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Thailand’s integrated resorts are not afraid to dare be different

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The second part of the two-part series reports on how Thailand’s legalisation of casinos may go against conventional thinking.

Christopher G Moore, a Bangkok-based writer who lives in the United States, imagines a casino resort tower that will rise above the Thai capital. This scenario is becoming more realistic as Thailand’s legalisation of gaming moves forward. However, a Bangkok integrated resort in the real world will remain a distant dream.

Thailand is likely to approve the “entertainment resorts”, the Kingdom’s term for the integrated resorts that include casinos and other non-gaming activities. However, the exact shape, location and ownership of these developments are still unknown.

Parliament’s preliminary framework, endorsed by Prime Minister Srettha Thavisin’s cabinet last month, includes up to five licences for IRs across Thailand within 100km of international airports, a 20-year licence term, a minimum investment of 100 billion Thai baht (roughly US$2.8bn/PS2.17bn/EUR2.52bn) and a 17% gaming tax rate. It is the goal to increase tourism.

The biggest gaming names around the world are interested. Robert Goldstein, Chairman and CEO of Las Vegas Sands, reiterated the company’s interest in Thailand during its earnings call for the first quarter. Craig Billings, Wynn Resorts’ CEO, followed suit on its earnings call. MGM Resorts, Hard Rock International and Hard Rock International also showed enthusiasm about a market with 66,000,000 people. This market attracted an estimated 40,000,000 international tourists in 2019 ranking 8th globally and recovered to 28,000,000 last year.

Capital appreciation in Thailand

These international operators are mainly focused on Bangkok. In 2019, it attracted 22,8 million visitors from abroad, which is 3.7 millions more than Paris and London. The legalisation framework, however, recommends IR expansion outside of the capital city and the “Bangkok-adjacent” regions.

James Kaplan, CEO of Destination Capital says: “I don’t know what adjacent means.” On the one hand the government says that IRs must be located within a radius of 100km from an airport international, but on the other, they refer to adjacent questions. This will probably be clarified and fleshed-out over the next 6 months.

Brendan Bussmann, managing partner of B Global urges: “There is no problem with the location limitation. Let’s just get the most profitable ones that maximize tourism.”

An integrated resort in CENTRAL bangkok seems unlikely

There seems to be a consensus that an IR will not be licensed in central Bangkok despite the commercial potential. Bang Na, a large shopping center in the south of Bangkok, or Muang Thong thani, a mass transit-connected site to the north that is home to Impact – a complex with an arena, convention and exhibition centre, two malls, and over 1,000 rooms attracting upwards to 10 million tourists annually – are both potential IR locations outside the city.

These locations are clearly Bangkok-related.


Pattaya

Pattaya is a beach resort located 150 km south of Bangkok. Pattaya, located in Thailand’s Eastern Economic Corridor targeted for development, ranked 15th on the global index 2019 with 9,4 million visitors. Pattaya IR supporters have been most visible to date.

Suranand Venjjajiva is the chief of staff for Prime Minister Yingluck Shinawatra. He says that Pattaya already has “the basics infrastructure in place”. The entertainment venues are already there and in due course, the city could become a Las Vegas style.

The U-Tapao airport [Rayong-Pattaya] could host chartered flights in conjunction with Suvarnabhumi, Bangkok’s main gateway airport. It is a 90-minute car ride away.

The government has approved an expansion of U-Tapao to a capacity of 60 million passengers per year by 2022.

Suranand thinks that Phuket and Chiang Mai are also viable IR locations. But I believe the opposition to casino gambling in these cities will be stronger than Pattaya.

According to local tourism officials, Chiang Mai’s mountains in northwestern Thailand attracted more than 5.6 million visitors from abroad in 2019. This is up from 3.9 millions last year. China was the leading source of direct flights. Arrivals were lower than in previous years, however, from 878.984 to 200.982. Pre-Covid seven out of Chiang Mai’s top 10 international flights served Greater China.

Julapun Amornvivat, Deputy finance minister to Prime Minister Srettha and also government Finance Minister, was designated by Srettha as the person who would spearhead legalising casinos. Julapun represents Chiang Mai in parliament. His father was a longtime regional power broker and former deputy premier.


Phuket Style Conventional Wisdom

Phuket off the southwest coast of Thailand welcomed 10 million visitors in 2018, the same number as 2019 when the island ranked 14th on the index. In 2023, its international airport will handle 14 million passengers, with 7.7 million of them arriving directly from overseas. It has a capacity to accommodate 20 million.

Hard Rock Asia President Edward Tracy said to iGB last year that the studies conducted by Hard Rock Asia showed Phuket would be able to support an IR based on conventions in the US$1.5-2bn range.

Kaplan’s firm, which finances and manages hospitality properties, states that “other than central Pattaya I don’t believe remote areas will support this US$2.8bn Investment.” These [properties] may be small and would serve as a testing ground.

David Leppo, chairman and CEO of FootballBet.com, believes that investors will construct IRs “in areas which have traditionally proven attractive to tourists such as Pattaya , Phuket, Hua Hin , but with a few twists.”

Leppo, which has been active in the Mekong Region since 2010, including the operation of sports betting in casino, suggests that investment requirements could be expanded to include spending on community or infrastructure facilities, such as hospitals. This would likely reduce local opposition.


Build One, Get one Later

Leppo also believes that the initial licenses may be a precursor to Bangkok-region opportunities. Investing in the first batch IRs is a requirement. He adds, “I believe there may be more than just one IR within the Greater Bangkok Area.”

A top executive in the casino industry with experience across multiple Asian and US markets, who requested anonymity, said, “I do not want to leave that US$2.8bn (in another tourist region) stranded.” You’re in a bind if they decide to move the casino from Las Vegas to Bangkok.

It’s a risky thing and it’s unknowable. I have no idea how to fundraise for something of that nature. You don’t have enough time to earn a return.

A retired casino consultant and executive familiar with Thailand, who requested anonymity, said: “Thailand is, to my mind, a unique market located in an ideal location in Asia. It will need a completely different strategic planning approach in order to keep the capital costs low and complement existing infrastructure.”


Hybrids against cannibalisation

Thailand would make a fantastic location for hybrid IRs. Thailand is a great place for hybrid IRs because it has an excellent tourist infrastructure, which services more than 40 million tourists per year. “It is important to not cannibalize existing market shares or hurt Thai businesses or companies.”

According to this retiree: “Independent Retirement Communities (IRs) may not need huge hotel facilities depending on their location. However, these new IRs would benefit greatly from modern multifunctional, larger entertainment venues.

The local food court at Genting Highlands’ new casino is fantastic. Then they went out and looked for the local best food vendors, restaurants etc. They invited the local restaurants to set up shop in their newly created food court.

Thailand will need some strategic planning to design such new facilities. The goal is not to focus on how much money they can spend, but rather think more strategically. It will be necessary to educate the government as it has no experience with casino internal audits. Hybrid IRs are effective in both operational and financial terms. “Bigger isn’t always better”.

Bussmann who was in charge of regulatory affairs at Las Vegas Sands says that only a few operators have the expertise and capability to achieve Thailand’s goals. These operators want a regulatory framework that will allow them to build the integrated resorts they need.

It remains to be determined whether Thailand can produce a regulation regime that protects licensees from jurisdictions with strict regulations, such as North America and Singapore, or, more recently, Australia.


No Wynn situation in Thailand?

It doesn’t need to be Wynn. The LVS does not have to exist. The executive from the two continents says that it doesn’t need to be a Caesars. There are many hotels that have large meeting rooms and do well.

There are many ways to make money, says the executive, if there is a small number of casinos where a lot of people play and a few people who have shown a propensity for it.

There are also many companies who can operate without the restrictions of US gaming laws or Singapore gambling regulations. Several operators in Thailand, and elsewhere, are ready to take on the challenge.

These companies include Bloomberry which is the owner of Solaire, a casino in Manila owned by Enrique Razon Jr., a billionaire from Philippines. It’s possible that the leader of Asia’s fastest-growing gaming market is preoccupied by its Solaire North IR, which will open in this month, and its plans to build its third IR at the southern end of Metro Manila.

NagaCorp’s NagaWorld, located in the Cambodian capital Phnom Penh has probably done more for tourism development in Cambodia than any other IR operators in Asia. Naga is facing a number of challenges, including the death in December of its founder Chen Lip Keong and a continuing decline in Chinese travel abroad.

Galaxy Entertainment has shown interest in entering the Thai market. The company is currently working on the third phase of Galaxy Macau and the fourth and final phases of the Cotai Complex. Galaxy Entertainment, led by Hong Kong’s billionaire Lui Family, tried to expand into the Philippines in previous years, but their Boracay Resort proposal was rejected during Rodrigo Duterte’s presidency.

Melco’s Macau competitor Galaxy, which is listed in the US and operates City of Dreams in Cyprus, Philippines, or both, may be able to compete. Lawrence Ho, the son of ex-Macau gaming monopolist Stanley Ho and Galaxy’s Chairman and CEO, has been a vocal advocate for a Japan IR license.

Ben Lee, managing partner of IGamiX Management & Consulting tells iGB there has been no indication by Macau authorities to the effect that local concessionaires are not allowed to invest in Thailand.

Would Thailand’s opening up of high-quality IRs in Thailand under these brands lead to a diversion of revenue from Macau?” Anthony Lawrance, Intelligence Macau’s managing director says: “Undoubtedly.” Can Macau share its revenue with Thailand?” The pie is large enough.

Lawrance says, “Macau may welcome Thailand’s competition within the next 5 to 6 years. It is certain to be overrun by demand and hotel rooms can’t be built quickly enough.” This begs the question of why Macau would not dissuade its hotel operators from building rooms elsewhere.


Local champions

Galaxy was initially married to LVS, but the marriage fell apart due to irreconcilable disagreements. This case is a great example of how a developer can become a successful casino operator. Thailand is home to many property and hospitality development companies that are capable of making this transition.

Kaplan predicts that “I think the best Thai developers are going to bid,” he says. Some will work with US and regional operators and others will build their own expertise.

Another key factor could be funding from overseas partners. Kaplan says that “international finance and bonds are needed, particularly if more than two IRs exist.”

Apollo Group and Blackstone are both potential Thai IR investors, if they’re not already operators. Blackstone acquired Australia Crown Resorts from Sands. Warburg Pincus could be a candidate. They are an investor and operator in Vietnam IRs Hoiana, The Grand Ho Tram, with a partnership for hospitality.

International investors are selectively active in Thailand despite restrictions on foreign ownership of land. They have had good success despite the limitations. The multi-billion dollar integrated resorts will take their participation to an entirely new level.

Muhammad Cohen, a former US diplomat who is currently iGB Asia’s editor-at-large, has been covering the Asian casino industry since 2006. He most recently covered it for Forbes. In 1997, he wrote Hong Kong On Air – a novel about television news, romance, betrayal and high finance.

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