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Cambodian Conundrum

A personal experience with a 2009 casino opening in Bavet, Cambodia

Cambodian Conundrum

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There are currently nine well-established casinos operating in the remote border town of Bavet, Cambodia. Bavet is a 1½-hour drive from Ho Chi Minh City, and is the main commercial crossing between Cambodia and South Vietnam. In April 2009 our group decided to test both our management and casino operation skills and open a small casino resort in Bavet. Our total intended gaming offering consisted of 20 tables and 62 slots. We opened the Casino Royale on June 19, to 1,400 customers.

For many years while managing Asian casinos, I have searched for an owner/investor tolerant enough to put up with my acerbic nature, but flexible enough to allow a modern approach to customer relationship development and employee management. On April 13, I met with several Malaysian property developers who seemed to have an appropriate business methodology.

These businessmen were both informed and decisive. Together we agreed in principle to embark on a casino project in Bavet at flank speed. They had done considerable research and preparation prior to our initial meeting, and were ready to move fast. I had to get up to speed quickly.

I have known about Bavet for some time, but I had never been there prior to our engagement. It is a rough-and-ready place with no medical facilities, few decent restaurants, zero sanitation and zero entertainment besides casinos. There are no guarantees in business, and opening this property on an extremely limited budget, in a very short time frame, would not be easy. However, it sounded like a lot of fun, so I agreed to participate.

Business Environment
The nine casino operations in Bavet typically have 200-plus hotel rooms, 100 or more casino tables and 150-200 state-of-the-art slot machines. Some are very well patronized. Several other properties are not meeting costs and are literally going bankrupt. Of particular note as good operators are the New World Casino Hotel, the Le Macao and the Las Vegas Sun. The Moc Bai Casino Resort is busy, but simply rents out tables on a monthly basis to junket operators. The new Chateau Casino Resort is still under construction but is well designed and looks fantastic. Most of these properties have established marketing departments, facilities for transferring cash out of Vietnam to Cambodia, and an entire network of Vietnamese contacts and Vietnamese-speaking gaming staff.

As in Macau, junket promoters completely dominate the casino marketing business. The promoters control the vast majority of the customers in Bavet. No casino in Bavet operates, or even attempts to operate without junket promoters. The promoters assist in bringing cash across the border, facilitate transportation services for players, and provide credit to the customers. They find new patrons and assist in bringing casino customers from their homes in Vietnam to the casino resorts in Bavet.

Casino Opening Process
Anyone who has had a position of responsibility for a casino opening understands that the process is, at the very least, difficult. There are always too many things to do and not enough time to do them. There are a multitude of competing interests that must be addressed quickly and fairly. If you pay the staff too little it will be difficult to recruit. If you pay too much it will be difficult to reach profitability. Control supplier prices too much and the suppliers will cut corners. Lose control of suppliers and they will fail to deliver the product on time, or to the standard required. Costs can quickly balloon out of control in Asia and schedules may have to be completely abandoned.

As you might imagine, opening a casino in Cambodia has a different order of problems than in the West or even Macau. It is often impossible to get credit from suppliers. On the other hand, if you pay them up front, they simply may not deliver at all. The very nature of a start-up organization precludes the use of existing supplier relationships. Normal delivery, transportation and customs clearance problems are exacerbated threefold. You must plan on crucial supplies arriving late or not at all. The achievement is in how you overcome the obstacles.

For example, if your playing cards do not arrive before the opening date, how do you open card games? We actually had to buy locally manufactured generic “Bicycle” cards from a Phnom Penh supplier at an exorbitant price. The alternative was to delay the opening. Whatever happens, you must overcome the problem. No layouts? Use green felt and stencils. The tables don’t arrive on time? Build them locally. Always have a Plan B! Do not delay the opening under any circumstances!

Staffing
Since I was working with Malaysian investors, I made the decision to recruit primarily Malaysian management staff. Having worked and lived in Malaysia for many years, this call was not difficult. I know from personal experience that Malaysians generally are hard-working and disciplined individuals who give real value for money. To balance things out we also recruited some great Filipino executives for their professional game/job knowledge and their customer service abilities.

This year, the Macau government decided to kick out all the foreign casino workers who recently helped make that country the fantastic casino center it currently is. They have done this by denying work visa extensions to most of the foreign casino workers there. The government gave little warning for this visa cancellation process. As a result, hundreds of experienced casino workers are coming back to the region from Macau without much savings and without jobs.

I must give a personal thank you to Chief Executive Edmund Ho and the Macau government. Thanks to this exclusion policy, we were able to find a great core group of experienced casino executives at competitive compensation rates.

Communications
Almost all Malaysians speak three languages minimum, and Asian communication in general is greatly facilitated when they are around. Even with this management asset we were still faced with many communications issues. For example, our front-liners—the Cambodian croupiers, waitresses, cleaners, etc.—do not usually speak English, Vietnamese, or even Chinese. They only speak Khmer, but often cannot read Khmer. Our customers, the Vietnamese, do not speak or read English or Khmer; they only understand Vietnamese. Our VIP service girls speak Vietnamese, but not Khmer or English. Sometimes we cannot even effectively tell our own staff what to do! True multi-language individuals on the border are in great demand, and command relatively high salaries. They were usually priced out of our budget.

As a result, we must go to extremes to communicate effectively. You cannot just explain to the staff how to clean a toilet; you must do it yourself and physically show the employees. The menu cards must be completely multi-lingual. They must be simple and easy to remember so that Khmer staff who cannot read can recognize or memorize the number/location of the desired item. Pictures are helpful but take time to shoot, select and lay out properly.

Settling gaming disputes can be extremely difficult because of the complex and esoteric game rules involved. Communication is the most daunting problem in Asia, but is the most satisfying area to overcome. When the place finally works, and the staff works together as a team, it is a great feeling.

First Steps
During a fast trip in mid-May 2009 to evaluate Bavet business levels, I was reacquainted with Vellu Pillai. He is an ethnic Indian Malaysian who had worked for me in a junior capacity in the early 1990s at Genting Highlands Resort. Though I did not really remember his work capability from the 1990s, his attitude was good and he spoke some Khmer in addition to Mandarin, English, Cantonese and Tamil.

Primarily on a cost/value basis, together we decided to open the resort with “virgin” dealers who had never dealt a game before. Using virgins also meant that it was less likely that they had already learned to steal at other casinos.

Pillai posted some job vacancy posters on some local notice boards and we performed hundreds of multi-lingual job interviews in two days. Due to the tight time frame to opening we needed to start the training school two days after that. Extensive background checks are difficult in this environment, and Cambodians often just change their names and identity cards at will. You must just make a lot of phone calls to people who may not speak English, and who may not want to talk about ex-staff. Some miscreants will always get through. We have caught some stealing already, but the problem has been less than expected so far.

While the training school was going on, we also had to do some fast casino renovations. Our casino hotel building was basically a shed with some air conditioning. It required a lot of work. The hotel rooms were even worse than the casino hall. The entire renovation process and even the non-casino recruitment was accomplished at top speed by our Malaysian shareholder representative Linda Chong Lay Lin. This hard-working and highly intelligent Malaysian executive removed most of the usual opening problems from my back. She single-handedly got us ready on time. I only really had to worry about whether we could make money in the casino.

Target Market
Choosing the primary and secondary target markets can sometimes be an intuitive process. In this case, it was made even more difficult than usual because of our determination not to issue credit, and not to use junket promoters. Because of this policy, brand differentiation was inevitable. But what gaming limits do you offer? How do you get the players in? What service can you give that the other casinos are not offering?

Everyone says they will give “great customer service” but this is usually exaggerated. The real question is: What can you do within your staff abilities that is cost-effective and has adequate margins? The primary market-segment determination often involves more art than science when opening in a foreign and ultra-competitive environment. A final factor that also had to be considered was the limited time we had for training and developing staff.

Our mid-May evaluation revealed that the existing casinos did not respect or pay attention to low-end players. Because of a per-table taxation policy and low marginal tax rates, virtually all management effort at the existing Bavet casinos is expended on the extremely competitive VIP play. The small players were left to fend for themselves.

Some casinos were later found to be paying junket commission rates in excess of 97 percent of theoretical win. The big answer for us was obviously to become a “grind joint!”

We went after the grind market with a vengeance. Many of our tables were opened with $1 and $3 minimums to start. Of course, we allowed up to 600 times wagering spreads to attract customers and to give ourselves the potential to make some money. The problem we always deal with is volatility.

Additionally, we had to remove the grind players from junket control. This was a big problem. Junket promoters control players by using non-negotiable and promotional chips and controlled cash-outs. To exclude the junket operators, we turned back a page of history. We removed the junket control mechanism and returned to the late 19th century technique of using cash notes for much of our gaming!

We are aware of the potential internal control problems, but the customer response was fast and amazing. The smaller players love it. They love to play with cash and to leave and walk out at will. There is no cash-out required when you gamble with cash. Our computer system has been modified to handle cash inventories. And we love paying no commissions to junkets.

Stealth Opening
As is usual in Cambodia, there is considerable risk in starting a new business. There is always the potential that existing business operators with strong relationships with local authorities and law enforcement could use these to interfere with our opening. They could take obstructionist action against us based on false land ownership claims, through abuse of political power, or based on non-existent legal issues. The solution was to get open fast and to have the business operational before anyone was really aware what we were doing.

The problem then: How do you advertise? How do you let the customers know that you are open, and even harder, get them to come in to try your gaming product? How do you do that in a facility that has failed before, and in a business that was previously aborted just before opening day? This was actually due to a lack of business confidence in the then-Korean shareholders. The previous owners walked out on staff without paying the last three months’ salaries. As a result, our property also had some credibility issues to overcome. The final issue is that even with enlightened bosses, advertising expenses are not readily accepted in the Asian budgeting process for small “start-up” companies. It is difficult to get advance approval for these costs.

The first part of the solution was to “buy the players” with high-value match play coupons. The second part involved hiring an individual who knew most of the Bavet players personally, and getting him to distribute the match play coupons to players he knew were legitimate. The third issue was to pay him enough to ensure loyalty and make the effort worthwhile, while not upsetting the fairness of the entire employee pay scheme.

Other Issues
Many things happened during the opening process. We drove the staff very hard, and the first casino manager and a few executives eventually resigned to join the pre-opening teams for the new casino operations opening in Singapore in 2010. In addition, many of our front-line Asian staff are quite spiritual, and have a ready acceptance of ghosts and other non-Western spiritual phenomena.

Indeed, shortly after opening, Anthony King, the New World casino manager, called me up and asked if I had the local number for “ghost busters.” It seems that six of his croupiers went into trances and convulsions, and started speaking in tongues. They advised that they saw nine ghosts walking around the staff quarters. This has happened to my staff on several occasions, but “nine” is an unusual number for ghost appearances.

We found out that the Vietnamese are real gamblers. They are prepared to wager a very high percentage of their capital on individual bets like Thais, but otherwise they play in a very aggressive, “value-oriented” manner. They are completely different than Malaysian, Singaporean, Australian or Indonesian gamblers.

I love ‘em!

Michael J. Gore, MBA, J.D. has been involved in gaming in Asia at senior management levels since 1990. He has worked as a surveillance director, a VP of casino operations, a casino marketing manager, an executive director of operations, and as a CEO at different Asian and Australian regional gaming properties. He recently helped write the winning casino submission in Singapore for the Genting Group. He can be reached at [email protected].

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