IPI topline growth continues as casino makes difficult debut

 The opening of Imperial Pacific’s resort on the South Pacific island of Saipan had been one of the most eagerly anticipated openings in Asia in recent years, though in the end the casino made its debut with very little fanfare in July this year.

The company, which beat rival Marianas Stars Entertainment for a license in 2014, had set the date for a lavish Chinese New Year event, though few familiar with the pace of construction on the island had expected that target to be met.

Since more than doubling its initial investment pledge to $7 billion shortly after being awarded the license, the project has been plagued by a series of weather and labor-related problems. Typhoon Soudelor swept across the island chain in 2015, causing widespread devastation and forcing the temporary closure of the airport to civilian flights.

It also created a scarcity of local raw materials and labor needed for the construction of the white and gold waterfront palace. Still, Imperial Pacific forged ahead and won the right to operate a temporary facility out of the luxury T-Galleria shopping mall to generate revenue to help finance the development.

It was the numbers generated by the 48 tables at the tiny casino that generated all the buzz. VIPs rolled in, mainly from China, despite a scarcity of any suitable hotel accommodation. The casino was generating monthly VIP roll averaging at about $2 billion.

As the date for the opening of the casino approached, the company’s problems appeared to mount in tandem. International credit rating agencies Moody’s and Fitch both expressed concern about the financing situation, both downgrading Imperial Pacific’s credit rating early in the year.

Casino spending fuels GDP

The Commonwealth of Northern Mariana Islands posted a 28.6 percent jump in gross domestic product in 2016, driven mostly by the services sector, reflecting growth in tourism spending. Service exports surged by 72.8 percent, compared to a 14.9 percent gain in 2015, while visitor arrivals in the year were up more than 10 percent. “Private fixed investment [in CNMI] increased over 60 percent in 2016, reflecting construction of the casino resort in Garapan and other hotel construction on Saipan,” said the federal commerce department.

Politician seeks GGR-based tax

 

House Representative Edwin Propst has said he plans to push for a 10 percent tax on gross gambling revenue for Imperial Pacific. “We will go through the painstaking and long process of an initiative petition,” he was quoted by local media as saying, adding that the proposal would be supported by community members. Propst noted that prior attempts to introduce a GGR-based tax on the casino had stalled and therefore taking the proposition direct to the people was the best way forward. The CNMI Constitution allows the enactment of laws through people’s initiative.

Then came reports that the Federal Bureau of Investigation was investigating one of the project’s main contractors after the death of a worker. The probe uncovered undocumented Chinese workers working illegally on the site. 

Imperial Pacific moved to announce new workforce rules banning any individuals who are not authorized to enter the construction site. On May 1, 2017, the Imperial Pacific Security Department hired Island Protection Services to secure the Garapan construction site was adhering to rules.

Still, the workforce issues have not gone away. Labourers claiming back wages picketed the opening of the casino and more recently 37 have refused an offer to be paid and sent back to China, seeking further compensation. 

IPI held a “preview” of its casino facilities at the end of March, but it wasn’t until July 6th that the casino finally opened its doors to the public, offering about 70 tables and 190 machines, including baccarat, blackjack, Texas Hold ‘Em, roulette and sic bo.  

However, it was only the casino that opened in July. The company filed an amended timetable for the rollout of the rest of the facilities in August, pledging the full opening of the initial facility no later than August next year. This will include at minimum, a 329-room four or five star luxury hotel; 14,140 sqm of gaming area; 3,870 sqm of food and beverage outlets; 186 sqm of retail space; 930 sqm of meeting space; 15 villas; 1,500 sqm of spa/fitness area; and associated parking, site improvements, landscaping, furnishings, fixtures, utilities and infrastructure.

Phase one is to be completed no later than August 13, 2023, and shall “result in the establishment of a fully functional integrated resort, while the full rollout is expected by 2028. 

The group stopped publishing monthly VIP rolling figures in June, though said it would make an announcement if the amount were to drop below $2.5 billion a month, which so far it hasn’t. For the first half of the year, it reported an 8.9 percent increase in profit to HK$912 million ($116.9 million). Revenue was up to HK$7.3 billion, up from HK$3.98 billion in the prior year period.

Best Sunshine Live saw VIP table games rolling rise to HK$196.3 billion in the half year, compared to HK$104.7 billion in 16H1. The mass market business did gain, but was negligible compared with the VIP.

Elsewhere in the region, little progress has been made developing casino resorts. The Tinian Dynasty Hotel & Casino, whose license was revoked in 2016, was ordered to pay a $191,400 civil penalty to the U.S. Department of Labour for infringements of workers rights. 

While, the company behind the $130-million Tinian Ocean View Resort and Casino launched an online petition seeking support after the denial of a Master Siting Permit. The Bridge Investment Group (BIG) has already spent more than $13 million on construction of the casino resort, but a roadblock emerged when the Commonwealth regulatory agencies determined that the proposed activities at the Tinian Harbor, by which the casino resort is located, did not meet the technical definition of “port-related activities.