Andrew Klebanow, principal of Klebanow Consulting, discusses the impact of the coronavirus pandemic on Cambodia’s casino industry, maps out a potential path for reopening and looks at some of the measures operators could take to attract visitation once they resume operations.
Casino Review: Roughly what time scale are we looking at for casinos in Cambodia reopening?
Andrew Klebanow: The reopening of casinos will be predicated on the continued downward trend in new infections, hospitalisations and deaths from Covid-19 within the Kingdom of Cambodia. Once the central government is assured that the spread of the virus has been abated, casinos, along with other businesses will be allowed to re-open. The central government will probably impose certain social distancing measures on casino operators similar to those introduced in Macau. This may include a reduction in seating capacity, mandatory usage of masks by both customers and employees, and enhanced cleaning efforts. Regulators may also require the temporary cessation of smoking inside casinos. Coughing is a byproduct of smoking and coughing is a primary vehicle for the spread of the virus. It is also impossible to smoke a cigarette while wearing a mask. Should such a restriction be imposed, casino operators will have to provide smoking lounges or smoking zones outside of the casinos.
The reopening of casinos is only half of the equation; the other part requires the return of customers, particularly those from other countries. NAGA World will probably be the first casino to enjoy a resurgence of business because of the large expatriate population residing in Phnom Penh. These foreign nationals have been holed up in their apartments for quite some time and will be eager to get out and once again enjoy gaming entertainment experiences. NAGA’s strong relationships with major junket operators will also allow for a quick return of VIP play, comprised of players from adjacent countries. The very nature of VIP rooms allows players to be cloistered in gaming environments that are removed from large groups of people and where they will feel safe.
The border casinos will be the next markets to see a return of customers and that will require the easing of travel restrictions at overland border crossings coupled with customers who feel comfortable going back to casinos. I would expect Bavet and Poipet to be the next markets to start seeing a path to recovery. Sihanoukville will probably be the last market to recover. This destination is wholly dependent on gamers and tourists from other countries for the lion’s share of their business volume. The only way for those visitors to get to Sihanoukville is by air, so a return of flights into that market, coupled with visitors willing to travel, will mark the return of business. Trying to predict consumer demand for gaming entertainment in Sihanoukville from key feeder markets such as China, Malaysia and Thailand in the wake of this pandemic is difficult. Visitors will need to feel safe before they will be willing to get on a plane and fly to a gaming resort destination.
CR: Will the COVID-19 virus delay the introduction of the country’s new gaming legislation? What sort of time frame are we looking at for the introduction of the new law?
AK: The Law on the Management of Integrated Resorts and Commercial Gaming (LMIRCG) was expected to be completed in 2020. I do not know how COVID-19 will affect the ultimate passage of the legislation. The LMIRCG must go before the Council of Ministers, the National Assembly and the Senate. I do not think they are convening during this period that the country is under lockdown. In all probability, passage of the gaming legislation will be delayed until the government reopens.
CR: How big an impact has the decision to end online gaming had on Cambodia’s gambling industry?
AK: Online gaming was the accelerant that fuelled the rapid growth of new gaming licences over the past two years, particularly in Sihanoukville. Allowing online gaming licences to expire on 31 December 2019 and not permitting renewals of those licences brought that industry to a complete halt and with it, a massive exodus of Chinese nationals that worked in that industry. Those Chinese nationals had skewed the lodging and condominium demand/supply model. It was far more profitable to rent a hotel room or condo unit to a group of workers than it was to rent them to tourists. When the industry shut down and those workers left, occupancy dropped dramatically. Had the pandemic not emerged, Sihanoukville would have seen the steady restoration of normal tourism driven demand. Unfortunately, the pandemic shut down tourism. Tourism will recover but probably not until 2021.
CR: What are some of the measures operators could take to attract visitation once they resume operations?
AK: Operators will need to assure visitors that their gaming and resort environments are safe. This means creating environments that allow for social distancing. Unfortunately, the basic design of casinos brings a lot of people into close proximity of one another. Operators will need to look at what Macau has done and what the major operators in Las Vegas will do to ease the crowding normally associated with casinos. This will probably include limiting the number of people who are allowed to enter a casino at any one time, masks for all employees and customers, more frequent cleaning and redesigning casino floors to allow for social distancing. Expect overall gaming capacity to be reduced with more space between tables and fewer seats at each table. Unfortunately, there is a direct correlation between gaming capacity and gaming revenue. If capacity is reduced, revenue will decline.
CR: What can steps can the Cambodian government take to help support casino operators – I believe there was discussion of tax exemptions for casinos while gaming operations are suspended?
AK: I do not know what exemptions casinos would be entitled to. Gaming tax rates in Cambodia are already some of the lowest in Asia. I do not believe that relief of taxes would stimulate growth. What is needed after the casinos reopen is a return of tourists and people who enjoy gaming entertainment.