirisena, who previously had served as Mr Rajapaksa’s health minister before quitting abruptly to run against him just two months before the vote. Mr Rajapaksa, who governed the country virtually unopposed for 10 years, supported gaming expansion as a means of boosting the island nation’s economy through increased tourism and foreign investment. However, the plan was never popular with influential religious leaders of the country’s Buddhist-Sinhalese majority and was criticized heavily both by opposition parties and segments of Mr Rajapaksa’s own coalition partners, who feared the industry would undermine traditional values and lead to a variety of social ills. Among Mr Sirisena’s campaign promises was the cancellation of the previous administration’s approval of casinos at three resorts planned for the capital of Colombo—a promise he fulfilled immediately after coming to power. The casinos canceled include one slated for a US$400 million resort planned by Australia’s Crown Resorts in the capital’s popular tourist core, prompting Crown to scrap the entire project. Casinos are also gone from a $300 million resort proposal called Queensbury, backed by local company Vallibel One, which owns three of Sri Lanka’s four existing officially sanctioned casinos, and an $850 million resort called Water Front Properties proposed by hospitality giant John Keells Holdings, the country’s largest publicly traded company. The government dealt the industry a further blow in April, moving ahead with the imposition of a US$100 casino entry levy, which, unlike Singapore’s S$100 (US$70) levy, applies to foreigners as well as locals. The handful of small casinos currently catering to the Dhammika Perera Chairman and Managing Director  Vallibel One Colombo tourist trade only gained official recognition at the end of 2010, having operated for years before then as “recreation clubs” under a gray- area arrangement dating back to the British colonial era. The turning point was arguably the decisive end to a bloody 26-year-long civil war pitting the government against ethnic Hindu Tamils in the north of the country, in which Mr Rajapaksa was instrumental. That victory gave his government the mandate to pass legislation to formally recognize the industry through the registration of the casinos with the Inland Revenue Department for tax purposes. Four de facto casino licenses were thus established. Dhammika Perera, by many accounts the country’s richest individual, is the biggest casino operator in Sri Lanka— though casinos account for only about 4% of the revenue of his holding company, Vallibel One. He owns three licensed gaming establishments. Raji Wijeratne, Crown Resorts’ intended local partner before it pulled out, owns the remaining license, which he has managed to split across two venues. All five casinos are located in Colombo, and the biggest, Mr Perera’s Bally’s, has 80 table games (his Bellagio has 40 and his MGM Colombo another 40). Though small in size compared to the super-resorts of Macau and Las Vegas, Sri Lanka’s casinos are pleasantly decorated and well maintained and offer service on a par with international standards. Indians and Chinese are the main patrons, with Mr Perera claiming they each contribute about 40% of the revenue at his casinos. He told Inside Asian Gaming that locals are responsible for only about 4%, with the remainder generated by other foreigners.