Ho Tram is a ways from China and not too close to Ho Chi Minh City either. But The Grand is open for business. And it’s gorgeous
The house was packed and sizzling with excitement on the night of the 26th of July for the ribbon-cutting to mark the long-awaited opening of The Grand – Ho Tram Strip.
It was a remarkable event for a lot of reasons. The presence of US hedge fund titan Phil Falcone was a bit of a surprise, but then it’s Harbinger Capital that put up most of the US$500 million to get the place off the ground.
It was remarkable for who wasn’t there. Dialing back just six months ago you would have expected to see more than a few heavyweights from MGM Resorts International mingling with the junketeers and their well-heeled clients and the rest of the glitterati in their dinner jackets and gowns—a beaming Jim Murren himself in all likelihood.
Instead it was Robert Wolfe who strode onto the stage, the tall, bespectacled chairman of Asian Coast Development (Canada) Limited, the Vancouver-based owners of this beautiful beachfront resort on Vietnam’s South China Sea coast. He looked exhilarated. He looked tired. Doubts have stalked Ho Tram since its inception. There are many who still question its viability, especially after MGM pulled out earlier this year as the resort’s operator. Mr Wolfe knows about all this of course. He spoke to the crowd of what an “amazing ride” it’s been. He said, “What has been accomplished here has been unprecedented in Vietnam. We are making history here tonight.”
Opening night and not an MGM executive to beseen.
A smile made its way into the corners of his mouth. “So with that I think it’s time that we should have some fun,” and he reached for the knot of his tie. “My staff says I can’t wear a tie anymore.” The tie fought back for a second but he worked it with both hands and off it came.
It had been years in the making, months behind its expected debut, but The Grand was ready for its close-up.
Bob Wolfe, collar open to the world, stood vindicated. “We’re going to have a party!” he cried. “Game on!”
The Grand – Ho Tram has battled its share of obstacles to become Vietnam’s largest casino resort, really the first fully integrated resort in the country and the largest in the ASEAN world outside Singapore. It weathered the global financial crisis of 2008- 2009. It’s overcome funding issues. In the second half of last year certain completion deadlines were missed. Nothing uncommon perhaps when you’re trying to get a very big hotel with a casino and restaurants and all the rest built. But in an uncommon environment like Vietnam that can spell headaches. The government withheld the necessary investment certificate, which triggered a syndicate of Vietnamese banks to suspend the undrawn portion of the project’s credit facility. That was enough to move NYSE-listed Pinnacle Entertainment, a major regional casino operator in the States, to announce that it was writing off its 23% stake. While all this was going on the relationship with CEO Lloyd Nathan was disintegrating. Then 2013 arrived and a planned Lunar New Year opening came and went. Mr Nathan, who had been with the project since 2010, was gone not long after. He claims he was forced out, and he’s suing Bob Wolfe and Phil Falcone and Pinnacle CEO Anthony Sanfilippo. In March, MGM jumped ship. Maybe it was the investment certificate, maybe it was the problems with Mr Nathan, an admired former executive who at one time had headed the gaming giant’s global development arm, maybe both. At any rate, before the investment certificate finally came through in April it wasn’t looking good. The July opening wasn’t announced until June.
“There were many people who probably thought it might never happen,” says COO Mike Santangelo, who was brought on in March from The Cosmopolitan on the Las Vegas Strip, where he was vice president of finance.
Mr Wolfe will tell you The Grand’s troubles are behind it and the financial ground beneath it is solid.
“I’m not going to give you the mix of our senior bank versus equity,” he says, “but we are heavily balanced toward equity in our structure. We’re far from over-levered. We have considerable room on our senior debt. We have ongoing dialogue with our banks about how we can expand, and our equity investors have provided commitments for additional capital to build out the rest of this project and into our next phase.”
Construction began on that next phase last fall. Plans call for 559 hotel rooms and 14 luxury villas to open in 2017 along with a second casino that will bring the gaming complement to Vietnam’s legal limit of 180 live tables and 2,000 slots and EGMs. Pinnacle will be the operator.
There’s a lot of room to play with beyond that. The 164-hectare site is configured for three more hotels or some variation, possibly involving a high-end residential and/or luxury time-share component. Critical mass will be ACDL’s answer to the government’s ban on casino gambling by its own citizens and the challenge of being a good two to three hours’ drive through the congested port lands of Ho Chi Minh City from the only international airport in the south of the country. Nor does it enjoy the proximity to China of its smaller competitors in the resort hotels in Da Nang and up on picturesque Halong Bay and the border casinos in the northeast and above Hanoi in the far northwest.
If The Grand can work through the location issues it hasthe product to capture an outsized shareof a market that currently exceeds 4 million leisuretravelers a year. International arrivals to Vietnamwere up 14% last year to almost 7 million visitorsacross all categories. The government expects thatto reach 10 million by 2020.
If it can work through all this, though, it has the product to capture an outsized share of a tourism market that currently exceeds 4 million leisure travelers a year. International arrivals to Vietnam were up 14% in 2012 to almost 7 million visitors across all categories. The government expects that to reach 10 million by 2020.
What is true of The Grand at this point is that you can drive three hours or you can drive for a day, there is nothing at the end of any road in Vietnam to compare with it. Nestled amid gently rolling hills and protected forest it straddles one of the prettiest beaches in the country. Its heart lies in the Club Med ambiance of its outdoor pool area, where you can lounge in a cabana or saunter up to the bar for a glass of something with an umbrella in it or stroll down to the beach to watch the surfers and kayakers and parasailers. It’s carried throughout the property on the warmth of the Steelman Partners design—spacious, airy, basking in natural light—and it’s there in the restaurants and the world-class spa. The Grand takes you up in a relaxed embrace. It’s a feel that distinguishes it from much of Asia’s current resort gaming product. There aren’t many in the world that it doesn’t surpass on this level. It’s the anti-Macau, if you will, equipped, as few casinos anywhere are, for long, lazy holidays.
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The Grand takes you up in a relaxed embrace.It’s a feel that distinguishes it from muchof Asia’s current resort gaming product. There aren’t manyin the world that it doesn’t surpass at this level.It’s the anti-Macau, if you will, designed, as few casinosanywhere are, for long, lazy holidays.
The hotel offers an elegantly outfitted standard room with all the extras you’d expect with five stars and some you might not, like full-length windows that open onto a Juliette balcony—and whether you’re looking out over a sliver of azure sea or the flapping roofs of the cabanas or the golf course that opens later this year, there isn’t a view that isn’t delightful.
The casino is bright, friendly, intelligent. The air is cleansed by an innovative baseboard A/C system. The floor is a breeze to navigate. The product is diverse and spread across a mix of live tables and the latest slots and electronic table games in circular and stadium configurations. It’s also the first all-G2S floor on the continent, built on IGT’s sbX technology, which enables the open Game-to-System architecture and allows IGT’s Service Window to be fitted onto every one of the floor’s 614 machines. It’s state-of-the-art stuff. “It’s the one thing I’m most proud of,” says Ian Garner, who joined The Grand as vice president of slot operations from The Venetian Macao, where he was director of slots. “We’ve got [Service Window] running on every single vendor. They all really stepped up to make this happen.”
The system also includes IGT’s Table Manager solution and its newly released Rebates and Commission module developed specifically for the Asian junket market.
This is significant because with no recourse to domestic players management is looking to the region’s whales to drive gaming revenue. Currently, 55 of the property’s 90 tables are baccarat assigned to the VIP salons. Fortunately, the tax structure is not unfavorable. It’s comprised of two parts: 10% VAT and a 25% “special services tax” which is a tax on revenue for all intents and purposes. Incentives to junkets are deductible, however—a “discount on stipulated currency,” as its officially termed—so after discounting rolling-chip sales the effective blended rate—“our net tax position,” as Mr Santangelo calls it—is in the low to mid-teens.
“That’s why we can offer a little better incentive to our international tour operators, and that’s why they’re going to bring their players here,” he says.
He’s led dozens of junketeers and promoters through the property, he says— from Macau, mainland China, Japan, South Korea and Singapore—and 10 had been signed to partnerships as of opening day (“international tour operators” is the preferred euphemism) and three more looked to be coming on.
A standard room at The Grand—five-star all the way.
“People are calling us, versus us going out hunting them down. It’s been quite exciting for us,” he says.
They’re confident enough to be opening a marketing office in Macau.
“When you walk around and you get the feel of this building and you feel the energy it will bring people back,” he says.
And if government was ever to relent in its opposition to domestic play?
“We’d actually be sitting on a gold mine,” is how he puts it.
Hanoi has given no indication that it will, however; if anything, it’s indicated the opposite. A new decree that takes effect 1st October affirms the ban and outlines fines for violators.
“My opinion is they’d like to see how this goes,” says Mr Wolfe. “We have a good relationship with government, we talk to them all the time, and my expectation is they want to see a good experience with our property and others that they may allow to do international business. I think if there’s going to be local gaming, it’s not next year, it’s a couple of years out at the earliest.”
It’s like the accessibility issue, a work in progress.
“When you walk aroundyou get the feel of this building and you feelthe energy it will bring people back.”— Chief Operating Officer Mike Santangelo
The critical short-term piece is the ability to bypass the port highway out of Ho Chi Minh. That would shave an hour off the drive from the airport. It’s expected to materialize in the first half of next year with the completion of a direct east-west expressway. An international airport is planned for Long Thanh about 70 kilometers from Ho Tram and could be open within five years. There are other ways in. One of the ITOs is talking about running luxury cruises into the port town of Vung Tau about an hour’s drive away. The Grand also is whisking select players in by helicopter directly from Ho Chi Minh.
“There are other airport solutions that are available,” Mr Wolfe says. “We’re in direct discussions about charters with people that have very strong tour relationships throughout the region: frankly, as far away as Russia. We can drop people within an hour of the property.”
He’s not worried. As he sees it, The Grand has met its greatest challenge with the snip of that ribbon on the last Friday in July.
“To have one property here over time is not at all our desire or the government’s desire,” he says. “But at the same time, the other element is that at some point we hope and believe that the government will offer in some way gaming to locals. So we’re basically wedging ourselves between building the critical mass for this location, creating a platform that will be successful and profitable on its own, but over the long pull, if local gaming comes, it’s a grand slam. … It’s not a big secret. It’s the underpinning of our whole strategy: Get in, do it right, build the business and be in a position that if the larger opportunity presents itself that’s just frosting on the cake.”
“We’re basically wedging ourselves between buildingthe critical mass for this location, creating a platform thatwill be successful and profitable on its own, but over thelong pull, if local gaming comes, it’s a grand slam.”— Robert Wolfe, chairman, Asian Coast Development (Canada)
