Vietnam keeps thinking big when it comes to casino development. But Vietnam’s gaming success stories center on thinking small. The government says it wants multibillion dollar integrated resorts but keeps putting up regulatory barriers to their success. Some of the biggest names in gaming, including MGM and Genting, have come to – and gone from – Vietnam, but new players keep emerging, apparently hoping Vietnam’s communist government will change its stance.
In May, Banyan Tree’s Laguna Lang Co resort in central Vietnam issued a request for concepts for a casino to be included in the beachfront development’s second phase. The resort, located about an hour by road north of Danang’s international airport, currently has nearly 300 hotel rooms and villas plus a Nick Faldo designed golf, spas, residences and a conference center. The second phase would include more hotel accommodations, residences and, if regulators allow it, a casino.
Laguna Lang Co timed its request of concepts to have a gaming operator chosen with a specific timetable in mind. “The selection of a gaming operator is expected to coincide with the convening of the National Assembly in early 2016 and subsequent discussions about how to proceed with gaming and tourism development, and the creation of a more robust regulatory regime and gaming licensing policy,” the developer said in a press release.
Currently, Vietnam requires new casinos to be sited in integrated resorts with a total investment of $4 billion. The government has earmarked five relative remote locations for IRs. Laguna Lang Co is not located in one of those areas but its province, Thua Thien-Hue, this month reportedly asked the government to be added to the list. Down the coast to the south, Qang Nam province has a designated IR area where Malaysia’s Genting Group, the parent company of Singapore’s Resorts World Sentosa and other casinos across the globe, agreed to develop a resort in 2010 then pulled out two years later. In March, Chow Tai Fook Enterprises, controlled by Hong Kong billionaire and Macau gaming investor Cheng Yu-tung, and Macau’s leading junket promoter Suncity Group joined local investment firm VinaCapital to revive the project, proposing a $500 million first phase including a casino hotel and golf course on the beach.
Besides restricting IR locations, Vietnam only allows entry to its casinos and electronic gaming parlors to people who hold a foreign passport, effectively barring the vast majority of its 90 million citizens. Sheldon Adelson’s Las Vegas Sands is among the gaming giants that have expressing interest in Vietnam, but only if locals can play.
Vietnam has also set a tax increase for January 1, raising the gaming levy from 30% to 35%, substantially higher than Singapore, the Philippines, South Korea or Cambodia. It’s not as bad as it sounds: unlike most other jurisdictions, Vietnam lets casino deduct promotional costs and commissions from taxable revenue. Still, the two ways for governments to discourage an activity are restricting it and taxing it (more), and Vietnam hits the daily double on gaming.
On the other hand, Vietnam estimates it loses $800 million annually in much needed tax revenue from its citizens’ overseas gaming, and it wants more foreign investment. For more than a year, gaming industry insiders have been expecting Vietnam to issue a casino decree that would codify its regulation of casinos; the government issued a decree on slot parlors in 2013. They’re hopeful that the casino decree or rules in its aftermath will loosen restrictions on gaming, including a mechanism for Vietnamese citizens to play on some limited basis. Vietnamese citizens could be required to pay an entry tax as in Singapore, they could need to show proof of income or assets, they could be restricted to a particular casino as in South Korea, or Vietnam could cook up some combination of those rules.
Laguna Lang Co hopes to provide a bookend to Ho Tram, Vietnam’s first large scale casino resort that opened in 2013 on a pristine beach about two hours south of Ho Chi Minh City, the former Saigon, the country’s commercial capital. MGM agreed to operate the first of a projected four to five resorts on the site, but pulled out citing opening delays. US regional operator Pinnacle Entertainment, currently selling its real estate assets to GLPI, holds about 15% of Ho Tram’s owner, Asian Coast Development Ltd (ACDL), though Pinnacle has written off that investment stake.
ACDL has a gorgeous beachfront hotel, The Grand- Ho Tram Strip, designed by leading resort architect Paul Steelman, a Greg Norman designed golf course and plans to complete the resort’s second tower under a condominium model in 2016, giving it 1,100 rooms. ACDL also has an uphill struggle to make money and meet Vietnam’s investment rules. With the second tower, ACDL may be a quarter of the way to the $4 billion investment mandate.
What’s worked in Vietnam are casino enterprises established before the requirement for $4 billion integrated resort investments and sited in more favorable locations. Properties such as Donaco International’s Aristo International in Lao Cai on the border with China’s Yunnan province – where card-carrying residents can cross the border freely – started small and have scaled up based on business, not government mandates. Their small size enables them to succeed by targeting niche markets, such as Silver Heritage’s Phoenix International Club in Bac Ninh outside Hanoi that focuses on expatriates working within driving distance and Crowne International Club in Danang with strong links to Macau junket promoters and a location just seven miles from the city’s airport with four daily flights to/from Macau.
These small resorts can make money under the rules as they stand. Bigger projects’ best hope for success depends on Vietnam’s government changing course, and that’s not a smart money bet.