Casino operator mulls betting on Taiwan

From China Daily

MACAO: Harrah's Entertainment Inc, the world's largest casino operator, is contemplating expansion to Taiwan and Japan, to capitalize on opportunities presented by the fast-growing and affluent Asia market.

Harrah's, which was taken private in a 2008 leveraged buyout, has remained aloof from the Asian market thus far, leaving the field open to US rivals, Las Vegas Sands, MGM Mirage Inc and Wynn Resorts Ltd. The three major casino operators have invested billions of dollars in the Asian market and are earning rich returns.

Harrah's however is projecting that a "significant portion" of its revenue will come from Asia within the next 10-15 years, depending on government liberalisation of local gaming laws, Michael Chen, Harrah's president for Asia, said yesterday.

"Asia remains highly underpenetrated as a market for gaming. There is enormous upside," Chen told Reuters on the sidelines of a gaming show in Macao.

Asia has roughly 100 casinos, far less than the United States, which has more than 800, he added.

Taiwan's huge and wealthy population, as well as gamblers from Japan and the mainland, would drive growth for Taiwan's casinos if and when they were built, Chen said.

After years of talk, Taiwan's legislature voted to legalise gambling in January, but limited the opening to several offshore islands in efforts to boost tourism and speed up economic development there.

Progress has been slower in Japan where liberalization of gaming laws has met with public opposition.

"In our industry, liberalisation is measured in decades, so it's highly unpredictable," Chen said, when pressed on a timeframe for Harrah's expansion in Asia.

But any near-term expansion for the casino operator is likely to be difficult. Like its rivals, including Sands and MGM, Harrah's has struggled to meet debt costs amid a credit crunch and the global economic downturn.

Despite a lack of casinos in Macao, which has overtaken the Las Vegas Strip as the world's biggest gambling resort based on revenue, Harrah's is interested in Macao over the long term, Chen said.

In 2002, Harrah's decided not to bid for a gaming license when the Macao government opened up the market to foreign casino operators. At the time, Harrah's believed regulators in the 14 jurisdictions where it operated would not permit the company to run casinos in Macao, Chen said.

While Harrah's has no casinos in Macao, the company paid $577.7 million in 2007 for a 70.8-hectare golf course on the Cotai Strip.

Foreign casino operators Sands and MGM, and Macao companies including Stanley Ho's SJM Holdings and Melco Crown Entertainment are among the companies holding Macao's six gaming licenses.

"The government has been very clear that there will be no additional licences," Chen said. "Things have a tendency to change, there might be an opportunity for us."

If Taiwan moves ahead with its plan to legalise casinos, gaming developments would be smaller in size and scope because of their locations, Chen said, adding that they "would not be large enough to satisfy a $5 billion investment".

Casinos in Japan's major metropolitan cities such as Tokyo and Osaka would probably have large-scale entertainment facilities, while those in Taiwan would have golf courses or beach-related attractions, he said.

Harrah's could team up with local partners, including real estate developers, banks and media companies in entering these Asian markets, Chen said.

In 2006, Harrah's lost a bid to Sands to build a new casino resort in Singapore's Marina Bay, which is expected to be ready by late 2009 or early 2010.

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From Bloomberg

By Tim Culpan

Nov. 23 (Bloomberg) -- Casinos in Taiwan may generate $3 billion in total annual revenue should the island legislate to legalize the industry, according to Las Vegas-based industry magnate Larry J. Woolf, who manages 13 casinos in North America.

``I don't think it'd be too much of a struggle to reach $1 billion'' in revenue each should the government allow three casinos, Woolf, Chief Executive Officer of London-listed Amazing Holdings Plc., said in an interview in Taipei.

Taiwan is considering allowing casinos on outlying islands such as Penghu. Woolf, 63, is betting the legislation will be passed, paving the way for Amazing to open the island's first casino as rivals Wynn Resorts Ltd. and Las Vegas Sands Corp. expand in Macau, which reaped $9.5 billion in gambling revenue in the 12 months to Sept. 30.

``Taiwan's market potential for casino gaming revenue, in the context of large-scale integrated resort and tourism development, is significant,'' said Jonathan Galaviz, a partner at Las Vegas-based hotel and casino consultancy Globalysis Ltd.

Amazing, which is based in the Isle of Man, plans to spend $50 million on the first phase of a 300-room hotel resort in Penghu to be opened by the end of 2009, Woolf said. The development, which will eventually be expanded to 600 rooms, is designed to accommodate a casino should the company win a license.

Shares of Amazing, which are listed on the London Stock Exchange's Alternative Investment Market, have surged 61 percent this year and closed at 240 pence each yesterday.

Casino Veteran

Woolf, a 40-year casino veteran, built and operated the MGM Grand in Las Vegas which was then the world's largest casino, and opened the most profitable, the Casino Niagara in Canada. His Navegante Group Inc. manages at least seven casinos in the U.S., including the Plaza Hotel & Casino in Las Vegas and the Casino Fandango in Carson City, both in Nevada.

Now Woolf says Taiwan could build the world's largest casino, surpassing the 800-table Venetian Macao opened by Sheldon Adelson's Las Vegas Sands in August.

Taiwan's government is discussing the feasibility of casinos and seeking public approval before opening up the market, the Government Information Office said in an Aug. 9 statement.

A December 2005 plebiscite of Penghu residents found 57 percent in favor of legalizing casinos, although the turnout for the vote was just 21 percent.

In addition to Penghu, Woolf recently visited the southern Taiwan county of Chiayi, which he says would also be a possible site for a subsequent casino should Amazing be allowed multiple licenses.

``It would take several years and billions of dollars of public and private sector investment to make Taiwan, or one of its islands, into a premiere leisure tourism destination such as Macau,'' Globalysis' Galaviz said.

`More Than Macau'

Macau's tax rate on casino revenue is 35 percent, compared with Taiwan's corporate tax rate of 25 percent. Its tax rate on gambling is yet to be set.

``I like this market more than Macau, especially if the tax rate is lower,'' Woolf said in the Nov. 19 interview.

Macau's gambling revenue in the third quarter was 20.5 billion patacas ($2.6 billion), 45 percent higher than a year earlier and 4 percent more than the previous quarter.

Taiwanese make up the largest portion of non-China visitors to Macau's resorts with many also traveling to Las Vegas to gamble, according to Henry Tsai, assistant professor of hotel and tourism management at Hong Kong Polytechnic University. Taiwan already has vast pent-up demand from illegal gambling which would support the casino industry, he said.

One illegal gambling operation uncovered in May was found to have revenue of NT$130 million ($4 million), with more than 170 other cases investigated by police, according to a report by the National Police Administration.

``In Taiwan, there's a huge amount of unaccounted economic losses from underground gambling,'' Tsai said. The government should ``turn this effort around and legalize gambling or make it a formal economic activity.''

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

If you would like to receive any of our country specific research or land market reports please call Mr. Magnus Harding at +852 3589 3051.

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