Strip casino operators check out opportunities in Taiwan

David Strow

Friday, March 9, 2001 | 11:43 a.m.

Las Vegas Sands Inc., owner of the Venetian hotel-casino on the Las Vegas Strip, confirmed Wednesday it is examining the possibility of opening a resort casino on an island off the coast of Taiwan.

Though first to be mentioned, Las Vegas Sands isn't expected to be the only company interested in the Pacific Rim nation.

"Anyone that has any sort of interest or market share in baccarat on the Strip should look at this," said Adam Steinberg, gaming analyst with CIBC World Markets. "It wouldn't be surprising at all if MGM (MIRAGE) would look at it, and Park Place (Entertainment Corp.) and Mandalay (Resort Group) would make good sense as well."

The Venetian issued a statement confirming that Chairman Sheldon Adelson had met with Taiwanese President Chen Shui-bian about the possibility of Las Vegas Sands building a resort casino on the island of Penghu, located halfway between Taiwan and China. Taiwan is a key source of Asian casino customers, but gambling is illegal there.

"President Chen encouraged LVSI to invest in the tourism industry of Taiwan, but did not make any commitment to permit gaming, saying that the approval for gaming would have to come from the legislature and, of course, the Taiwanese government," Adelson said in a statement. "If the government of Taiwan were to adopt a favorable policy toward gaming, LVSI would be interested in pursuing a gaming venture in that country."

To that end, Adelson said the company has started discussions with developers about building "tourism and casino operations" on Penghu.

"In the event that gaming is legalized in Taiwan, we believe that our expertise and resources in the hotel, tourism and gaming fields would be very helpful in the creation of a first-class resort there," Adelson said.

A spokesman for MGM MIRAGE said this morning his company would also examine the opportunity, though he said he was aware of no contact between the company and Taiwanese officials.

"We will look at any jurisdiction in which legalized gambling exists and a regulatory structure is in place in a way that's appropriate for a Nevada licensee," Alan Feldman said. "We'll do our due diligence on what's going on there. We've not made any commitments, and we have no plans to build anything. We'll try to understand what it is they've set up there."

The reason Las Vegas companies would be so interested in Taiwan, Steinberg said, is because it would give them a presence in Asia, the backyard of some of their most lucrative customers.

"Look at what Harrah's (Entertainment Inc.) does with 'Total Rewards,"' Steinberg said. "They know their customers better because of their riverboat properties, and they bring them to the Strip. (With an Asian property), you're giving them an opportunity to know you better. So anyone who has any sort of presence in high-end play should look at this."

Others, however, are doubtful anything will happen.

"If I chased down every story about (gaming) companies wanting to build in foreign countries, I'd waste my entire day," said Dennis Forst, gaming analyst with McDonald & Co. Investments. "It's difficult enough getting your arms around politics and players in Louisiana, let alone Taiwan.

"None of the gaming companies have ever invested any material amount of money off-shore, and I don't expect that to change."

Even if Taiwan does legalize gambling, Steinberg said casino operators would need to consider several issues before building there. One is how much in gaming revenues the Taiwanese government would demand from licensees; another is political risk.

"As an operator going into a foreign country, there is the risk of repatriation of your assets," Steinberg said.

Taiwan has been involved in a long-simmering dispute with China, which claims jurisdiction over Taiwan. Talk of Taiwanese independence in recent years has caused Beijing to threaten war with the island nation.

Jason Ader, gaming analyst with Bear Stearns, also believes MGM MIRAGE would attempt to enter Taiwan if it legalized gambling.

"It's such a strong gaming market," Ader said. "For anybody in Las Vegas who is pursuing the Asian high-roller business, it's great to have a casino as a form of marketing representation for the Vegas market."

However, Ader said talk of a Taiwanese gaming market is "premature" at best at this time.