Despite the bright prospect of more Chinese gamblers visiting its Savan Vegas casino and hotel in Savannakhet province, Sanum Investment Ltd has put its investments in Laos on hold because of diminished confidence in doing business in the country.
The Savan Vegas casino can accommodate up to 2,000 gamblers at a time and could be expanded to take advantage of the Chinese market if conditions permit.
The decision stems from the move by the Lao government to seize control of the Thanaleng Slot Machine Club near Vientiane and allow a Lao family, believed to have close connections to the government, to operate the club. Sanum has been also hit with a retroactive tax bill for US$23 million, said Richard Pipes, executive vice-president of Sanum Investment.
The Thanaleng property was earning upward of $3 million in monthly revenues in April 2012, when Sanum’s minority partner, ST Group, was assisted by police and military officials in forcibly ejecting Sanum officials from the site.
Macau-based Sanum has fought back by filing legal documents with the World Bank’s International Centre for the Settlement of Investment Disputes, saying the government has broken treaties protecting foreign investments.
Savan Vegas is now the company’s only business in Laos, and there are concerns that it too could be in jeopardy if the retroactive tax bill is not settled.
Frank Hamada, managing director of Savan Vegas Ltd, the management arm of Sanum Investment at the casino complex, said that since the business was established in 2008, the number of gamblers had grown impressively. It now attracts 8,000 to 10,000 people per month.
Located near the border just a 30-minute drive from Mukdahan province in Thailand, the site is also within driving distance of Lao Bao in Vietnam. Thai and Vietnamese customers originally were the prime targets for the casino, but the arrival of more Chinese investors as well as tourists in Laos has opened new opportunities.
Frank Hamada
Mr Hamada said the Chinese were now among the top three investor groups in Laos and more are coming as the Savan-Seno Special Economic Zone (SEZ) expands. Chinese are very enthusiastic gamblers and their spending per bet can be 10 times higher than for those from other countries, he added.
To attract the new customers, the company has adapted its marketing campaign. Like other casinos, Savan Vegas will support transport costs and offer free hotel rooms and meals for high-rolling guests, particularly those from Thailand. It reimburses guests 3,000 to 15,000 baht per vehicle depending on the distance they drive. Now it wants to fly punters from China to Savannakhet directly.
“We’re working with an airline and many tour agents to ask for the opportunity to stage direct flights to Savannakhet,” said Mr Hamada.
Currently, there is only one direct flight from Bangkok to Savannakhet. Departing from China, Chinese travellers have to fly to Vientiane first and then take a bus to the province, which takes around eight hours.
Mr Hamada said Savan Vegas had also contacted the Savannakhet local government, offering the assistance to help expand the existing airport. The investment may cost around $2-3 million. The expansion is aimed at accommodating larger aircraft than the ATRs that now land at the airport.
If Savan Vegas can conclude a deal with an airline and tour agents, it is possible that it will expand capacity to cater to increasing numbers of Chinese gamblers, he said.
According to its tentative plan, Savan Vegas will double the number of its VIP rooms to 12. It will also add a new wing called Jade Elephant with Chinese-style decoration. The current capacity of the casino can serve up to 2,000 gamblers per day.
On the hotel side, Savan Vegas has 490 rooms with an average occupancy rate of 80-90%. It is usually 100% full on weekends.
“The current stage of hotel service is okay. The expansion may take place next year or the year after,” said Mr Hamada.
Savan Vegas has yet to finalise the investment cost for the expansion.
However, Mr Pipes said the expansion plan remained uncertain given the fact that the company still had a legal dispute with the Lao government.
“Although we see a bright outlook for the gaming business in Laos, we’re not confident to expand our business now,” he said. “The government has to ensure foreign investors that their assets will be safe.”