MANILA - With palatial new resorts and other big investment plans, the Philippines and Vietnam are both vying to enter Asia's top tier of casino destinations. While parallels between their efforts abound, they also diverge in several key areas that could make the difference between winning and losing their respective gambles.
Two new properties are the first movers in projected casino clusters on prime waterfront real estate hoping to recreate the magic of the Las Vegas Strip or Macau's Cotai district. The resorts aim to attract investment, boost tourism, create jobs and
bolster government revenue. Yet amid the many similarities, differences stand out in government attitudes toward the projects.
The Philippines made the initial move. Solaire Resort and Casino opened in March, the first of four US$1 billion-plus resorts planned to populate the Entertainment City complex on Manila Bay. Three other resorts in the 120 hectare (300 acre) district are scheduled to open one per annum, starting early next year with Belle Grande, a joint venture between the patriarch of the Philippines' richest family, shopping mall magnate Henry Sy, and Macau's Melco Crown Entertainment.
Solaire also combines a Philippine tycoon, ports magnate Enrique Razon, with a foreign casino operator, Global Gaming Asset Management (GGAM), led by former Las Vegas Sands (LVS) president William Weidner. As LVS founder Sheldon Adelson's top lieutenant for a dozen years, Weidner oversaw the development of the pioneering Sands Macao and Venetian Macao, as well as the company's Las Vegas operations.
Many GGAM executives have similar resumes. Solaire tries to capitalize on both sides of GGAM's gaming pedigree, claiming it has Vegas-like ambiance to go with its extensive links to Macau gaming promoters, four of which have dedicated private rooms in Solaire's VIP area, adjacent to four insanely opulent villas for top high rollers. Solaire expects to open a second tower next year with a shopping mall, a theater and hundreds of additional suites, bringing its first phase development cost to $1.2 billion.
"Our VIP business has been, in a word, great!" Solaire chief operating office Michael French said. "We were sensitive to how Solaire would be perceived by customers who have to fly over Macau to get here ... We've gotten great reactions. Some have come back already."
Vietnam got into the game in July when The Grand-Ho Tram Strip made its long anticipated debut. Owner Asian Coastal Development Ltd (ACDL) hoped to open its resort in March, but licensing issues caused resort manager MGM International Resorts, majority owner of MGM Macau and subsidiary of US gaming giant descended from the movie studio of the same initials, to withdraw from the project.
In the aftermath, ACDL decided to manage the resort itself through its wholly owned Ho Tram Project Company. ACDL itself is majority owned by New York investment firm Harbinger Capital Partners, recently in the news for a Securities and Exchange Commission fine and sanctions against its founder Philip Falcone, with US gaming company Pinnacle Entertainment Inc holding a 23% stake.
Like Solaire, The Grand began with one tower of about 500 rooms, plus swimming pools, restaurants and entertainment venues. The gaming floor is skewed toward VIPs, with 55 of its 90 tables aimed at high rollers. The Grand also has another tower under construction that will raise its total to 1,100 five-star rooms. The Bluffs, its Greg Norman-designed golf course, meanwhile is set to tee off late this year.
Strip poker
Ho Tram Strip is the name ACDL chose for its resort cluster on a 168 hectare plot, including 2.2 kilometers (1.3 miles) of beachfront bordered by a protected forest area. Plans call for an investment of more than $4 billion to build up to five resorts.
When it bought into the project in 2011, Pinnacle agreed to manage the second resort under a new Asian brand to be created with ACDL. During the past 12 months, however, Pinnacle has written off its entire $117 million investment in the project, though it continues to participate in management at the board of director level. Analysts now believe Pinnacle's decision on whether to build its resort will depend on the success of The Grand.
Success for The Grand will in turn depend on that most basic rule: location. The Ho Tram Strip is part of a larger budding resort area located 130 kilometers south of the nearest international airport in Ho Chi Minh City. "For a gamer, there are an awful lot of casino destinations that are far more convenient," Gaming Market Advisors principal Andrew Klebanow says. "Singapore's casino resorts are 20 minutes from the airport. The casinos in Cotai are 10 minutes from Macau airport and 70 minutes from Hong Kong International. Entertainment City is 15 minutes from Manila's airport."
Entertainment City is part of the greater metropolis of 20 million in and around the Philippine capital city, where three-quarters of international arrivals land. But a bigger difference is that each and every one of those Philippine citizens and the 80 million in the rest of the country are all welcome to try their luck at Solaire or any other casino in the country, including 43 gaming venues operated by the government owned by the Philippine Amusement and Gaming Corporation, popularly known as Pagcor. Vietnam, on the other hand, bars its citizens from its casinos, sending thousands of them a day over the border to casinos in Cambodia.
Vietnam is not alone in the foreigners-only restrictions. Cambodians and Muslim Malaysians are excluded from casinos in their own countries, and Singapore bars some citizens outright while charging others S$100 (US$78) for 24 hours of play. South Korea's casinos are closed to citizens, except for one in a remote derelict mining area a harrowing three and a half hour drive from Seoul. Casino companies loath these laws but they do help to mitigate the negative impacts of casinos on local populations.
Stretched regulators
Like the Philippines, Vietnam's gaming regulations and regulators have been stretched to keep up with their casino ambitions. The real difference between the two countries, however, has been shown when they run into rough spots.
Both countries offer operators competitive tax rates. In Vietnam, the rates work out to the "low to mid-teens" after allowances and deductions, according to The Grand's Santangelo, while the Philippines encourages casinos to target foreign VIP play with a 15% levy, compared to 25% for other play.
Private casinos such as Solaire pay that levy to Pagcor as a licensing fee, and Pagcor's profits go to the government. However, the government's Bureau of Inland Revenue (BIR), which sued to end Pagcor's tax exempt status and won - essentially changing the hand that puts the money into the treasury - declared that casinos also need to pay the 30% corporate tax to them.
BIR's regulation spread chills among casino operators and investors. But Pagcor quickly responded that it would not raise casinos' overall payments to the government and pay BIR from its fees. "We will keep the casino operators whole," Pagcor vice president for gaming licensing and development Francis Hernando said, adding that his agency is negotiating with BIR to make that happen. The response reflects Pagcor's new approach under reformist President Benigno Aquino, aiming to be more open, transparent and responsive.
Pagcor faces a stiffer test with Japan's Universal Entertainment, Entertainment City's sole foreign casino licensee. Under local affiliate Tiger Resort, Universal is scheduled to open the area's largest resort in 2015, with 2,000 rooms, 500 tables, 3,000 machines and an indoor beach club. But Pagcor has found that Tiger's Entertainment City land doesn't meet the constitutional requirement for 60% Philippine ownership.
Tiger is also in the middle of a mud fight between Universal chairman Kazuo Okada and Wynn Resorts founder Steve Wynn. Before their falling out, Okada was a director of Wynn Resorts and its largest shareholder; Wynn has since removed him from the board and redeemed his shares at a substantial discount on unfavorable payment terms.
Wynn's investigation accused Okada associates of funneling $40 million to a consultant linked to Pagcor's former chairman, who is already facing separate graft charges, as well as granting $110,000 worth of improper hospitality to Philippine government officials.
On the Tiger case, Pagcor has said that it will abide by the judicial system's findings regarding the bribery allegations. On the land issue, Tiger has to make ownership compliant with the law before Pagcor will allow it to open its casino. Until then Pagcor is staying out of the way. "We're full steam ahead for opening in the first quarter of 2015, if not before," Tiger senior vice president Laurence Hawke says. Yet Tiger continues to negotiate with Philippine companies to fix the land issue.
At Vietnam's Ho Tram, when ACDL needed to extend the deadline for its investment certificate and gaming license, Vietnam officials dragged their feet. Moreover, they did not prevent state-owned banks financing Ho Tram from cutting their credit line to the project, which raised significant doubts about the project's viability and caused MGM to drop the project, removing Ho Tram's top drawing card.
Ho Tram officials are fulsome in their praise for the government's support. But viewed from a distance it appears that Philippine gaming regulators are doing everything they can to help Entertainment City and its operators succeed, while Vietnam officials seem far less cooperative. It is as if they have invited guests to dinner but now can't decide whether to let them eat.
Macau Business magazine special correspondent and former broadcast news producer Muhammad Cohen told America's story to the world as a US diplomat and is author of Hong Kong On Air, a novel set during the 1997 handover about television news, love, betrayal, financial crisis, and cheap lingerie. See his blog and more at MuhammadCohen.com.
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