When workers found ancient dice among a haul of antiquities unearthed at the site of a planned casino resort in Russia’s Far East, many locals saw it as a good omen for the designated gambling zone about 40 kilometers outside the port city of Vladivostok.
Not so lucky for Hong Kong-listed NagaCorp: construction that had begun in 2015 ground to a halt; it took archeologists around six months to clear the site, at a cost of about US$500,000. More seriously, it frustrated the company’s ambitions to transform itself from being the monopoly casino-hotel in Cambodia, Southeast Asia’s third-smallest economy, into an international operator of integrated gambling and tourism resorts.
That milestone is back in sight. The company has now restarted construction on its US$350 million Mayak resort, which is expected to open early in 2019. The first phase will comprise a hotel and casino perched on Russia’s east coast. The 11-story building will have 279 rooms and a 2,000 seat concert hall/theater, while the casino will host an estimated 300 slot machines and 30 gaming tables.
If that proves transformational for Naga, it marks something of a sea change for the Primorye Gaming Zone too: Mayak, with its open-air pool and aqua park, will be the first project there to offer non-gambling entertainment. Mayak’s arrival will also end the effective monopoly of Tigre de Cristal, the casino complex opened in 2015 by Lawrence Ho, son of Macau lynchpin Stanley and a successful tycoon in his own right.
That there is still only one casino operator up and running in Primorye eight years after the zone was set up doesn’t, at first glance, appear to endorse the government’s plan to drive growth and prosperity in a sparsely populated region long beset by lack of investment and a lack of interest.
But take a closer look, and it becomes more clear why others are increasingly keen to double down on Ho’s big gambit – the Tigre de Cristal is the largest Chinese investment in the Russian Far East to date and Ho opted to go it alone through Summit Ascent Holdings, a Macau company he owns.
Tigre is also the largest casino in the six zones where gambling has been legalized since the government banned all betting in 2009 in response to a plague of gaming dens and slot machines – and an associated boom in organized crime groups. The US$172 million first phase of the project hosts 35 VIP tables, 33 mass market tables, and 321 slot machines, as well as casual and fine dining restaurants, bars, a gym and spa, and a 121 room hotel.
Since opening, more than 350,000 tourists have visited Tigre complex, with over a fifth coming from overseas, mostly from China. Summit Ascent’s annual report released at the end of March stated that the main source of revenue was from so-called rolling chip turnover associated with high-rollers: this rose to US$1.32 billion in the second half from US$450 million just six months earlier.
The casino resorts push is backed by more than just land, Ho said in the report. The government is investing in roads, bridges and airports and making it easier to apply for tourist visas. By some estimates, about 400 million people live within three hours flight of Vladivostok. Convenience is clearly a major factor in destination; Beijing-area residents accounted for less than 2% of mainland visitors to Macau in 2012.
In addition to an underserved population in Northeast Asia, Russia offers “the lowest effective gaming tax regime in the world, a tax exemption on non-gaming revenue until 2020, underutilized infrastructure, [and] strengthening ties between Russia and China.”
Construction of a more ambitious US$500 million phase two for Tigre is expected to begin in the second half of 2019, with 100 VIP gaming tables, 70 mass market tables, 500 slot machines, a shopping mall, F&B outlets, a spa center, night club, auditorium and conference facilities and 500 hotel rooms.
There are two other investment groups that have committed to develop casino resorts inside the Primorye zone. Russia’s Diamond Fortune Holdings is also expected by 2019 to open its Selena complex, including a four-star hotel, casino, spa, restaurants and retail space, with preliminary ground work now completed.
The fourth investor, Royal Time, is looking like a no-show. The company is undergoing restructuring and last month the Development Corporation of the Primorsky Territory filed an arbitration claim to terminate its contract, according to Calvin Ayre. A preliminary hearing was scheduled for today.
In March, Primorsky Territory’s vice-governor Evgeny Polyansky warned companies to stick to their agreed deadlines or risk being replaced. Failure to meet stated timetables would result in “termination of the investment agreement with the subsequent payment of fines for failure to work.”
Altogether, the four agreed to invest US$2.68 billion in the zone, with all construction to be completed by 2022.
“By that time, we expect to see eight large entertainment complexes and we’ve given out 263 hectares for the purpose of construction,” said Konstantin Shestakov, director of tourism for Primorsky Krai. “The total space reserved for the zone is 619 hectares, as we will be offering tourists a wide range of entertainment options.”