Phuket and the Prospects of Land-Based Casinos
Phuket, situated on Thailand's southwest coast, maintained its appeal with approximately 10 million foreign tourists in 2023, matching its 2019 figures. This performance placed the island at 14th in the global tourist attendance ranking. Phuket Airport handled 14 million passengers and 7.7 million international flights last year, underscoring the high potential for investment in Thai integrated resorts (IRs).
According to Hard Rock Asia President Edward Tracey, research indicates Phuket could generate annual gambling industry revenues ranging from $1.5 billion to $2.5 billion.
"I don't believe the outlying areas, apart from central Pattaya, can support a $2.8 billion investment," says Kaplan, whose business includes financing and managing hotel properties. "Starting with smaller facilities that can serve as test sites might be more feasible."
David Leppo, chairman and CEO of FootballBet.com, predicts investors will focus on "areas historically attractive to tourists, such as Pattaya, Phuket, Hua Hin...", albeit with some modifications.
With a decade of experience in the Mekong region and involvement in casino sports betting, Leppo suggests expanding investment requirements to encompass infrastructure or public amenities like hospitals. Such measures could potentially mitigate local opposition to legalized gambling.
Investments in IC Bangkok: Profitable or Not?
David Leppo believes that the initial round of licenses for integrated resorts (IRs) could pave the way for opportunities in the Greater Bangkok area. He emphasizes that investing in the first batch of IRs is essential for future business development in the region. "I foresee several integrated resorts in the Greater Bangkok area," he adds.
However, not everyone shares this optimism. An anonymous casino industry executive, with extensive experience in the US and various Asian markets, expresses skepticism: "I would prefer to invest this $2.8 billion in another tourist area. Approving IRs in Bangkok could pose risks and uncertainties. Raising funds for such a venture is challenging, and there are no guarantees of profitability."
Another former global casino executive and consultant, familiar with Thailand, echoes concerns about Bangkok's IR potential: "Thailand is a unique market, located in one of the most beautiful locations in Asia. Its development requires a new strategic planning process that includes reasonable investment costs to complement existing infrastructure."
Land-Based Establishments: The Principle of Hybridity
Thailand presents a promising environment for hybrid integrated resorts (IRs), leveraging its robust tourism infrastructure that accommodates over 40 million visitors annually. It's crucial to maintain the existing market framework and support local Thai businesses.
Experts suggest that hybrid IRs may not necessarily require massive hotel complexes, depending on their location, but they can greatly benefit from large, modern, multifunctional entertainment centers.
For instance, Genting Highlands provides a compelling example by integrating a local food court next to its new casino. They curated the best local food stalls and small restaurants, creating a clean and convenient indoor environment adjacent to the casino.
"Thailand will need strategic planning when designing these new facilities, focusing on efficiency rather than just the size of investment," explains Brendan Bussmann, a former regulatory affairs officer at Las Vegas Sands. "This approach can be operationally and financially effective. More isn't always better. If Thailand's policy objectives are to attract tourism and investment, few operators have the experience and capabilities to achieve these goals."
The effectiveness of hybrid IRs also hinges on establishing a regulatory regime that ensures licensee safety, akin to highly regulated jurisdictions like North America, Singapore, and Australia. This regulatory framework will be crucial in attracting experienced operators and fostering high returns.
Prospects of Wynn, Philippine, Cambodian, or Chinese Companies in Thailand
"It doesn’t have to be Wynn. It doesn't have to be LVS. Not necessarily Caesars or MGM," remarks a bi-continental executive, emphasizing that hosting conferences and attracting clients is a critical aspect of integrated casinos (ICs) that doesn't require specialized skills. "There are plenty of hotels with large conference spaces that are very successful."
The executive continues, "If there are a limited number of casinos accessible to a large number of people who have already demonstrated a fondness for gambling, there are many ways to make money."
Several companies are being considered for entering the Thai market, including:
· Bloomberry, the owner of Solaire in Manila, controlled by Filipino billionaire Enrique Razon Jr. Bloomberry is a leader in Asia's dynamic gaming market, focusing on its new Solaire North IR and plans for a third IR in southern Metro Manila.
· NagaCorp, owner of NagaWorld Hotel in Phnom Penh, Cambodia, has been instrumental in boosting tourism in the country. Despite challenges following the passing of founder Chen Lip Keong and a decline in international travel, NagaCorp remains a significant player.
· Galaxy Entertainment, led by Hong Kong's Louis family, has shown interest in the Thai market. Galaxy previously attempted to enter the Philippines but faced rejection during Rodrigo Duterte's presidency. The company is completing construction on Galaxy Macau and Cotai.
· Melco, a US-listed company operating City of Dreams in Cyprus and the Philippines, also expressed interest in Thailand. Melco's chairman and CEO Lawrence Ho actively pursued a Japanese IC license, similar to Galaxy's efforts.
Ben Lee, managing partner at IGamiX Management & Consulting, noted that Macau authorities haven't indicated any restrictions preventing local concessionaires from investing in Thailand.
"Will Thailand's opening of world-class ICs under these brands divert revenue from Macau? Absolutely," states Anthony Lawrence, managing director of Intelligence Macau. "Can Macau afford to share some of its revenue with Thailand? Yes, the pie is big enough and growing rapidly."
Lawrence adds, "In the next five to six years, Macau might welcome competition from Thailand as demand for hotel rooms skyrockets and they can't be built fast enough." This raises the question of why Macau doesn't restrict its operators from building hotels elsewhere.
Local Gaming Tycoons
Galaxy, originally merged with LVS in an arrangement orchestrated by Macau authorities, which later dissolved due to irreconcilable differences, is a prime example of a real estate developer transitioning into a highly successful casino operator. In Thailand, there are numerous experienced real estate and hospitality tycoons who may attempt a similar shift.
"I anticipate that leading Thai construction firms will participate in the bidding," predicts Kaplan. "Some may merge with regional and U.S. operators, while others may recruit foreign talent and cultivate their own expertise."
Foreign partners could bring another crucial asset: financing. According to Kaplan, "international funding will be necessary, particularly if more than two integrated resorts are planned."
Potential investors or operators of Thai investment companies include Apollo Group, which purchased The Venetian complex in Las Vegas from Sands, and Blackstone, which acquired Australia's Crown Resorts. Warburg Pincus, involved in Vietnam's The Grand Ho Tram and Hoiana investment partnerships, may also be contenders.
Despite restrictions on foreign companies in land ownership, international investors have selectively engaged in Thailand and have achieved promising outcomes. Multi-billion dollar integrated resorts could propel these companies to the next level.
