Cambodia Bets Casinos Can Boost Tourism [-More revenue for Xok Kong?]

An artist's rendering of the Thansur Bokor Highland Resort under development (Thansur Bokor Highland Resort)

Xok Kong - Chairman of Sokimex and a crony of Hun Xen

April 3, 2012
By PATRICK BARTA
The Wall Street Journal

Cambodian developers are betting that casinos can make the tiny Southeast Asian country a bigger draw for high-spending tourists.

The nation of 15 million people has more than 25 casinos, but most are small affairs in rough-and-tumble border towns that cater to hard-core Thai, Chinese and Vietnamese gamblers. Now, as the country continues to stabilize after political chaos in the 1970s, '80s and '90s, developers are pushing ahead with more-ambitious resorts hoping to attract a broader clientele. But some skeptics say the odds of success are long.

Among the planned developments is the sprawling Thansur Bokor Highland Resort, two hours south of the Cambodian capital of Phnom Penh. The resort held a soft opening last week and is expected to open officially by midyear, with 418 rooms, a convention center, spa facilities, scenic trails and an "edutainment center" for children, with a library and board games. Developed by a unit of Sokimex Group, a Cambodian conglomerate that controls much of the country's oil industry, the resort also is notable for its location along a cliff's edge nearly 1,100 meters (3,600 feet) above sea level that often is covered in clouds.

Cambodia's best-known casino, NagaWorld in Phnom Penh, is adding 220 rooms to its current total of about 500. It is adding as many as 30 new gambling tables to its total of 131 and around 275 new slot machines. Several other additions are being developed for the resort, which is operated by Hong Kong-listed NagaCorp., 3918.HK -14.53%at a cost of $369 million. The plans include a "NagaCity Walk", a tourist park and such retailers as Cartier, Rolex and Piaget.

Developers also are looking to expand gambling in other parts of Cambodia, including near the southern beach resort of Sihanoukville and near what could be the biggest prize: Siem Reap, home to the Angkor Wat temple, Cambodia's most-renowned tourist attraction.

Government officials have blessed the idea of adding new casinos, despite protests from advocacy groups that worry that the projects will generate crime and push some residents off their land. The government says casinos generated about $20 million in tax revenue last year, up 25% from the year before. That revenue is helping Cambodia develop in such areas as education and health, said Phay Siphan, a spokesman for Cambodia's Council of Ministers. The casinos also will encourage tourism, he said.

The development push comes as Cambodia's neighbors are racing to benefit from explosive gambling growth in the region. The Chinese territory of Macau raked in $33.5 billion in gambling revenue last year, more than five times the amount of the Las Vegas Strip. Singapore, which opened its first casinos in 2010, already is neck and neck with the Strip, and the Philippines aims to surpass Las Vegas, with plans to open four casino resorts in Manila.

But it remains far from clear whether Cambodia is ready to compete. The country has emerged in recent years as a popular tourist destination, attracting more than 2.5 million visitors in 2010, compared with fewer than 500,000 in 2000. Yet that is small compared with other destinations; 28 million people visited Macau last year.

Also, most of Cambodia's gamblers are serious about wagering. Many aren't interested in the country's other attractions, such as ancient temples and relics from the 1970s, including the so-called Killing Fields mass graves outside Phnom Penh, where victims of Cambodia's former Communist Khmer Rouge regime are buried.

Analysts say NagaWorld, which draws heavily from nearby Vietnam and reported a profit of more than $90 million last year, may be ripe for more traffic.

The Thansur Bokor project is an even larger wager. The five-square-kilometer (1,200-acre) site includes a former French colonial hotel, built in 1917, that became a casino before it was abandoned and gutted during Cambodia's civil wars of the 1970s. Future phases include housing and a scenic cable car. A golf course designed by Arnold Palmer and more than a dozen dining areas also are planned.

Some gambling experts are skeptical it will succeed, in part because of Thansur Bokor's distance from Phnom Penh. It also is unclear whether Cambodia will be able to attract the kind of family-oriented crowds that have boosted revenue at casino developments in Singapore.

"Why would you fly to Phnom Penh, do all that traveling, and then sit in the car for another 2½ hours when [NagaWorld] is right there?" said Ben Lee, a managing partner at industry consulting firm IGamiX. In Cambodia, "gambling is serious business, it's not a holiday trip. Time on the road is time wasted."

Backers of the project, who didn't provide an estimate of its cost, said they were confident that it would be a success.

"We offer a perfect destination for people to entertain and rejuvenate in a pristine environment coupled with yearlong cool weather," Thansur Bokor Chief Executive Ngin Banal said by email. Expanded airline service into nearby Sihanoukville will likely boost tourism, he said. "Our sincere service and quality facilities will inspire our guests to return again and again."

—Celine Fernandez,

Kate O'Keeffe and Sun Narin contributed to this article.