Malaysian casino operator betting big on U.S. market
Las Vegas will be getting its first new casino on the Strip in a decade. And the only casino currently operating in New York City, at the Aqueduct Racetrack in Queens, is getting an upgrade to include a 400-room hotel with a celebrity-chef restaurant.
They’re both part of the huge U.S. expansion plans of the Genting Group, a Malaysian conglomerate that’s seeking to move beyond its Asian roots — not just in New York and Las Vegas, but in Miami and suburban Massachusetts as well.
“We want to diversify the portfolio, spread out the risk and be able to leverage international travel by having the right assets in the right cities,” said Edward Farrell, president of Genting Americas.
In 2020, Genting plans to open the 3,000-room centerpiece of its U.S. strategy on the northern end of the Las Vegas Strip, where construction on the $4 billion project has recently started, Farrell said.
The Strip hasn’t seen a major hotel opening since 2009, and with no new projects on the horizon, Genting is positioning itself well, said Brent Pirosch, director of gaming consulting at real estate brokerage CBRE Group in Las Vegas. He said the company will benefit from a planned expansion of the city’s convention center and the arrival of the National Football League’s Raiders, scheduled to move from Oakland into a new $1.7 billion stadium nearby.
“It will be the newest and one of the best offerings out there on the Strip,” said Genting Americas’ Farrell.
Genting’s Resorts World New York City at Aqueduct generates plenty of proceeds: Last year it had gambling revenue of $826.5 million, according to Bloomberg Intelligence, 13 percent more than Atlantic City’s biggest casino, MGM Resorts International’s Borgata Hotel Casino & Spa, and 26 percent more than the casino revenue of Wynn Resorts Ltd.’s flagship Las Vegas property.
“Now it’s a good regional gaming product,” said Farrell,
who said the hotel is due to open in mid-2019. “It will be much more of a destination, a full entertainment facility.”
Resorts World pays 70 percent of its gross to New York State, according to the company, which says it has paid more than $1.9 billion to New York’s Lottery Education Fund since opening in 2011. The casino offers electronic slots and other games but isn’t allowed to have live table games.
Like other casino operators, Genting is implementing a hub-and-spoke model, said Michael Pollock, managing director of Spectrum Gaming Group, a N.J.-based consulting firm that has done work for the company. The model operates by having properties in densely populated areas that help to build demand for Las Vegas through loyalty programs that reward frequent customers. That helps build revenue on both ends of the business, Pollock said.
“You encourage your higher spending, most profitable customers to stick with you,” he said. “People in Queens will play more often if they can earn points redeemed in Las Vegas.”
Yet Genting has had less success with other parts of its U.S. strategy. A $1 billion project with the Mashpee Wampanoag tribe for a resort with three hotels and a casino, about 40 miles south of Boston, is being delayed by a legal challenge over the tribe’s right to operate it. The tribe is contesting the challenge, and a decision by the U.S. Department of the Interior has been delayed, according to a statement by Cedric Cromwell, the tribe’s chairman.
Further delays in resolving the dispute could be costly
for Genting. The group has invested $347.4 million in promissory notes issued by the tribe, Genting Malaysia said in a filing with the Malaysian stock exchange on July 7, noting that recovery depends on the case’s resolution. Genting said in a statement that the new deadline for parties to file replies to opposing submissions in the case is Oct. 30.
A plan to build a large casino at the site of the former Miami Herald building, which Genting purchased for $236 million in 2011, is also in limbo, with Florida lawmakers balking at proposals to expand gambling in the city. Genting’s Farrell said there’s little reason to expect the company will be able to move ahead.
“The likelihood of anything major happening in southern Florida is very slim,” he said.
Demand for Miami property has waned. The city’s condominium boom, which fueled much of the construction, led to a glut in residential high rises, and now many developers are putting off new projects.
The downtown Miami site has attracted interest from
would-be buyers, according to Farrell, who described it as a “premier piece of property.”
“We have had several opportunities to sell that we have not accepted,” he said. “We are going to hold on to our property and see what happens.”
Genting, through an affiliate, owns 88 percent of Empire Resorts Inc., which is building a $1.2 billion casino resort in the Catskill mountains outside of New York. Also branded as a Resorts World property, it is expected to open in March.
Information for this article was contributed by Chong Pooi Koon and Sterling Wong of Bloomberg News.