Casino bill moves forward, lifting locals ban
Vietnam’s long-delayed draft casino bill has finally been submitted to the government in a move many in the industry say will be a game changer for the country’s gambling industry.
The decree, which has been seven years in the making, will allow Vietnamese locals access to casinos for the first time. This has long been seen as a key factor needed for large-scale international investor interest.
“We hope that this will be the last draft, already we have seen a lot of revisions before its submission in June,” Nguyen Huy Dat, deputy director of the Ministry of Finance’s (MoF) Lottery and Gambling Division, was cited by local media as saying.
As expected, the latest draft also cuts the minimum investment requirement in half to $2 billion, with a condition that disbursed capital must reach at least $1 billion. That figure may still be considered high for Asia’s emerging markets.
The report gave no timetable for the next step for the bill, though the news it has finally been submitted took some in the industry by surprise, as there had appeared to be no imminent end to the regulatory deadlock.
The Vietnamese government wants any new casinos to be sited in integrated resorts (IRs) in keeping with the official view that these developments are for general tourism, conferences and business meetings and don’t have an overwhelming focus on gaming. For the moment that also means not permitting casinos in central Hanoi or Ho Chi Minh City.
Investors circling
Despite the slow-moving regulatory progress, some projects have been moving ahead. The 541-room Grand Ho Tram Strip, which opened in July 2013 as the first of five resorts planned for the beachfront strip two hours from Ho Chi Minh City, is now in expansion mode.
Success Dragon drops Danang purchase
Hong Kong-listed Success Dragon International Holdings has terminated an agreement to acquire a stake in a 5-star hotel in Danang, Vietnam. The gaming services firm in April said it would acquire a 45 percent interest in the One Opera Danang Hotel for $14.1 million. The deal was also to include the electronic gaming machine club operated within the hotel.
Police bust $339m gambling ring
Police broke up two football betting rings in June, with a total value of $339 million. The leader and 23 other members were arrested in connection with the scheme, which operated across multiple provinces and cities in Northern Vietnam. They had been organizing online gambling since June 2015.
The resort recently signed a memorandum of understanding with Cotec Construction to cooperate on a $75 million expansion of the integrated resort complex. The MOU adds a further 559 rooms, increasing the total capacity at the resort to 1,100 rooms.
Building has also begun on a development in the south on Phu Quoc island, but no government approval has yet been granted for gaming, while Sam Sheng, managing director of Double Square Consulting (Macau), said he is currently scoping sites for a gaming property on behalf of private investors.
Scaled down expectations
Sheng said in an interview at G2E Asia in Macau that in his view, the optimal investment size for the Vietnam market under current conditions would be about $250 million, a far cry from the $4 billion initially mooted by the government.
The $500 million Hoi An development in central Vietnam, which has a target opening of early 2019, is proceeding as a foreigners-only development between Hong Kong’s Chow Tai Fook and Macau junket operator Suncity with local partner VinaCapital.
If the ban on locals gambling is lifted, the resort is seen as a key beneficiary as the area is a playground for wealthy Vietnamese.
Bigger picture?
Smaller casinos that were operating before the steep capital investment and IR rules were put in place appear to be thriving with their focus on niche audiences, although experts note that the headline GGR figures may not reflect the full story.
The foreigners-only Crowne International Club in the beach resort of Danang was said to be generating an eye-popping $9 billion per quarter in rolling chip revenue according to reports. The casino enjoys strong links with Macau with four flights daily into the city’s airport only 12kms away.
But Global Market Advisors’ Shaun McCamley questioned whether that business model is sustainable in the current climate: “The current anti-corruption drive is strictly enforced in China so no valuable players are sticking their heads up and travelling. The other big issue, whether you are a first- or second-tier, is the difficulty in collecting loans. Some are saying as much as 90 percent is now uncollectable.”
He added: “Unless a casino operator is willing to give substantial credit as well as unrealistic commission programs, no one is doing well in terms of EBIDTA [earnings before interest, taxes, depreciation and amortization]. It’s for this reason most operators outside of Macau will only report gross gaming revenue to the media.”
