Indochina's winners and losers

Over the past 20 years, parts of Indochina have become a hotbed for casino gaming. Yet while this corner of Southeast Asia can be a challenging environment and not a guaranteed license to print money, certain casino operators have struck gold there. Arguably two of the region’s biggest winners are Crown International Club in Danang, Vietnam and NagaWorld in Phnom Penh, Cambodia.

So how have they managed to do so well? If we take Crown International Club first, this property’s number one asset is that it is situated in a desirable location on Vietnam’s coast, less than seven kilometers from Danang International Airport. The country’s third-busiest airport offers scheduled direct flights to and from major cities across Asia, including Bangkok, Tokyo, Singapore, Seoul, as well as nine destinations in Mainland China.

Junkets also lay on regular charter flights for VIPs from China to Danang, where they are greeted by warm weather, sandy beaches and luxury relaxation away from the tables. 

“The reason why Crown has been successful is that the hotel is in a beautiful spot like Danang and 20 minutes from a very big airport with flights everywhere and many flights from China,” says Tim Shepherd, director of Fortuna Investments. “There is no proximity to market, but you have got fantastic air access into Danang.”

First opened in 2010 under the name Silver Shores and positioned adjacent to Crown Plaza Hotel, Crown International Club has also enjoyed a certain degree of market exclusivity. Yet the property will soon have a worthy competitor when the Hoiana project 40 kilometers south of the airport is completed. The first phase is slated to open this year and it will be interesting to see if this US$4 billion luxury IR will prise away Crown’s international high rollers.

NagaWorld, on the other hand, hasn’t had to worry too much about nearby rivals stealing its players as no other casinos are permitted by law within a 200 kilometer radius of Phnom Penh. This monopoly goes a long way to explaining why the NagaCorp-owned casino, which from 1995 to 2003 operated from a boat moored on the Mekong River, grew into Cambodia’s largest casino and one of the world’s most profitable gaming properties. It also made its founder, Malaysian businessman Chen Lip Keong, a billionaire. 

“A monopoly license in Asia is obviously rare,” says Shepherd, “so when you get a monopoly that’s enormously helpful.”

The nearby $700 million Naga 2 property flung open its doors in 2017, while the ambitious US$4 billion Naga 3 project is earmarked to be ready by 2025. Last year, Naga 2 helped the NagaWorld complex to post net profit of over US$390 million – a 53 percent increase over 2017. Gross gaming revenue leapt 55 percent to US$1.4 billion in 2018. Hong Kong-listed NagaCorp attributed much of the rise to an influx in VIP gamblers and Chinese tourists. NagaWorld also benefits from the fact Cambodia’s capital is home to a sizable expatriate population from China and Malaysia.

“Perhaps Naga’s greatest strength is that their management team understands the wants and needs of their customers,” says Andrew Klebanow, senior partner at Global Market Advisors. “Naga offers a great gaming, dining and entertainment experience, while for mass market customers, its lodging, dining and gaming are priced lower than Macau. For junket promoters, Cambodia’s low tax rate allows Naga to offer a more generous commission structure than Macau while providing players with an equally luxurious lodging experience.”

NagaWorld and Crown International Club are magnets for gamblers from China due mainly to the accessibility by air, though the same can’t be said for Grand Ho Tram in Vietnam’s Ba Ria-Vung Tau Province. Opened six years ago, the opulent beachside resort is more than 110 kilometers by road from Ho Chi Minh City’s airport, making it an unappealing destination for certain overseas VIPs. “While a stunning property, the Grand Ho Tram Resort has, and always will, suffer from a relatively poor location,” says Klebanow.

“It is a miserable two-and-a-half-hour drive from Tan Son Nhat International Airport and while an improved highway will eventually reduce travel time, it will always be at least two hours away from Ho Chi Minh City.” Furthermore, Vietnam’s first IR wasn’t an immediate beneficiary of the country’s pilot program permitting locals to gamble. If and when Grand Ho Tram can accept Vietnamese gamblers, the property will face stiff competition from casinos in Bavet on Cambodia’s border for a share of the greater Ho Chi Minh City gaming market.

MGM Resorts walked away from managing the property in 2013, choosing instead to focus on markets like Macau and Japan. Indeed, despite Indochina becoming a casino resort hotspot, the major international operators have tended to stay away. This is partly due to the fact projects lack scale, while the prospect of a casino in isolated border towns in Cambodia, Laos and Myanmar means you are reliant upon gamblers crossing frontiers. And what happens if Thailand did ever decide to legalize gaming?

 In addition, bureaucracy, corruption and lax regulatory frameworks can be a deterrent. 

“The vast majority of public companies will not enter a market without a robust regulatory regime,” Klebanow states. In Cambodia, where a staggering 163 casino licenses have been issued, regulation is coming, yet first-mover advantage has been key in gaming hubs like Poipet where, says Shepherd, the likes of Star Vegas, Holiday Group and Crown Group have done “extremely well.”

Assessing the region more broadly, he concludes: “Winners I would narrow down to those who opened early, opened proximate to a big market, or got a monopoly. The losers are the ‘me-toos’ who built later and with no real USP, or built in a market with no access to players. Grand Ho Tram is a good example of that.”