Online gambling busts threaten Sihanoukville’s gaming renaissance

Cambodia’s coastal town of Sihanoukville, a sleepy place popular among backpackers and expats looking to escape the frenetic pace of the capital, has long been a gateway to some of Cambodia’s most prized beaches.

Hotel and travel companies have capitalized on the popularity of the nearby islands and coast, leaving investment in the main city largely neglected.

Recently, however, that has changed. There has been a surge in China-driven interest in the hotel and casino industry in the city itself, helped by the introduction of online gambling.  

Ministry of Economy and Finance spokesman Ros Phirun says in the last year investment from the Chinese has more than doubled the number of licensed casinos operating in Sihanoukville from 7 to 15, with five licenses pending approval.

Many of the casinos are integrated into hotels, which are opening rapidly to take advantage of rising visitor numbers and increased flight connections.

One of the largest properties to open recently is the 135-room White Sand Palace, which will also feature a casino set to open next month.

In the twelve months of last year, Sihanoukville airport handled a total of 84,897 passengers, with total arrivals at 46,732, up 96 percent and 84 percent year-on-year, respectively. Lucky Air recently launched direct flights from Kunming to Sihanoukville, becoming the first Chinese carrier to offer year-round regular scheduled service to Sihanoukville.

Flights are also available from Sihanoukville to South Korea, Singapore, Cambodian temple town Siem Reap and Phnom Penh.

While casino operators are keen to attract mass traffic, their key market is mainland Chinese gamblers to whom they are also able to offer online services.

Phirun says online gaming took off in Sihanoukville in the second quarter of 2015 following some initial guidelines set by the government. Since then many of the casinos in the city have been granted approval to offer the service.

But the partnership between online gambling operators and land-based is on shaky ground, says Phirun, after police arrested and extradited 168 Chinese nationals in October. The scandal and police response shook investor confidence and optimism in the growth prospects for the city’s casino industry.

On October 31, 2015, Cambodian immigration police working with Chinese Interpol agents raided a villa and a guesthouse in Sihanoukville, busting a ring that was using an internet-based telephone system to extort money from victims back in China.

Local media reported that hotel and casino operators said they suffered huge losses after Chinese investors, workers and tourists left the coastal city en masse, with many of those arrested in the Cambodian raids working in casinos in Sihanoukville.

“We have no more customers, and our workers have quit,” Ly Koung, owner of the newly opened Majestic Hotel was quoted by the Phnom Penh Post as saying.

He added that he had to suspend casino operations after racking up $20,000 in losses.

“Arresting Chinese nationals who work in casinos without any clear evidence made our Chinese staff fearful and many resigned, which forced us to close the casino,” he said.

“If those arrested are found guilty, we support this police action, but if they are in fact innocent then these arrests have [irresponsibly] incited fear.”

Phirun says offering online gambling from Sihanoukville casinos has been a boost for operators who are looking to make up the shortfall in the lack of foot traffic in the properties.

"We don't have many foreigners who gamble in the casinos in Sihanoukville so online gaming is a big business for them. Casino operators are trying to convince online companies to come back and resume investment."

"Investors have lost confidence and even though we assure them that we will help protect them they are still not confident because online gambling is very new here," Phirun said.

Phirun added that the fallout from the arrests has not prompted any land-based casino applications to be withdrawn due to the expectation that confidence in the industry will be restored soon.

Aharon Gini, general manager of the Queenco Hotel and Casino, said last month that the situation had calmed down since the busts, but that Chinese visitor numbers had yet to pick up.

"I think that things will become back to normal but since the busts the numbers went down and haven’t picked up yet," he said.