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Traditional Vietnamese Fishing Boat on Ho Tram...

Traditional Vietnamese Fishing Boat on Ho Tram Beach

Vietnam’s Ho Tram Strip is starting to take shape with U.S. gaming companies MGM and Pinnacle already on board.

Asia Coast Development says Ho Tram will be “a big deal”

The Asian gaming landscape already includes Sands and Oceanus and it will soon have the beach. Not just any beach but a 2.2-km stretch of white sand on the crystalline blue South China Sea, with international casino operators, entertainment, conference facilities and a golf course designed by Greg Norman.

“Our site is spectacular,” says Asia Coast Development Ltd. chief executive Lloyd Nathan. “It’s a stunning beach and when we got to the fifth storey of our tower construction and could see over the sand dunes to the protected forest, it was quite amazing.”

Place that natural beauty in Vietnam, “a hospitable, economically pragmatic country” of around 90 million people with a “government committed to doing things the right way”, Mr Nathan says, and it adds up to a “tremendous opportunity”.

Asia Coast Development is the
driving force behind the US$4.2 billion (MOP33.6 billion) Ho Tram Strip in Ba Ria Vung Tau province, the leading edge of Vietnam’s drive to become an international tourism destination. MGM Resorts International’s MGM Grand Ho Tram will be the first of five gaming resorts Asia Coast Development plans for its beachfront, 127 km south of Ho Chi Minh City and about one hour by a new road from the city’s new international airport, which is scheduled to open
in 2020.

In May, United States casino company Pinnacle Entertainment Inc. agreed to operate the second resort and take a 26 percent stake in Asia Coast Development for US$90 million. Listed on the New York Stock Exchange, Pinnacle operates seven casinos, one in Nevada and the rest around the Midwest and New Orleans, plus a horseracing track.

Ideas aligned

Pinnacle, which once owned two casinos in Argentina, and Asia Coast Development jointly plan to create a hospitality brand at Ho Tram for use in Asia and beyond.

“There was a lot of interest in the second resort,” Mr Nathan says. “Everyone thought this would be a big deal
in Asia.

“However, as we got deeper into the selection process, Pinnacle rapidly became our first choice. They are philosophically aligned with us in terms of operational efficiencies, appropriate governance and a broad vision for Vietnam and Asia.”

There are still three more resort sites available.

“The Ho Tram Strip is not just based on gaming,” says Mr Nathan, who was for many years an MGM executive and attorney. “We have a prime beachfront location located within one of the main tourist destinations for Vietnam, with diverse and appealing ancillary resort facilities including entertainment, restaurants, conference, spa and retail. Vietnam also has a growing economy and a large, young and well-educated population providing an increasing domestic consumer base for the hotel and other non-gaming amenities.”

The MGM Grand Ho Tram, scheduled to open in early 2013 and costing about US$430 million, will have 541 rooms, a conference centre, a theatre and shopping in a 19-storey tower. The casino will initially have 90 gaming
tables and 500 machines. The second phase will add a matching tower, bringing the room count up to 1,100.

“It is very exciting to be part of the initial development of a new area and help define its direction and personality,” says MGM Grand Ho Tram president
John Shigley.

Numbers game

“Ho Tram will be a multi-faceted destination resort with broad appeal to many customer segments, gaming and non-gaming,” says Mr Shigley. “For gaming, the project’s target customers will be pan-Asian, in addition to local expatriates and foreign passport holders.”

He adds: “It is likely that MGM Grand Ho Tram will use junket operators.”

Mr Shigley, who was appointed in April, having previously worked for MGM in Macau and Las Vegas, does not believe MGM Macau will be harmed by the opening of Ho Tram. “There is significant excess demand in Asia for casino gaming,
as has been evidenced by growth rates in Macau and Singapore,” he says.

“I doubt there’s such a thing as unlimited demand but there’s no doubt demand exceeds supply in Asia,” says Asia Coast Development’s Mr Nathan. “This region has 50 percent of the world’s population and 5 percent of licensed gaming venues. It’s going to take a very long time to fill that supply gap.”

Apart from gaming, “Ho Tram will offer the first five-star resort experience on the south coast of Vietnam, and we believe that many Ho Chi Minh City locals will be attracted for non-gaming experiences, including entertainment, dining, weddings, meetings, conventions and exhibits,” Mr Shigley says.

“MGM is developing a hotel resort brand in addition to its casino brand,” says Gaming Market Advisors principal Andrew Klebanow. “Ho Tram will fit nicely in with that strategy of developing luxury hotel resorts.”

Mr Klebanow thinks the strategy, conversely, fits Ho Tram. “I am not a big believer in the Ho Tram project as being a game-changer in the Asian gaming market. It will be a nice resort area but I do not see it evolving into a major gaming centre,” he says.

Risk management

Independent gaming and leisure industry strategist Jonathan Galaviz sees Vietnam as a “high-risk market in both the context of economics [because] there is tremendous inflation there, and in the context of government transparency”.

At present, Vietnam is still drafting its gaming laws and a tax regime for Ho Tram. Despite MGM’s problems with New Jersey regulators over its Macau partnership with Pansy Ho Chiu King, Mr Shigley does not believe its Ho Tram casino will cause trouble with the U.S. authorities.

“We have kept U.S. regulators informed of our activities in Vietnam. Senior Vietnamese government officials responsible for the Vietnamese gaming regulations have also met on more than one occasion with U.S. regulators. All parties concerned understand the need for an appropriate regulatory environment, that is compliant with foreign gaming statutes of all jurisdictions in which MGM currently operates.”

Mr Nathan says Vietnam’s government is aware of the dynamics of its Asian competition, which are driven by tax rates.

The law prohibits Vietnamese, except those also holding foreign passports, from gambling in Vietnam’s handful of small slot parlours and casinos and there is little likelihood of the law being changed for Ho Tram.

“When a government prohibits its citizenry from gambling it severely limits the revenue potential for its casinos and the investment potential from foreign companies,” says Mr Klebanow. “What the country gets are some nice, quaint casino properties that provide a reasonable amount of employment, perhaps 1,000 employees per property, and some modest amount of capital investment from foreign companies. What it does not get is the capital investment one sees in Macau and Singapore or the tens of thousands of jobs those casinos create.”

So Asia Coast Development must depend on expatriates, 5 million tourist arrivals a year and the resident holders of foreign passports, including Vietnamese that have returned from abroad and recently been granted the right to keep second passports.

“We only need to capture a tiny percentage of those groups to succeed,” Mr Nathan says.

Casino development chemistry

Asia Coast Development Ltd. chief executive Lloyd Nathan knows the Ho Tram Strip project from both sides of the table. As MGM Resorts International’s global gaming unit president, Mr Nathan helped make and manage the 2008 deal that brought the casino and hospitality giant to Ho Tram. In April last year, Mr Nathan joined Asia Coast Development as its boss.

This has created the mistaken impression that MGM owns Ho Tram. In fact, it has no equity in the project. Asia Coast Development’s biggest investor is Harbinger Capital Partners LLC, a US$10-billion (MOP80 billion) New York private equity fund. Pinnacle Entertainment, the United States casino company that will operate Ho Tram’s second resort, owns 26 percent of Asia Coast Development.

Mr Nathan is a graduate of the London School of Economics and a lawyer licensed to practise in England and California. His history with MGM goes back two decades to when he was the company’s outside legal counsel. He joined the company as its European managing director in 2002 and also served as an executive vice-president and international managing director in Hong Kong.

Despite having left the company, there is still good chemistry between Mr Nathan and MGM. “We have significant confidence in Lloyd Nathan’s experience and his role as a leader in this project,” says MGM Grand Ho Tram president John Shigley.

“MGM has been doing business here in the region for 30 years,” Mr Nathan says. “Having the MGM marketing machine is going to drive a tremendous amount of business to Ho Tram.”

http://www.macaubusiness.com/news/beach-games/11568/

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Age: Bính Thìn
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