Imperial Pacific: Forging the world’s newest gaming economy

Saipan Mark Brown Imperial Pacific
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The US-administered Pacific island of Saipan is fast becoming Asia’s hottest new destination for VIP casino players, thanks to its proximity to China and the high-life offered by Imperial Pacific Holdings’ Grand Mariana development. One of the gaming industry’s leading lights, Mark Brown, talks to Casino Review about the prospects ahead. Chris Webster reports.

 

[dropcap]L[/dropcap]ittle more than two years ago, few in the gaming industry had ever heard of Saipan. The most populous of the Northern Mariana Islands – an archipelago and US commonwealth in the northwest Pacific Ocean – up until recently Saipan’s most noteworthy historical mention was a particularly horrific battle between American and Japanese forces during World War Two.

But in 2014, all that changed. Driven by a need for increased revenue and investment in its local economy, the CNMI senate approved a bill repealing a long-standing ban on casinos on Saipan – bringing it in line with its sister islands Tinian and Rota.

“The island was really struggling financially, with the government essentially bankrupt,” explains Mark Brown, chief executive of Imperial Pacific International Holdings. IPH’s sub-company Best Sunshine was awarded Saipan’s first ever casino licence two years ago, along with forty years of operational exclusivity. In return, it promised to channel massive investment into Saipan – by way of the Grand Mariana resort: a massive, $7.1bn (E6.2bn) complex which is slated to open later this year.

 

  Whether it’s Morgan Stanley guys, Credit Suisse guys, whoever – when they actually travelled there and stood on the beach and saw what could be done, that’s when they were like…holy shit, I get this

 

The road to market opening on Saipan had been a rocky one. The CNMI’s house of representatives had twice attempted to legalise casinos on the island (in 1979 and 2007) only to have both bills rejected by its senate. In 2014, a third attempt – prompted by the expressed interest of IPH – was successful, with Best Sunshine subsequently being elected operator of choice. The selection process, inclusive of two other competitors, saw the CNMI government consult with both the Innovation Group and background security specialist B2G – and brought to an end IP’s own search for a new gaming destination within the Asia Pacific region.

“The company had been actively searching for a new market to invest in for about six years,” says Brown. “They looked everywhere – they went to Australia, Korea, Vietnam, Cambodia – and eventually came across this unbelievably beautiful island of Saipan. When they discovered Saipan, they immediately tried to see whether they could get gaming there.”CR165 Mark Brown1

But why? What appeal did Saipan hold to warrant such large investment? For Brown, the answer to that question lies in the visceral reaction experienced by actually visiting the place.

“Once I came and saw the island, once I listened to the story of the company and its vision – I knew I wanted onboard,” he recalls. “It was the same with our financiers. Whether it’s Morgan Stanley guys, Credit Suisse guys, whoever – when they actually travelled there and stood on the beach and saw what could be done, that’s when they were like…holy shit, I get this.”

And indeed, the case for Saipan as a new gaming hub certainly seems compelling. With an unspoiled coastline, the world’s most stable temperatures throughout the year (a balmy 26-29 degrees centigrade [78- 84 fahrenheit]), unrivalled diving opportunities – not to mention the security benefits of bestowed by its status as a US territory – the CNMI is already a popular destination with Chinese, Korean and Japanese tourists. Just a four to five hour flight from major Chinese cities such as Beijing and Shanghai – around 500,000 visitors already make the trip out to Saipan each and every year. Indeed, several major Asian airlines fly direct to the island’s airport – making the trip to the CNMI more convenient to the Asian mainland than its apparent geographic isolation would first suggest.

To Brown’s mind, this relative proximity is something of a trump-card for Saipan – and one that he is eager to stress.

“When people say to me: ‘but wait, isn’t Saipan in the middle of nowhere?’ – I tell them, no. It really isn’t,” he says. “For many of these VIP Chinese guys, the CNMI is actually easier to get to than Macau – and certainly easier than a number of other major Asian gaming locales.”

Best Sunshine’s preliminary figures seem to bear this argument out. Last summer, the company opened a temporary casino in the DFS shopping mall – the major retail hub in Saipan’s largest settlement, Garapan. IPH didn’t skimp on the price, throwing $25m (E22.4m) into the short-term venture, but the company viewed the property’s core purpose to be the preliminary training of its large contingent of new staff (the majority of which are required – as a condition of the Best Sunshine licence – to be local residents). Nevertheless, early results – limited to the temporary casino’s 106 slot machines, 32 mass and six premium-mass tables – were highly encouraging.

“We were dropping $400,000 (E359,000) to $500,000 (E448,000) a day on the mass floor,” says Brown. “That showed us right away that the mass was here.”

Almost by accident, Best Sunshine seemed to have stumbled across a dormant domestic market of foreign residents.

“We say it’s not really the local Chamorrons gambling, it’s the local foreign business owners,” explains Brown. “The Chinese and Japanese owners of hotels and restaurants. That’s who’s coming and playing in terms of the mass.”

Casino Floor

Fast forward the clock to last November – and things were ramped up to a different order of magnitude entirely. By that point, Best Sunshine had in-place a squad of highly experienced VIP baccarat dealers resident on Saipan – ready to man the new casino’s seven private high-rolling rooms. It had also chartered two luxury yachts. As such, a “grand-opening” ceremony saw Brown welcome the first of Asia’s elite gamers.

What happened next took everyone by surprise. “Out of the gate in November, we rolled $1.6bn (E1.43bn) and in December we rolled $1.5bn (E1.34bn) – we were blown away,” says Brown. “Our goal had been to make $1bn (E900,000) to $1.2bn (E1.1bn) per month – and I was worried that this was overly ambitious. I was thinking – ‘are we’re really saying we’re going to roll a billion dollars on an island in the Pacific?’ But then things started to get even better: January saw us roll $2.2bn (E2bn), April was $3.2bn (E2.9bn) and May $2.6bn (E2.3bn). Now, we’re anywhere between 2 and 3 billion every single month.”

I think there’s a misconception about the Chinese VIP player – that all they want to do is drink and play baccarat

 

As such – Best Sunshine’s temporary, training-orientated effort has transformed Saipan from gaming backwater to the fourth highest-grossing VIP destination on the planet.

How did this extraordinary turn of events come about? Brown believes the numbers attest to the unique luxury appeal the island can offer its guests.

“I think there’s a misconception about the Chinese VIP player – that all they want to do is drink and play baccarat,” he remarks. “But they’re more sophisticated than that. These guys love the yachts we offer them, the gourmet food, the fishing – beach barbecues, snorkelling with their families – they love all of that.”

“Another important factor, I think, is that our players feel very safe here, both inside our casino and outside on the island itself,” he adds. “Our elite players see the casino control commissioners and security guards and cameras – and feel comfortable betting half a million dollars per hand. I don’t think that same guy is betting that kind of money anywhere else in the Asian satellite market.”

Garapan

Giving back – what the Grand Mariana brings the people of Saipan

[dropcap]U[/dropcap]nder the terms of its licence, Imperial Pacific pays an annual fee of $15m (E13.5m) to the government of the CNMI. This revenue is channeled into the local retirement scheme – both for residents of Saipan and nearby Tinian and Rota. IPH made an initial $30m (E27m) payment upon first receiving its licence – and will pay a further $20m (E18m) upon final completion of its second phase of construction.

On top of these fees – the Grand Mariana will be subject to an annual 5 per cent business gross revenue across all business vectors (including gaming). In terms of infrastructural improvements, IPH is focusing first on increasing Saipan’s hotel capacity – as well as planning on expanding the number of flights to the island.

“At the moment, Saipan’s 2,800 hotel rooms operate at virtually 100 per cent occupancy, year round,” says Brown.

“So in terms of growing the market – the key issue is the lack of rooms. So when people say to us – are you making relationships with airlines? The answer is yes, but the main concentration for now is expanding the accommodation options.”

PUBLIC SERVICES

As for staffing its new hotel and casino facilities, IPH has committed itself to a 65 per cent (best effort) ratio of local versus non-local staff. At present meanwhile, Best Sunshine employs just over 1,200 staff at its temporary casino – just over half of which are long-term residents of the island (from a total population of 55,000).

Employment opportunities aside, Brown believes IPH’s investment in Saipan has already started to bear fruit for the people of the CNMI. “In just two years, we’ve already have an extremely positive impact on the CNMI’s economy,” he says. “Through our financial contributions, the budgets of numerous public departments have already been raised.”

THE GRAND MARIANA – WHAT’S TO COME

Scheduled to open its first (permanent) phase later this year, the Grand Mariana Casino and Hotel will boast a four-story main casino building – fashioned in the Beaux-Arts style of the Casino de Monte Carlo. Over 200 mass and premium mass tables will feature alongside 400 slot machines and a 16-story hotel tower with 350 suites. 15 luxury villa suites will round out the initial accommodation offering, as will an expanded fleet of private yachts.

Meanwhile, IPH has appointed Michelin star chef Brian McKenna to oversee cuisine at 11 restaurants – themselves headed up by fellow Michelin star chefs – all of them completely new to Asia. Other leisure facilities will include four bars, a nightclub and a beach club. Phase two has been forecast for completion in 2018 – and will see retail, leisure, accommodation and convention facilities substantially expanded in an “asset-light” approach involving a number of third-party operators. IPH will retain exclusive operation of any and all casino assets throughout this process.

Grand Mariana

 


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