Thailand integrated resorts can dare to be different

Thailand’s casino legalisation may defy conventional wisdom, Muhammad Cohen reports in the second of this two-part series.

In Dance Me to the End of Time, Bangkok-based novelist Christopher G Moore envisions an iconic casino resort tower hulking above the Thai capital. That scenario has become more plausible as Thailand’s gaming legalisation initiative progresses but, as in Moore’s novel, a real-life Bangkok integrated resort looms only in a murky future.

While Thailand seems likely to approve “entertainment complexes” – the kingdom’s chosen term for integrated resorts featuring casinos and non-gaming attractions – the shape of those developments, their locations and potential ownership remains undetermined.

Parliament’s preliminary framework, endorsed by Prime Minister Srettha Thavisin’s cabinet last month, includes up to five licences for IRs across Thailand within 100km of international airports, a 20-year licence term, a minimum investment of 100 billion Thai baht (roughly US$2.8bn/£2.17bn/€2.52bn) and a 17% gaming tax rate. The overriding goal is to boost tourism.

Many of the biggest names in global gaming want in. Las Vegas Sands chairman and CEO Robert Goldstein restated the company’s long-running Thailand interest in its first quarter earnings call. Wynn Resorts CEO Craig Billings followed suit in its call. MGM Resorts and Hard Rock International have also expressed enthusiasm for a market of 66 million people that attracted 40 million international visitors in 2019, ranking eighth globally, and rebounded to 28 million last year.

Capital appreciation in Thailand

For the most part, these international operators have focused on Bangkok, number one in Mastercard’s Global Destination Cities Index for the past two years and, in 2019, when it when attracted 22.8 million foreign visitors, 3.7 million more than Paris or London. But the legalisation framework recommends IR development outside the capital and “Bangkok adjacent” areas.

“I have no idea what ‘adjacent’ means,” Destination Capital CEO James Kaplan says. “On the one hand, the government is stating the IRs need to be within a 100km radius of an international airport, while on the other hand reference is made to the adjacent question. I suspect this will be fleshed out and clarified during the next six months.”

“No problem in the limitation on locations, but let’s get the best ones available that maximise tourism and maximise revenue,” B Global managing partner Brendan Bussmann urges.

an integrated resort in CENTRAL bangkok appears unlikely

There appears to be consensus not to license an IR in central Bangkok, despite its commercial promise. Potential IR sites outside the city limits with mass transit connections include Bang Na to the south, currently featuring a massive shopping mall, and Muang Thong Thani to the north, home to Impact, a commercial complex featuring an arena, exhibition and convention centre, plus two malls and nearly 1,000 hotel rooms, which attracts upwards of 10 million visitors annually.

Those locations seem decidedly Bangkok adjacent.

Plugging for Pattaya

Further afield, beach resort Pattaya, 150km south of Bangkok, stands out. Located in Thailand’s Eastern Economic Corridor area targeted for further development, Pattaya ranked 15th in the 2019 global index with 9.4 million international visitors. Pattaya IR boosters have been the most visible so far.

Pattaya has “the basic infrastructure already in place,” Suranand Vejjajiva, chief of staff under Prime Minister Yingluck Shinawatra, says. “The entertainment venues already exist and, in time, it could develop into a Las Vegas-style city.

“The U-Tapao [Rayong-Pattaya] airport could accommodate chartered flights, in conjunction with Suvarnabhumi,” Bangkok’s principal gateway airport, a 90-minute drive away.

In 2022, the government approved expanding U-Tapao’s capacity to 60 million passengers annually.

Suranand believes Phuket and Chiang Mai could also be viable IR sites. “But I think the opposition to casinos in those cities will be much stronger than Pattaya.”

Chiang Mai in the mountains of northwestern Thailand attracted 5.6 million foreign visitors in 2019 and 3.9 million last year, according to the local tourism board. China was the top source market for direct flights, although arrivals were down from 878,984 in 2019 to 200,982 last year. Pre-Covid, seven of Chiang Mai’s top ten international flight routes served greater China.

Prime Minister Srettha, also the government’s finance minister, designated Deputy Finance Minister Julapun Amornvivat to spearhead casino legalisation. Julapun represents Chiang Mai in parliament. His father is a former deputy prime minister and long-time regional power broker.

Conventional wisdom, Phuket style

Phuket, off Thailand’s southwest coast, welcomed an estimated 10 million foreign visitors last year, the same figure as 2019, when it placed 14th in the global index. Its international airport handled 14 million passengers in 2023, including 7.7 million direct overseas arrivals, and has capacity for 20 million.

Last year, Hard Rock Asia president Edward Tracy told iGB that its studies showed Phuket could support a convention based IR in the US$1.5-2.5bn range.

“Other than central Pattaya, I do not believe remote areas can support the US$2.8bn investment,” Kaplan, whose firm finances and operates hospitality properties, says. “These may be smaller [properties] and as such would be a proving ground.”

FootballBet.com chairman and CEO David Leppo believes investors will build IRs in “areas that have historically proven to be attractive to tourists, such as Pattaya, Phuket, Hua Hin…” but with a couple of twists.

Active in the Mekong region since 2010 including operating sports betting in casinos, Leppo suggests that the investment requirement could be broadened to encompass spending on infrastructure or community facilities such as hospitals, likely diminishing local opposition.

Build one, get one later

Moreover, Leppo believes the initial licences could prove to be a prelude to Bangkok region opportunities, with investing in the first batch of IRs as a prerequisite. “I think there could be more than one IR in the greater Bangkok area,” he adds.

However, a top casino industry executive with extensive experience in the US and multiple Asian markets requesting anonymity says, “I don’t want to strand that US$2.8bn [in another tourist area]. If they decide, now we’re going to do Bangkok, you’re stuck.

“That’s the kind of thing that’s risky and unknowable. I don’t know how to raise money around something like that. It doesn’t give you enough runway to make a reasonable return.”

“Thailand, in my opinion, is a very unique market in a great location in Asia and will require a totally different strategic planning process to help keep capital investment costs reasonable as well as complement what already exists,” a retired globally experienced casino executive and consultant familiar with Thailand requesting anonymity says.

Hybrids against cannibalisation

“Thailand would be a great location for hybrid IRs. I say hybrid because Thailand has a fantastic tourist infrastructure that services over 40 million visitors per year. It will be important not to cannibalise existing market share or to hurt current Thai companies or businesses.”

Specifically, according to the retiree, “Hybrid IRs may not require giant hotel facilities, depending upon location, but these new IRs could definitely benefit from larger, modern, multifunctional entertainment venues. 

“Genting Highlands did a great job on their local food court next to their new casino. They went outside and found the best local food stalls, small restaurant operators etc. and invited them to open their own spot in their new food court, thereby bringing great local food into a new clean and sanitary environment conveniently located internally next to the casino.

“Thailand will require some strategic planning for the design of such new facilities with the object being to think smarter rather than think about how many billions of dollars they can spend in Thailand. This will also involve educating government, which does not have any casino IR experience. I think hybrid IRs can be effective both operationally and financially. Bigger is not always better.”

“If Thailand’s policy goals are to drive tourism and investment into the country, there are only a handful of operators that have the experience and capacity to do those things,” Bussmann, who worked in regulatory affairs for Las Vegas Sands, says. “Those operators desire a certain level of regulatory structure that allows them the opportunity to develop the type of integrated resorts that can accomplish those goals.”

However, it remains to be seen whether Thailand will produce a regulatory regime that will safeguard licensees in fastidiously regulated jurisdictions such as North America, Singapore and, lately, Australia.

No Wynn situation in Thailand?

“It doesn’t have to be a Wynn. It doesn’t have to be an LVS. It doesn’t have to be a Caesars or an MGM,” the bi-continental executive says, adding that conventions, often a highly valued IR component, don’t demand rare skills. “There are a zillion hotels with large convention space that do quite well.”

The executive concludes, “If there’s a limited number of casinos that a large number of people can access and that a number of people have already demonstrated propensity to play, there’s plenty of ways of making money.”

Likewise, there are plenty of companies that can do it unencumbered by US or Singapore gaming regulations. Industry sources in Thailand and beyond mention several operators that appear ready for the challenge.

Those companies include Bloomberry, owner of Solaire in Manila, controlled by Philippine billionaire Enrique Razón Jr. The leader in Asia’s most dynamic gaming market may be preoccupied with its Solaire North IR slated to open this month and plans to develop its third IR on the south side of the Metro Manila sprawl.

NagaCorp, owner of NagaWorld in Cambodian capital Phnom Penh, may have singlehandedly done more to develop tourism in its host country than any other IR operator in Asia. However, Naga faces broad challenges with the passing of founder Chen Lip Keong in December and the continuing slump in Chinese international travel.

Galaxy Entertainment, ramping up Galaxy Macau’s third phase and rolling ahead on the Cotai complex’s fourth and final phase, has expressed interest in the Thai market. Led by Hong Kong’s multibillionaire Lui family, Galaxy previously tried to expand to the Philippines, but its Boracay resort proposal was shot down during Rodrigo Duterte’s presidency.

Galaxy’s Macau rival Melco, listed in the US, also operating City of Dreams properties in Cyprus and Philippines, could contend. Chairman and CEO Lawrence Ho, son of former Macau gaming monopolist Stanley Ho, campaigned enthusiastically for a Japan IR licence, as Galaxy did far less vociferously and similarly unsuccessfully.

IGamiX Management & Consulting managing partner Ben Lee tells iGB that there’s been no indication from Macau authorities that local concessionaires cannot invest in Thailand.

“Would Thailand’s opening of world-class IRs under those brands result in diversion of revenues from Macau? Undoubtedly,” Intelligence Macau managing director Anthony Lawrance says. “Can Macau afford to share some of its revenues with Thailand? Yes: the pie is big enough and growing fast enough.”

Lawrance adds, “Macau might welcome competition from Thailand within the next five to six years as it is sure to be overwhelmed by demand while hotel rooms cannot be built fast enough.” That does beg the question: why would Macau not discourage its operators from building hotel rooms anywhere else?

Local champions

Galaxy, initially paired with LVS in a marriage arranged by Macau authorities that split over irreconcilable differences, provides a case study of a property developer becoming a very successful casino operator. Thailand has many adept property and hospitality developers that could attempt that transition.

“I suspect the top Thai developers will join the bidding,” Kaplan says. “Some will team up with regional and US operators, and some will hire and build in-house expertise.”

Overseas partners could provide another key attribute: funding. According to Kaplan, “International finance and bonds will be needed, especially if there are more than two IRs.”

Apollo Group, which bought The Venetian complex in Las Vegas from Sands, and Blackstone, which acquired Australia’s Crown Resorts, are seen as potential investors in, if not operators of, Thai IRs. Warburg Pincus, an investor in Vietnam IRs The Grand Ho Tram and Hoiana with a hospitality operating partnership, could also be candidate.

Despite restrictions on foreign land ownership, international investors have selectively been active in Thailand with good results. Multibillion-dollar integrated resorts would take their involvement to a whole new level.

Former US diplomat and current iGB Asia editor at large Muhammad Cohen has covered the casino business in Asia since 2006, most recently for Forbes, and wrote Hong Kong On Air, a novel set during the 1997 handover about TV news, love, betrayal, high finance and cheap lingerie.