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Bring on the Locals

Vietnam casinos are thriving, but opening up the market to the country’s citizens would be the jackpot.

Bring on the Locals

Vietnam has a trio of top-flight integrated resorts (IR), raising its standing as a gaming and leisure destination.

Vietnam’s newest IR, Hoiana, wants visitors lifted into the sky. Vietnam’s first IR, the Grand Ho Tram, aims to keep travelers grounded. Corona, on Phu Quoc island, Vietnam’s only IR that allows players to gamble without a foreign passport, wants guests to do a little paperwork.

All three beachfront IRs have tempting features, and all three say they’re profitable amid a paucity of mainland China tourists. The question remains whether three world-class IRs make Vietnam a top-tier gaming destination for players, operators and investors.

Hoiana opened into the teeth of Covid in June 2020. After a successful opening came difficult months of what Hoiana President and CEO Steve Wolstenholme calls “character building.” The resort remained open—as did the Grand-Ho Tram—with reduced hours and staff adjustments.

But Covid wasn’t the biggest challenge Hoiana faced. In November 2021, Macau authorities arrested Alvin Chau, chairman of junket promoter Suncity Group, a 34 percent partner in Hoiana and engine of the IR’s erstwhile business plan focused on mainland China high rollers.

Chau’s arrest signaled Beijing would no longer tolerate junkets moving hundreds of billions of dollars out of the PRC illegally. Hoiana terminated Suncity’s casino management agreement and took over gaming operations.

“Hoiana’s business model had to be reconfigured, and it is noteworthy that they have managed to do so,” iGamiX Management & Consulting Managing Partner Ben Lee says.

LET Group acquired Suncity’s Hoiana holding and its chairman Andrew Lo sits on Hoiana’s board of directors. With the pending sale of LET’s interest in Russia’s Tigre de Cristal and its Westside City casino hotel in Manila slated to open late this year, Lo says LET is “open” to selling its Hoiana stake.

 

Ownership evolution

“The ownership structure is evolving,” Wolstenholme says. Once a Genting-led project, Hoiana’s largest piece is controlled by Hong Kong billionaire Henry Cheng and family, whose empire includes conglomerate New World, jeweler Chow Tai Fook and Rosewood Hotel Group (Hoiana Rosewood is planned), plus a strategic stake in Australian gaming operator Star Entertainment. Vietnam-focused investment manager VinaCapital has invested in Hoiana and the Grand Ho Tram.

Hoiana’s $1.3 billion first phase includes four hotels with 1,225 keys and a golf course, plus 20 F&B outlets laid out along four kilometers of inviting coastline. “It is a fantastic property and positioned very well for a tropical holiday getaway resort,” Lee says.

The casino is for foreign passport holders only, and features 140 tables and 300 EGMs, nearly all slot machines with a few stand-alone roulette consoles. No stadium area, no poker or variants, no craps, just baccarat, blackjack, roulette and sic bo, in that order of popularity. “We have all the games that our target market wants to play,” Wolstenholme says.

Card games start at $25 minimum with squeeze baccarat at $100. VIP rooms off the main floor and one level above are denominated in Hong Kong dollars—HK$1,000 (US$128) for squeeze baccarat. International tour operators (ITOs), Vietnam’s term for junket promoters, provide VIPs.

A handful of main-floor baccarat tables take bets in Vietnamese dong. “Customers (with foreign passports) who stay here long-term or live here may find it more convenient to wager in the local currency,” Wolstenholme explains.

With contemporary comfort in guest rooms and top-notch service, Hoiana balances beachfront casual and five-star elegance. Wolstenholme, who opened Okada Manila and worked extensively in North America, says the IR has to be outstanding enough to entice guests to fly there.

Poolside F&B options range from The Edge a la carte breakfast buffet and afternoon cocktails atop Hoiana Hotel and Suites to skewers at New World Beach Hotel’s Charred. Downtime Renew spa features Japanese showering stools, whirlpool and sauna facilities for before or after treatment. Quang Nam House is an ultra-lounge for business meetings by day and unwinding after dark. Perhaps Asia’s largest and best equipped kids’ club has pottery wheels, weaving looms, two adventure playgrounds and a kitchen for cooking classes.

Hoiana urges guests to look beyond the IR. “The value proposition is as much outside the resort as inside,” Wolstenholme says. “We want people to experience the charms of central Vietnam.”

 

Riverside Charm

The IR is 15 minutes’ drive from Hoi An, its Ancient City area a UNESCO World Heritage site. The well-preserved port district dating to the 1400s features riverboats, brightly painted lanterns and centuries-old buildings, where families still live, work and worship. On the opposite riverbank, there’s nightlife reminiscent of Singapore’s Clarke Quay.

About an hour away, UNESCO heritage site My Son Sanctuary has restored structures from the Champa kingdom, a Hindu civilization that ruled central Vietnam for a millennium from the 4th century. Orange brick buildings highlight sandstone carvings of Shiva and other deities.

UNESCO designations, further attractions including Chu Lao Cham Marine Park, seen offshore from Hoiana, and ancient capital Hue to the north, Danang’s international airport (45 minutes from Hoiana) and miles of beaches have spawned well-developed tourism infrastructure, including more than 50,000 guest rooms.

Crown International casino continues to operate in Danang, and there are a few slot clubs in hotels, but Wolstenholme sees Hoiana’s main competitors as Asia’s other IR destinations, Macau, Singapore and the Philippines, “not necessarily because of volume but more because of what we have to offer.”

Hoiana Shores Golf Club highlights that offer. The 7,004-yard links course designed by Robert Trent Jones Jr. has been listed among the world’s top 100 courses, with its back nine hugging the coastline. A state-of-the-art clubhouse has teaching studios and meeting space adjacent to a miniature golf course.

Overseas patrons hail largely from Korea, traveling either independently or on group tours, often for golf. Clubhouse restaurant 1552 Bistro specializes in Korean food and the casino hotel towers have a branch of Seoul’s Obaltan.

 

Grand Plan

The Grand Ho Tram has its own Korean restaurant, and Korean players enjoying its top-100 golf course, The Bluffs, designed by Greg Norman. It has three hotels with 1,314 keys along 2.2 kilometers of beachfront with spas, water sports and kids club. The IR works with ITOs to power VIP roll beyond US$1 billion annually. But none of that is CEO Walt Power’s main objective.

“I have always submitted that every successful gaming operation has as its primary market a local component,” Power says. “Our primary gaming target market consists of foreign passport holders living and working in Ho Chi Minh City.”

The Grand’s location—two hours (or more, depending on traffic) south of Ho Chi Minh City—remains a defining feature.

The IR lies within driving distance of Vietnam’s commercial capital with 15 million-plus residents, including the nation’s largest cluster of expatriates with a handful of other resorts and restaurants in the vicinity. But the lengthy drive from HCMC’s airport makes it a hard sell for overseas guests.

Las Vegas Sands’ senior vice president of operations in Macau, responsible for opening Sands Macao in 2004, Power arrived at the Grand in early 2020, just before Covid restrictions on international travel forced his team to focus on the local expat market. “The current performance of Ho Tram is multiples of the performance of 2019,” Power says.

With pandemic restrictions fading globally, Power says, the challenge is to convince those expats to ride to the Grand rather than fly to other casino resorts.

Events provide one draw. “International professional boxing, mixed martial arts competitions, VIP banquets, beauty pageants, golf tournaments and, yes, even horse racing on the beach have positioned the Grand as a place where something is always happening,” Power says.

In 2019, private equity group Warburg Pincus acquired the Grand Ho Tram in partnership with VinaCapital. Power terms their ownership as “critical to the success of the project. The ability to adopt a long-term strategy to increase the value of the investment is imperative.”

 

Grand Expansion

New ownership brought in IHG Hotels and Resorts. IHG renovated and rebranded the original Paul Steelman-designed hotel tower, opened in 2013, as InterContinental Grand Ho Tram with 543 rooms. In January 2022, IHG launched the IR’s long-anticipated second hotel tower, Vietnam’s first Holiday Inn Resort with 561 rooms, catering to families.

Last August, Ixora opened with 46 villas and 164 rooms developed through Warburg-VinaCapital partnership Lodgis, operating under its wellness-oriented Fusion group. Units are sold to investors and rented to guests when not owned/occupied. As at Hoiana Residences, owned units increase guest room variety while recouping some of ownership’s multibillion-dollar investment that the casino license mandates.

The Grand runs 90 gaming tables and just under 500 slots and terminals for live multigames. All play is in U.S. dollars. With slot clubs in Ho Chi Minh City among competitors, the Grand is adding new EGMs.

The main gaming floor holds about half of tables. Baccarat squeeze games have minimums of $100 and $200 with a $50,000 maximum differential. Blackjack and poker variants played against the house start at $25, sic bo and roulette from $10.

VIP rooms host ITOs. Commission and share rates are higher than Macau. The Grand has marketing teams in Korea and, since last August,

Taiwan, with the biggest chunk of casino play from Korea.

“The demographics of our guests mirror the sources of FDI (foreign direct investment) within southern Vietnam,” Power says. “Given that we focus on language, food and other cultural requirements of those guests, we simultaneously are well positioned to entertain overseas visitors from those locations.”

 

Corona Breakout

At Corona Resort and Casino on Phu Quoc island, two-thirds of its guests come from overseas. But as the country’s only casino that doesn’t require a foreign passport for entry, Corona gets about 80 percent of its gaming revenue from Vietnamese nationals.

“Considering Covid’s impact on international travel, that makes sense, as foreign players could not visit Corona for almost three years out of the five years that we have been open,” Corona General Manager Goran Milosheski says.

Vietnamese nationals who want to enter Corona’s casino must show monthly income of VND10 million, about US$400, for the past three months through tax filings, bank statements or pay slips, and pay a VND1 million entry fee, for 24 hours. With the right documentation, the process and approval can be completed in less than 10 minutes.

The casino has 147 tables, 875 slots and 125 ETG terminals. Main floor play is in Vietnamese dong from VND100,000 for roulette, VND50,000 for sic bo and VND1 million for baccarat—“Players can touch the cards in all of our baccarat games,” Milosheski says—VND300,000 for blackjack and VND200,000 for poker variants.

Corona has grown to four hotels and 20 restaurants, plus a 24-hectare amusement park, wildlife conservation park, golf course, convention center and 500-seat theater. Grand World, a shop house entertainment complex opened in 2021, has gondola rides, cultural performances and a nightly light and fountain show.

 

Bringing in the Masses

Off the southwest coast of Vietnam, Phu Quoc is an hour flight from Ho Chi Minh City and two hours from Hanoi. International direct flights originate from Seoul, Busan, Shanghai, Taipei, Hong Kong, Kuala Lumpur and Bangkok.

Three-quarters the area of Singapore, Phu Quoc is seeing billions in new tourism investment along its white sand beaches fronting crystal blue water. Vietnamese authorities have provided financial incentives and infrastructure improvements, including an international airport and a new road from it to Corona.

“More resorts opening means more marketing teams are working to bring guests to Phu Quoc,” Milosheski says. December and January were Corona’s best months ever for casino visitors, averaging more than 600 per day.

The government’s pilot program that allows local gaming at Corona (and unopened Van Don in northern Vietnam) is due for review this year. Management at Hoiana and the Grand expressed eagerness to join the program, although each claims to be profitable with their current foreigner-only casino status.

LET’s latest results at the time of writing show Hoiana had $113.8 million GGR for the first half of 2023, 88 percent from VIP play. Vietnam has a 35 percent gaming tax rate but allows deductions for promotional expenses, lowering the effective rate to roughly 20 percent. Hoiana’s EBITDA for the period totaled US$10.1 million. At that rate of return, it would take 100 years to recoup the $2 billlion mandated investment.

“It has been proven time and again that an IR in Vietnam cannot succeed without allowing Vietnamese residents entry into the casino,” Klebanow Consulting principal Andrew Klebanow says.

In Vietnam and beyond, IR performance should improve as travel and economies regain their footing after Covid. “The PRC market, we believe, will come back,” Wolstenholme says. “And that will no doubt be a primary, if not the primary, market for us.”

VinaCapital expects solid long-term returns from each IR. The firm, with $4 billion in assets under management, writes, “We would note that both investment cases were not predicated on policy changes regarding Vietnamese passport holders being allowed entry.”

 

Power to the People

Walt Power, CEO of Grand Ho Tram Resort, explains how his property can become a force in the Vietnamese gaming industry

As a kid growing up in Detroit, spending time in Asia was the farthest thing from Walt Power’s mind. But after a stint with a tribal casino in Michigan, he took a leap of faith and joined Las Vegas Sands as they were opening the Venetian Casino Resort in Macau. Power spent nearly 20 years in Macau with a variety of companies, and when he got the opportunity to run a property in Vietnam, he jumped at it.

Grand Ho Tram Resort had been sold to hedge fund Warburg Pincus, which hired Power to take over. But the day after he arrived, the pandemic shut down all gaming operations in the world—except Grand Ho Tram. Power explains why and how the property remained open and how it not only survived but prospered. He spoke with GGB Publisher Roger Gros from his office at Grand Ho Tram in March.

GGB: After spending almost your entire career in Macau, what was it like to come to Vietnam on the eve of the pandemic?

Power: I came with one suitcase to Vietnam, and my intention was to go back and forth and gradually move my clothes, my personal effects and my entire life. Well, when I showed up in February four years ago, Covid showed up the day after I arrived. The borders closed. And it literally took me three years to get back to Macau to close down a house that I had lived in for 18 years. So that was the first challenge.

What did you see when you got there?

Looking back on Ho Tram, it had been operating about for about eight or nine years before I got here. And I think the strategy was wrong. I think the people that had run this place saw it as a beach resort in Vietnam with a small casino attached to it. And what I simply did was to embrace the same strategy that we had used in Macau—the same the Venetian Macao had used in Las Vegas—and say no, this is an integrated resort. The center, the driver of that kind of resort is the casino operation, and everything else is ancillary.

What was Vietnam like during the pandemic?

It’s interesting. In my opinion—my personal observation—the government of Vietnam did a very good job handling the pandemic. If you remember before vaccines became a thing, isolation and separations were the attempt to control the pandemic. And Vietnam did a very good job of using that to control the spread. And then when vaccines came online, because of the strategic relationship between the United States and Vietnam, there were tens of millions of vaccines sent to Vietnam from the United States. I believe Vietnam was the most highly vaccinated country in Asia. The government supported us and allowed us to stay open in this bubble. And to this day, I believe we may have been the only casino on the planet that remained open and that remained profitable every quarter during the pandemic.

Are still restricted by the fact that citizens of Vietnam cannot gamble at Ho Tram? All players must have the foreign passports, but there’s a significant number of expats that live in Vietnam. How much of an audience is that for you?

That’s very a interesting question, because there is a group of Vietnamese citizens referred to as Viet Q. Basically, they’re Vietnamese citizens who fled Vietnam during or right after the war between the United States and Vietnam. They went to Australia, they went to America, they went to Malaysia, Singapore and other places, got their educations there and became successful. And now they’ve come back to Vietnam to open up businesses or to be senior executives of various firms, so they’re basically double passport holders. So as long as you have a foreign passport, I don’t care where you were born. That’s a part of our business, but it’s actually quite difficult to estimate the number of expats in Ho Chi Minh City.

There’s currently a test going on in one casino that allows locals to gamble. How is that going?

The only casino in Vietnam where locals are allowed to gamble is called the Corona casino in Phu Quoc. That’s on a resort island, a destination island. The original pilot program to test the impact that gaming activity for locals would have on society was extended for two years, about one year ago. So there’s one year left in that pilot. And I believe that once the pilot is done, the government will evaluate the pros and cons and decide whether to end the program, expand the program, or continue the program. I’m not aware of any major negative impact from the operation at Phu Quoc.

Would you be open to a type of Singapore situation where locals have to declare a certain level of income and also pay an entry fee?

Oh, absolutely. I would adopt the exact same controls that Singapore has, if you told me I could have all levels of gaming today. There could be a declaration of income at Phu Quoc, but there are some players who are not comfortable doing that, and they still continue to fly to Singapore, Manila or Macau. But I would certainly accept that in a second because of the tremendous potential that that local gaming at Ho Tram would have.

 

 

Former U.S. diplomat Muhammad Cohen has been covering the casino industry in Asia since 2006, currently as a contributor to Forbes and Inside Asian Gaming. He’s the author of Hong Kong On Air, a novel set during the 1997 handover about TV news, love, betrayal, high finance and cheap lingerie.

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