US operators benefit from China crackdown

The old idiom “one man’s loss is another man’s gain” appears to be playing out between the U.S. and Macau, as a drive to crackdown on corruption in the world’s biggest gambling hub sends an increasing number of Chinese gamblers to Las Vegas
 

Frank Catania*
 

For some time now, U.S. operators have been making efforts to lure Asian money into their casinos and recent statistics show why. Revenue from baccarat, the favored game amongst Chinese, rose 16 percent in July, far outpacing overall growth on the Las Vegas Strip of 4.8 percent.

To enhance the trend, operators have made efforts to tailor their offerings, using targeted marketing and even changing aspects of interior design to reflect Asian tastes and superstitions. Casinos have also been promoting food fare from top Asian chefs.

These efforts continue, however we have also begun to see a new phenomenon.

Players from Macau are coming because of a government crackdown on money movement by Chinese and Macau officials that so far shows no sign of slowing.

The campaign has dampened luxury spending in China, affecting items from brand-name goods to sharks’ fin soup, and has been directly linked to a slowdown in VIP revenue in Macau as high rollers seek a low profile.

The U.S. offers advantages.

Gamblers, especially high rollers, often take legal loans to skirt Macau limits on the amount of cash that can be brought into the territory. In Nevada the player has easier access to cash since it’s easily accessible from any part of the world with no limitations and U.S. gamblers don't have to go through the complex process of repatriating cash as they do with Macau winnings. Nevada also has a more favorable tax rate than Macau, 6.75 percent on gross gaming revenue and 1 percent of taxes on fees.

It has also become easier to get a visa to travel from China to the U.S. than in the past.

While a growing number of their clients look to the U.S. market, Asian operators have followed the money and are seeking opportunities in North America.

None has been as active or ambitious as Malaysia’s Genting. However, the group’s prospects for getting approval for a planned mega-resort in the small Orange County Village of Tuxedo, New York, are not as positive as they had seemed.

Assemblyman Gary Pretlow (D) stated that Orange County casino proposals “are causing everyone a lot of angst.... I am totally concerned. Any casino that has that proximity to New York City would be detrimental to casinos north and west of it.”

Genting has pledged to outspend all competitors in New York. Its proposed Sterling Forest Resort would be located "just 35 miles from the George Washington Bridge." It has proposed a $1.5 billion integrated resort with a 5-star hotel that would cater to "VIP players from the U.S., Asia and the World.” Specifically, they noted that there are over 540,000 Chinese tourists who visit New York City annually. Genting touts its excellent relationships with the various unions involved and claims that the project would create over 4,900 jobs.

The application also said that it would "not preclude a second gaming facility in the Catskills" that would attract "a more mass-marketing customer."  

In case the "Board may decide that it is in the best interests of the State to place a casino closer to a distressed community", Genting proposed Resorts World Hudson Valley, in Southern Orange County. The proposed $830 million project which includes a four-star, 600-room hotel with 19 restaurants, would "create nearly 3,400 jobs.”  

Genting’s ambitions may be derailed, however, by concern that an Orange County casino would render a casino further north in the Catskills unprofitable. Gambling has long been seen as a key to economic revival in the area.

Only three developers are competing for a license in the Catskills; six are contending in Orange County.

Genting has also purchased about 30 acres of land in Miami for $236 million in 2011, which it plans to develop into a mixed-use complex with residential, retail and hotel facilities. In addition, Genting acquired the Omni center near Biscayne Boulevard, raising its investment in Florida to more than $420 million.

However, Genting’s efforts to change Florida law to allow full-fledged casino gambling in Miami have so far failed despite heavy lobbying when state regulators denied a proposal to allow Gulfstream Park to use the racetrack’s authority to offer slot machines on the waterfront site because its permit couldn’t be moved under state law.

Australia’s Crown Resorts also has U.S. ambitions. Crown Resorts has announced that a majority owned subsidiary has acquired a 34.6 acre plot of land on the Las Vegas Strip for a total of US$280 million. The site, formerly occupied by the New Frontier casino, was acquired via a foreclosure auction initiated by lenders to the former site owner.

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* Frank Catania is senior partner in Catania Gaming Consultants, counsel to the Law Firm of Catania & Ehrlich, and an AGB Advisor.