Looking Beyond Macau in Asia’s Casino Sector

When looking at the Asian casino market it is easy to fall into the trap of focusing all of one’ attention on Macau at the expense of other interesting markets in the region. Of course, with growth of 58% in 2010 to another all time gaming revenue record of US$ 23.5 billion, Macau is the jewel in the region’ gaming crown. But in markets just to the west of Macau, in the likes of Cambodia, Vietnam, and Laos, there are still gems to be found.

In Cambodia Naga Resorts and Casino Ltd enjoys a 40-year monopoly on the operation of a casino in the capital Phnom Penh, which runs out in 2035. Under this agreement it negotiated with the Royal Government of Cambodia in 1994, NagaWorld is, therefore, Phnom Penh’ only integrated hotel and casino entertainment venue. Aside from the monopoly, NagaWorld’ licence to run the casino expires in 2065.
In common with other casinos in the region and around the world NagaWorld had a difficult year in 2009. The venue’ gaming revenues fell by 41% to US$ 112.3 million from a 5-year high of US$ 191.0 million in 2008. 

But 2010 has seen something of a recovery for the casino. Gaming revenues rose by 25% in 2010 to reach US$ 140.5 million, not far below the level it had recorded in 2007 before the financial crisis began to hit. The company also managed to increase its gross profit by 50% to US$ 106.7 million.
With the lure of Macau’ casinos not far away for casino gamblers in the region, Nagaworld has been adapting its business strategy to create a niche for itself in the region’ gaming sector. NagaWorld has said it is adopting a two-pronged approach. First it is intending to increase revenues in its mass market gaming floor by “tapping into economically burgeoning markets through focused marketing initiatives”. 
Second, rather than try to compete with Macau for top-end VIP junket business it has been trying to reduce its reliance on the VIP junket market, whilst also positioning NagaWorld as the “prime destination” for mid-size junket players.
In 2009 junket players made up 45% of NagaWorld’ revenues but this had fallen to 35% in 2010. In the same period the mass gaming floor increased its revenue contribution from 21% to 28%. Slot machines accounted for 30% of NagaWorld’ revenues in 2010 (2009: 29%).
The benefit of focusing on the mass market player for the casino is that it can produce a betting gaming margin than VIP market. In 2009 NagaWorld’ margin from mass market players was 16% and it managed to increase this to 20% in 2010. 

But away from Phnom Penh the casino market is faring less well in Cambodia’ border regions with Vietnam and Thailand. Although a number of new casino properties are being planned in Sihanoukville, Siem Reap, and Kampot there are signs of oversupply. In early October 2010 the Winn Casino in Bavet was forced to close because of falling visitor numbers, with the loss of 300 jobs. The VIP Casino also closed its doors in November 2010. It is reported that several other properties in the Bavet are also for sale. The closures of the Winn and VIP casinos could be the first of several closures in the border regions as the effects of the economic crisis continue to be felt.
Cambodia’ casinos are also likely to face increased competition from new developments in its neighbours Vietnam and Laos.
Historically, the Communist regime in Vietnam has had an ideological opposition to the gambling industry. Consequently, most forms of gambling have been illegal under the country’ general penal code. 
But whilst Vietnamese legislation prohibits Vietnamese nationals from gambling, it does allow hotels rated as being four-star or over to run casinos exclusively for foreigners and overseas Vietnamese.
One of Vietnam’ largest casino resorts is the Crowne International Casino in the coastal city of Da Nang . The casino is part of the Silver Shores International 5-star resort and opened on 23 December 2009 at a cost of US$1.6 billion. The casino is seeking to attract Chinese, Hong Kong, and Taiwan players. The resort also includes 584 hotel rooms and 52 shore-side villas.
But the existing gaming resorts will be dwarfed by the resorts being built by Asian Coast Development Ltd (ACDL) on the Ho Tram Strip. Las Vegas’ Paul Steelman Design Group is undertaking the multiphase, US$ 4 billion project. 
The first phase of the casino resort is due to open in January 2013 and will be headed by Lloyd Nathan, a former executive with MGM Mirage. MGM Mirage will operate the resort once completed, and is also giving its brand name to the property. Designs were approved by MGM Mirage in early 2009 and the ground breaking ceremony took place in July that year.
Phase One of the project will include 1,200 hotel rooms, a 7,200-square metre Las Vegas-style table games casino, ten restaurants, an eight-acre swimming pool, and a 200-acre golf course and country club.
On Vietnam’ north-eastern border with the Guangxi Zhuang autonomous region of China, another large casino resort is being built which wants to attract Chinese customers who cannot get to Macau. 
The Langson International is planning a resort with 12 casinos and 3,200 hotel rooms.
In Laos there are currently two official casinos. The first is part of the Dansavanh Nam Ngum Resort, which is located in Ban Muang Wa-Tha, Vientiane Province. The property includes 60 tables and 150 gaming machines, as well as 185 hotel rooms.
A second casino opened in September 2008. The Savan Vegas Hotel and Casino Resort is on the border with Thailand in Savannakhet. The resort includes 180 five-star hotel rooms and gaming space of 4,950 square metres which holds 380 slot machines and 80 table games.
The Savan Vegas Resort is a US$25m joint venture between a Thai and Laos consortium. The resort’s location near the second Thai-Lao Friendship Bridge over the Mekong should make it a popular destination with visitors from Thailand. 
But these two venues are soon expected to be joined by a third, large casino. The government of Laos has given King Romans Group land to develop an extensive destination resort on a 10,000 hectare site in Bokeo province. The resort is intended to feature shopping, restaurants, golf courses, and spa facilities. Currently only a casino has been built. The whole venture is being created in a special economic zone designed at regenerating the Golden Triangle region, which was at the heart of heroin production.
A number of governments in this region of Asia are clearly experimenting with casinos and gaming to diversify their economies and attract tourists from the surrounding region. If all of the planned properties actually come to fruition then it is going to be a very crowded marketplace in the coming decade and there is already evidence of oversupply in some specific areas of Cambodia. Macau will face more competition but won’t feel threatened just yet. 

Read more about the prospects for the Asian casino market in GBGC’s sixth edition of the Global Gambling Report