Opportunity in Thailand

The Thai Entertainment Complex Summit in Bangkok in December served up much food for thought.

The conference convened a week ahead of the kingdom’s legislative session, which was to consider a government-backed bill to legalize casino gambling in “entertainment complexes,” Thailand’s term for integrated resorts.

“As an inaugural event, the Thai Entertainment Complex Summit highlighted a number of key issues to be considered for the bill and for anyone wishing to access this new market,” said Winna Media CEO Rosalind Wade, organizer of the event. “If Thailand does it right, it could be the most exciting casino market in Asia.”

At the summit, House of Representatives member Chulapong Yukate revealed he will introduce a gaming bill on behalf of the People’s Party, which holds the most seats in the lower house, that differs from the government’s proposal in key areas.

The People’s Party bill would remove the prime minister as the head of the Policy Committee overseeing IRs.

“Why does the prime minister have to be chairman of Policy Committee?” asked Chulapong Yukate, a corporate finance lawyer with lengthy international experience. “I look at Australia and other places, and I don’t see the prime minister as chairman of the committee.”

Go with the Pros

This rival to the government’s bill would explicitly permit casino management agreements rather than requiring the entertainment complex licensee to operate the casino. That change would enable seasoned Thai developers to enlist established casino companies specifically to operate IR gaming, rather than having to build gaming expertise in-house or create full-fledged partnerships to hold the IR license.

“If you want to invest in a shopping center but do not have the expertise in casinos, then you can have a casino management agreement,” Chulapong said.

He emphasized that his party supports the government’s foreign investment-friendly provisions for entertainment complexes, including 100 percent foreign ownership. “We need foreign expertise, we don’t need 51 percent (Thai) ownership.”

The alternate bill would also establish a fund to address problem gambling and related issues. Chulapong said the party aims to get its provisions incorporated into the government bill. Legislation enacted in this session would take effect in mid-October, setting the stage for IR license bidding as soon as late this year.

A graduate of University of Washington Law School, Chulapong said, “The Entertainment Complex will be a big plus for the tourism industry in Thailand. Although Thailand has had a good reputation in tourism for many years, the country nowadays needs new tourist attractions.” He expects entertainment complexes will be “new destinations for tourists” and boost the national economy overall.

“Many Thais focus too much on the casino,” Chulapong said. The summit showed him how non-gaming contributes to IR success.

All Aboard Thailand IR Express

“It is very evident that the government is moving quickly to pass a very attractive bill into law, large local businesses are very keen to lead a number of developments, and that the world’s best international IR operators and industry suppliers are willing and ready to get involved in the market,” Murray International chairman Niall Murray said after chairing day one of the summit.

“IRs will catapult Thailand’s already highly successful tourism industry to the next level.” With multiple IRs, Murray projects Thailand’s “visitor numbers and revenues will soar to become the No. 2 (gaming) market in the world, behind Macau and ahead of Las Vegas and Singapore.”

“For decades, Thailand has seen billions of its potential gaming dollars pour across its borders into neighboring countries,” said David Leppo of playexpat.com and CheckMate Mitigation. “Thailand now knows not only will domestic IRs keep these domestic dollars in Thailand but will generate billions of dollars more from international tourists who are already flooding into Thailand.”

Leppo, operating sports betting in Asia jurisdictions since 2009, added, “Listening and speaking with the conference attendees and experts also confirms that Thailand IR gaming and regulators will be the beneficiaries of incorporating only the best parts of neighboring gaming regulations and avoiding the ineffective and bad parts.”

‘Repeat Appeal’

“I firmly believe in Thailand’s potential for the casino industry,” NYCE International Managing Partner Harmen Brenninkmeijer said. “Unlike the famous saying ‘What happens in Vegas stays in Vegas,’ or ‘What happened in Macau didn’t happen,’ the phrase ‘What happens in Thailand must happen again’ captures the unique allure and repeat appeal of this vibrant destination.”

Brenninkmeijer added, “The power of an integrated resort lies in its ability to elevate the sophistication of any city or region. It fosters surrounding areas to grow and develop at a significantly faster pace, resulting in more sustainable economic benefits than most other businesses. Moreover, this growth can occur through smaller SMEs, making opportunities accessible to a wide range of entrepreneurs.”

On the summit program, Murray International Director Bolormaa Ganbold highlighted Thailand’s status as a tourism powerhouse, with more than 800,000 guest rooms and 99,000 Airbnb listings. Visitor arrivals year-to-date project to reach 88 percent of 2019’s 40 million, and are expected to exceed that total next year, despite sluggish recovery from top feeder China.

Lawmaker Chulapong said that at a recent public hearing, entertainment complex opponents asked, “How do we know casinos will increase tourism?”

“An IR is the icing on the cake” for Thailand’s destination appeal, TravConsult Managing Director Lilly Choi-Lee said. The complex will deliver an “all in one” experience for guests at a single location.

Bagging ‘Brag Factor’

“Thailand has delightful hospitality that supersedes what you get anywhere in the world,” TravConsult Managing Director Trevor Lee said. “New IRs will add the brag factor that Asian travelers want.” Even without IRs, the husband-and-wife team notes Thailand’s average tourist spend exceeds US$3,000.

“IRs will broaden the spectrum of people coming to Thailand,” CLSA equity analyst Jeffrey Kiang said in a report published earlier this year. Kiang projected Thailand as a US$15 billion casino gaming market at maturity, third globally behind the U.S. “Thailand has all the elements (for IR success); it’s about execution.”

“Thailand’s international gaming market is easily US$10 billion,” IGamiX Managing Partner Ben Lee said. “Thai IRs will draw from countries with a penchant for gaming,” particularly Malaysia, South Korea and Russia.

The Macau-based consultant also spotlighted the “ring of gambling” surrounding Thailand with some 40 casinos hugging its borders with Cambodia, Laos and Myanmar. Grind mass players may continue to favor border casinos to avoid the IR entry fee for Thai citizens, a proposed 5,000 baht, nearly US$150, Lee said. But he expects middle-class players will patronize IRs, keeping a good chunk of Thailand’s gaming spend at home.

“Markets with a lot of local players do better with IRs,” said Michael Soll, president of The Innovation Group, who added, “IRs have closed a lot of underground casinos in other markets.”

Betting on Show Business

The financial power of the IR can underwrite new entertainment and events for the jurisdiction. Autumn Light Entertainment Senior Vice President John Raczka noted that Thailand achieves its tourism numbers with “no international-class theme parks, water parks or museums.”

He urged Thailand to look at emergent entertainment projects, citing rotating IP venues, such as Netflix House opening next year in Dallas and Philadelphia featuring content based on the streaming service’s programming, adult play centers and COSM, and a planetarium dome-styled live broadcast venue with food and beverage service. The Sphere, the high-tech indoor arena in Las Vegas reportedly seeking a second location, received repeated mentions from summit speakers.

“Entertainment at an IR is about more than slapping labels on off-the-shelf products,” said Raczka, who oversaw entertainment development at Melco’s City of Dreams and Studio City in Macau, featuring the world’s highest figure-eight observation wheel and a Batman magic motion ride.

Based on his experience running Grand Ho Tram resort in Vietnam, EuroPacificAsia Consulting Managing Partner Shaun McCamley said, “Events can be a win-win for the country and the government, along with the IR. It’s not just about what happens on the property but what happens around the property.”

McCamley added that IR owners must be willing to make major financial commitments for quality events, and “government has to be supportive,” by issuing required visas, for example.

“Event ownership is really important,” Raczka said. “It’s great to create a flagship event such as a music festival. Let it create its own local folklore, create something people from Hong Kong and Singapore will come for.”

Decision Forest

“Thailand is a very seductive real estate market,” Real Estate Access Thailand Executive Chairman Paul Scales, the summit’s day two chairman, said. “The food is great. The weather is great. The devil is in the details.”

That goes double for integrated resorts by any name. While underlining the enormous promise of Thai IRs, the conference also underscored the vast array of decisions facing Thailand and potential IR bidders.

“The biggest challenge is to build culturally sensitive teams,” Intelligence Macau Managing Director Anthony Lawrance said. “Thailand has a different social and political context from Macau.”

“None of the markets are replicable,” Seaport Research Partners Senior  Analyst Vitaly Umansky said. “Jurisdictions that say they will be another Macau… that’s impossible.”

For Thailand, the main task is to “make it possible for operators to come in and build world class assets.” With Lawrance, Umansky enumerated issues that will determine whether Thailand creates that world-class gaming environment:

• Number of gaming licenses: “Limited competition is what licensees prefer,” Umansky said. “A monopoly can have a higher tax rate, but there’s no competition (to drive innovation).”
• Online gaming: Provides tax revenue benefits for the government, “but it limits what developers will do from a brick-and-mortar perspective.”
• Thai companies adding in-house gaming expertise without foreign partnerships: “Galaxy Entertainment did it. But it took Galaxy 10 years to open Galaxy Macau, compared with Sands Macao in 18 months.”

“Banks will insist on foreign partners with casino experience,” Unicorn Hospitality CEO Yann Gouriou said. Even if developers hire gaming executives with impressive CVs, “Banks will say they had the expertise of Sands or Wynn behind them.”

• Splitting ownership and management of IR segments: “Not the best… It’s about aligned economic interest.” Lawrance added that it’s more difficult to run loyalty programs with retail, hotels and casino under different management.

Location, Location, Location… And Two More

Entertainment complex locations loom as crucial decisions. Early plans to exclude “Bangkok-adjacent areas” from the initial licensing round have seemingly evaporated in favor of at least two licenses in the capital area and others in regional destinations Phuket, Pattaya and Chiang Mai.

“Location depends on strategic objectives,” Ben Lee said. “Bangkok will make regionals less viable.”

“If the objective is to build revenue, one casino is enough,” Bloomberg APAC gaming and leisure analyst Angela HanLee said. “But to drive tourism, you need more locations.”

MagIQ founder and CEO Andrew MacDonald suggested Nalmaya Smart City as a futuristic home for one or more IRs as part of a US$250 billion investment over 30 years. “The vision is to establish Thailand as a prime destination for luxury.”

Cluster Strip Master Plan

Renowned resort architect Paul Steelman proposed creating a Thai version of Cotai or the Las Vegas Strip on a 350-hectare (865-acre) site near Bangkok’s Suvarnabhumi International Airport he visited in 2008 with then-Prime Minister Samak Sundaravej. The master-planned district would include eight integrated resorts, each on 35 hectares with 2,500 hotels rooms, surrounding a convention center and arena.

“Why not have Las Vegas?” the Steelman Partners CEO asked. “Las Vegas is not just the world’s gambling capital but the convention, entertainment and sports capital.”

Steelman stressed that a central coordinating body, in the mold of the Las Vegas Convention and Visitors Authority, would be required to ensure the cluster is a series of “connected integrated resorts” as found on the Vegas Strip, not the collection of unmatched bookends in Cotai or Manila’s Entertainment City, which has a master plan Steelman produced and stakeholders ignored.

To bring Vegas to Thailand, Steelman suggested regulatory oversight similar to Nevada, a 10 percent gaming tax rate, a 50-year license with a US$100 million license fee payable upon opening, and completion required within four years, alongside the commitment to master plan provisions. He said at least a dozen top gaming industry names would bid to join a Bangkok IR cluster.

“Las Vegas is the greatest city in the world,” Steelman told delegates. “All Thailand has do is say yes.”