Thailand – Why it might work this time around

Thailand has long been viewed as one of the top potential prizes when it comes to gaming in Asia, with its well-established tourism industry and infrastructure.

For decades some of the world’s largest gaming companies have tried to make inroads and failed, coming up against a wall of opposition from conservative sectors of society and the monarchy. In this week’s Face-to-Face, Daniel Cheng, a seasoned industry executive with knowledge of the Thai market, explains why he thinks it might be different this time around.

Covid has prompted the military-backed government, which was formerly opposed to gaming, to reexamine its stance. Committees have been set up to evaluate the potential and events are moving fast. 

Interview transcript

AGBrief   0:08  

Hello, and welcome to Asia Gaming Brief’s Face-to-Face series. Today I’m going to be talking with Daniel Cheng. He is a former executive with HardRock International and a seasoned veteran in Asia’s gaming industry. We’re going to be talking about Thailand and the potential for opening up to IRs in that country. 

Thank you for joining us today. Daniel. It’s great to have you with us again. What we wanted to talk about today is Thailand. And I know in your experience, your past experiences as a casino executive in Asia, you have had experience in this market. We’re looking at this, of course, because the government has just set up a committee to study the potential liberalization yet again, of the sector. So welcome. Do you think this is going to happen this time around?

Daniel Cheng  0:58  

I hope so. What a wonderful opportunity, something we’ve been looking at for 15 years, at least for me.

AGBrief   1:05  

Why do you think you might be different this time?

Daniel Cheng  1:09  

Well, during the time of the former king, King Bhumibol, who was known to be a pretty staunch religious leader. During that period, no one expected anything to really happen, even though there was some sliver of hope during the time when Thaksin Shinawatra was prime minister. But then, of course, it was false, and then it all went dead again.

AGBrief   1:39  

Okay? And why do you think the government might have more of a chance to get it through this time, because I know that there is still quite a lot of opposition within Thailand, from the conservative elements of society.

Daniel Cheng  1:52  

So there’s been a change of heart since the new king has taken over. He’s known to be more liberal. And the fact that this time around, in the last few months that the development we’ve seen, the movement was coming from the government itself, which is sort of still a little bit of a military government. So, that was the group that had been opposing this before, with the previous one. And the opposition, which was, you know, previously the Thaksin government before, has always been supportive of casino gaming. So now that the other side is the one pushing, you know, there seems to be very little resistance this time around.

AGBrief   2:50  

So what have they done so far? Where are we in the process?

Daniel Cheng  2:55  

It happened very quickly, right? So it probably was brought up innocuously from one of the lawmakers in the Parliament to suggest that and very soon after that, the government agreed to set up a panel, or a subcommittee of parliamentarians, to look at it. And that has also since been formed, I think, up to half a dozen, five panels, if I believe are studying it right now. So, the momentum has just moved all by itself. And we’re talking about a matter of less than three months, I think. So that all sort of points to something behind the scenes, at least what I’m guessing is that’s moving it forward. There’s some sort of already tacit approval from the higher powers I think for this.

AGBrief   3:53  

How long would it be if you had to put a guess on a likely timetable before we see something concrete? I know there was a certain consultation period given for the committee’s but beyond that, what processes need to happen?

Daniel Cheng  4:07  

A lot of studies have already been done in the past. Usually, in Thailand, it begins with academia. And they use academia to sort of endorse it first before the government picks up anything like that. So every study in the last 10, 15, even 20 years, has been supportive of gambling, or to the extent that it could be a model somewhat similar to what Singapore has done. And now that Singapore has been a success story for more than 10 years. I think there’s even more support for that, because now it’s tried and tested before it was just, you know, a vision.

AGBrief   4:48  

And you started by saying, what a wonderful opportunity this would be. Tell us tell us why Thailand is seen as such a good opportunity

Daniel Cheng  4:57  

Well look at Thailand, even before casinos. Thailand would be destination central in terms of tourism for Asia. It has always been a great destination hub, you know the Thai friendliness ,their culture and their cuisine. When we talk about entertainment and tourism, as far Asia is concerned, it is always Bangkok, Thailand. Singapore is a great international gateway that has all the advantages attached to it. But Thailand has the X Factor. You know, when you talk about entertainment in Thailand, in Bangkok, it’s in bold neon letters, it’s very different from the rest of the country. Even Japan, which is a little bit more genteel in terms of the tourism they offer. I mean, we look at Thailand tourism numbers, even before the onset of COVID. We’re talking about somewhere around 40 million visitors a year. Someone can say that’s the same as Macau. But in  Macau for the same number, half of them are day trippers that just walk across the border. In Thailand, we’re talking about real tourists and 40 million is twice that of Singapore. So, if Singapore can have successful integrated resorts, with $6-$7 billion in gross gaming revenue, we should be able to, you know, almost double it, I think, in terms of the prospects of travel.

AGBrief   6:41  

It would very quickly be the number two market in Asia and after Macau, if it were to come to pass?

Daniel Cheng  6:46  

It may even be the number one market when it finally comes up, because Macau is not going on the right trajectory right now, as we all know. In Japan, god knows when it’s going to start. They’re saying they’re going to start only in 2029, which is very, very conservative. At this rate, if the Thais are moving at the pace they’re moving, COVID permitting, they could even be sooner.

AGBrief   7:14  

And where do you think the most likely locations for an IR would be in Thailand?

Daniel Cheng  7:20  

I love it to be in Bangkok, but not within the city proper, but in the greater Bangkok Metropolitan area. So there’s always a possibility of that. And that would be the best prospects commercially for investors and operators. But it’s just as likely to be in a more resort region, like Phuket, or in the northern areas like Chiang Mai. So we don’t know.

AGBrief   7:48  

And who do you think might be interested?

Daniel Cheng  7:51  

Everybody really. I mean, it’s still early days, we don’t know. Is it going to be one trial license or multiple license or things like that, but Sands has been there forever. Right. During Sheldon Adelson’s time they visited it maybe half a dozen times or more. He met with, you know, former Prime Minister Thaksin and a lot of other top officials. George Tanasijevich has done the same thing. Thailand was always more the holy grail than Japan I think. So everybody’s gonna be there. Even just after the passing of the previous king, companies like Hard Rock, where I was working with them, were already making fresh inquiries, as would have a few other operators as well. Right, that would have stopped the last few years because of COVID. But the interest has never stopped.

AGBrief   8:53  

Interesting. I mean, obviously, you mentioned Japan a couple of times. That was also going to be the goose that was going to lay the golden eggs, but it didn’t turn out that way. What lessons do you think Thailand could draw from that?

Daniel Cheng  9:08  

If anything, I think Thais are always very practical. So even without the Japanese lesson, I think they would have come up with something that is more investor friendly. So they would have probably emulated Singapore’s taxation model that favors the premium, which is what the Philippines had done to good effect. And yeah, I mean, their reasons are very different from why Singapore, Japan, or the Philippines wanted gaming in the first place. We know that Thais are already big gamblers. We already know that. You know, various studies report research that has said that you have billions and billions of dollars outflow from gambling from Thai’s overseas, especially, you know, in the gamut of offshore casinos that came up along its borders, in Cambodia, Myanmar. We’ve read about underground casinos that still exist today in Thailand, reported to generate five $6 billion of turnover, just a little less than the two IRs in Singapore, and these are just illegal underground casinos. So that appetite has always been there and the government’s thrust has always been let’s legalize it so that we can actually regulate it properly, generate some good fiscal revenue from it. 

AGBrief   10:41  

Is there anything else you want to add, Daniel, I don’t have any more questions on the subject. What do you think?

Daniel Cheng  10:47  

I think it’s a great opportunity. So, if someone’s going to spend $10 billion for Osaka, then you can spend $15 to $20 billion using the same extrapolated argument for Bangkok because the potential is, I believe, would be so much higher.

AGBrief   11:11  

Just a note, on that one. Obviously, those casino operators that all piled into Japan spent a lot of money on the groundwork there, I mean, millions and millions and had nothing to show for it. Any chance that they might be once bitten twice shy.

Daniel Cheng  11:27  

But I think Thailand’s a different story. I think they’ll all jump right in again. In Japan, I believe people were caught by surprise by the snail crawl. Part of it is political. And then also when the policies came out, they were a bit of a dampener. But saying that Japan is still a great market. Yes, the government looks to be a little bit greedy in terms of, you know, their tax and all that. But it’s still going to make money for operators. MGM in Osaka is going to make money. They’re just not going to get it back in five years, like Singapore, maybe twice or three times that because of all your circumstances but in Thailand, look, construction costs can be much, much lower. Labor costs are going to be extremely, extremely low. It is already an international gateway. Everything you want in an integrated resort is there in Thailand and then some. More than in Singapore or Japan. So I see no reason for operators not to jump in and want a slice. It’s a great opportunity.