International edition
June 23, 2021

In Vladivostok

Russia aims to join Asia's gaming boom

(Russia).- Russia hopes to cash in on Asia’s gaming boom in the Primorsky Krai area outside Vladivostok on the country’s Pacific coast. Macau’s Lawrence Ho and Cambodia casino operator NagaCorp have each signed up to build casino properties targeting Beijing and China’s three northeastern provinces, along with South Korea, where citizens are restricted to playing at single, remote casino, and Japan, which has no casinos.

It’s a regional Asian casino that happens to be in Russia,” consultant Dean Macomber, president of Macomber International, told listeners at Global Gaming Expo Asia (G2E Asia) last month in Macau.

“Vladivostok is great play for both China and South Korea,” Global Market Advisors partner Jonathan Galaviz says. “Vladivostok is clearly a part of Asia and its ability to create a unique experience for tourists is actually quite compelling.” The Primorsky integrated entertainment zone includes coastal, lake and forest areas. The region already has seaside resorts popular with domestic tourists.

Global Market Advisors (GMA), which worked on the feasibility study for the region, estimates the Vladivostok area gaming market will reach US$ 1.2 billion in its third year of operation, and US$ 5.2 billion in its tenth year. That would make it one of the top four gaming destinations in the world, behind Macau, Las Vegas, and Singapore. Taxes rates will be low, about US$ 4,200 a month per gaming table and US$ 250 per machine, equivalent to a single digit percentage of expected revenue.

Russia’s domestic gaming market may have reached US$ 9 billion in 2009, before the government abruptly shut casinos and restricted gaming to four remote, relatively underdeveloped areas. “While the domestic market, both local day trip gamers and tourists, will certainly play a role in the success of Vladivostok, other feeder markets are expected to contribute more,” GMA partner Andrew Klebanow says.

Primorksy is the only one of the four gaming areas – Crimea could become a fifth – that faces east Asia. In its original forecast, GMA estimated the Russian market would provide approximately 8% of gaming revenue. China is projected to account for 57%, Korea 22% and Japan 13%. “This of course is dependent on a number of factors including the development of airlift into the region, the kinds of properties that are ultimately built as well as the marketing practices of individual operators,” Klebanow explains.

The region’s first resort, controlled by Melco Crown Entertainment co-chairman and chief executive office Lawrence Ho, is due to open later this year. The US$ 110 million project is expected to have 60 gaming tables, 15 of them for VIPs, 800 gaming machines and110 guest rooms. A second phase would add 100 more VIP tables and up to 600 machines.

Ho invested in Primorsky without Melco Crown partner James Packer and will own the project through two Hong Kong listed vehicles, Melco Crown partner Melco International Development and Summit Ascent Holdings. Taiwan gaming machine maker Finich Enterprises and Russian construction executive Oleg Drozdov also hold stakes in the project. Drozdov, who began building the project before Ho bought in, sold down his stake to 5% in April while facing investigation in Russia on criminal charges reportedly unrelated to the casino venture.

Hong Kong listed NagaCorp, controlled by Malaysian billionaire Chen Lip Keong, says it will invest US$ 350 million in a hotel casino complex with at least 100 tables and 500 machines, plus convention and entertainment facilities. The company says it doesn’t expect it to operate before 2018, after it opens a major extension to NagaWorld in Phnom Penh.

“Both NagaCorp and Melco International are an excellent fit for the market,” GMA’s Klebanow says. “NagaCorp in particular presents a compelling story. They are a nimble operator, capable of reacting quickly. For example, if the region’s airlines fail to provide sufficient capacity into the market, they could deploy one of their A-320s to bring gaming oriented tourists into the market. They also have an appreciation for some of the underserved portions of the region’s gaming market, particularly mid-tier premium players that the larger operators tend to ignore.

“Melco is also an astute developer and operator. If there is any concern, it is the amount of developments that they have in the pipeline right now,” Klebanow adds. Melco Crown expects to open its City of Dreams Manila later this year and Macau Studio City next year, and is also expanding City of Dreams in Macau.

Las Vegas based Global Gaming Asset Management, headed by former Las Vegas Sands president and chief operating officer William Weidner, has also looked into a Primorsky casino investment. But the company says it’s a taking a “strategic pause” in view of recent Russian government actions on the world stage. Dean Macomber believes Russia’s current outcast status compounds first mover advantages for companies brave enough to make the leap. “There are a thousand reasons to leave every day,” he says. “You need courage and commitment to last.”

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