Analyst: Still A Chance to Salvage Saipan Casino

When it opened in 2015 inside a Saipan shopping mall, a casino known as Best Sunshine rivaled even Macau for revenues. That’s all changed now, and its successor, the multibillion-dollar Imperial Pacific Palace, is in shambles. But all is not lost, says one analyst.

Analyst: Still A Chance to Salvage Saipan Casino

Back in 2010, it seemed like a surefire venture: a luxurious casino resort in an island setting, ringed by palm trees and within walking distance to white-sand beaches. But five years later, the multibillion-dollar complex, still unfinished, was plagued by labor disputes, funding shortfalls, missed construction deadlines and flailing leadership.

It sounds a lot like Imperial Pacific Palace Saipan, a beleaguered development in the western Pacific, also unfinished and also in danger of ruin. But the resort in question is half a world away, in the Caribbean.

Like the Saipan resort, Baha Mar near Nassau, Bahamas started on a high note, with an ambitious plan to develop a $3.5 billion 2,000-room retreat with gaming at the Bahamas’ Cable Beach. At the time, it was touted as the biggest leisure resort development in Caribbean history. Led by Sarkis Izmirlia and financed by a Chinese bank, it broke ground in 2011 with a plan to open in 2015. But soon, everything unraveled, in part due to the Great Recession.

The sprawling resort was 97 percent finished when it was forced to suspend construction. Six hundred million in the hole, Izmirlia filed for Chapter 11 bankruptcy before Baha Mar ever opened. The mess actually brought down the credit rating of the Bahamas. As a construction trade publication observed, “Major projects often go wrong, but rarely do they sour in quite such a public and spectacular way.”

Baha Mar seemed headed for an ignominious end when it was picked up by Hong Kong-based Chow Tai Fook Enterprises, which reversed its downward spiral. The resort finally opened in 2017, and last year, was named the Best Hotel in the Bahamas by U.S. News & World Report. The 2,000-room retreat also earned a 4-Star rating from the Forbes Travel Guide.

According to Brendan Bussmann, partner and director of government affairs for Global Market Advisors, Baha Mar shows how fresh capital and capable management can pull success from the jaws of failure. Under the right conditions, Bussmann believes, the Saipan project could reverse its fortunes too.

Owned by Imperial Pacific International (IPI), the resort holds the sole license to operate a casino in Saipan, the largest island in the Commonwealth of the Northern Mariana Islands (CNMI), a U.S. territory. At its inception, it promised to be one of the biggest taxpayers in the territory. But it’s fallen so short on that score that the government has had to enact austerity measures.

“From its early beginnings, the IPI project has been like watching a train wreck in slow motion, and at this point, it’s a multi-car pileup,” Bussmann told GGB News. “Gaming can work in Saipan, but it will take a strong operator and a strong plan to move forward.”

In the Beginning

It was 2015 when IPI opened a temporary casino in a duty-free shopping mall in Saipan. At the same time, it began development of a multi-billion-dollar permanent resort in the Garapan tourism district, complete with marble floors, gilded towers, and, in the lobby, two 20-ton Swarovski dragon sculptures made of stainless steel, gold and up to 2.5 million crystals.

The mall casino, known as Best Sunshine Live, made headlines by rivaling even Macau for VIP turnover. In a 2016 interview, the company’s CEO Mark Brown told GGB News, “We introduced our rolling-chip program and shocked people by doing $1.6 billion (in one month)…. Every month it’s continued to grow, and now we’re doing roughly $2 billion a month.” In one month, April 2016, Best Sunshine reaped $3.2 billion in revenues. “The VIPs love the island and what we do for them,” said Brown.

But revenues aren’t profit, and IPI apparently was too free with player credit. According to a 2019 article in Forbes, in its first four years the company accumulated $2 billion in player debt and wrote off two-thirds of it. It has since faced a seemingly nonstop barrage of legal snafus, allegedly importing illegal laborers under false pretenses, permitting unsafe working conditions, money laundering and wire fraud.

Though the permanent resort opened in 2017, it remains unfinished. Contractors and workers have gone unpaid. CEOs have come and go. The last of them, Donald Browne, tiptoed for the exit in December, after less than six months on the job, when he, too, went unpaid. IPI has also missed a series of revenue payments to the local government, and is about to miss the latest in a line of extensions to complete Phase 1 of the resort complex.

External circumstances haven’t helped, including Typhoon Yutu, which caused catastrophic destruction in the CNMI in 2018, and of course, the pandemic that began to spread in early 2020.

Still A Promising Destination

But with a good management structure in place—”one that’s experienced and can adapt to an evolving market,” said Bussmann—Saipan still stands a chance. “The challenge they continue to face is, you have all these key deadlines that keep coming out in the face of a very changing dynamic market. And it just turns into this snowball that never can straighten itself out.”

That view was echoed recently by Edward C. Deleon Guerrero, chairman of the Commonwealth Casino Commission, who told IPI last month that any new CEO must “truly understand, has truly read and, if necessary, has sought legal assistance to understand the gaming law. There is no other way getting around it but to fully understand it.” Word is that former Saipan Senator Ray N. Yumul has been tapped to become the new CEO.

Resurrecting IPI won’t be a quick fix, Bussmann said. “Other jurisdictions have done it, but it’s not necessarily shooting from the hip. It will take time.” It also may take the ouster of current executives and stakeholders including board members, “the problem children” of the venture, he said. In January, both Browne and IPI Chairwoman Cui Li Jie were threatened with jail on contempt charges for failing to pay the company’s employees for some 60 days.

“The news that continues to pour out of there doesn’t bode well for current leadership,” Bussmann said. “Getting experts from the outside is sometimes what’s required. But the regulator is the only one that has the lens into that, so it remains to be seen what’ll happen.”

In the 2019 Forbes article, iGamiX Director of Casino Operations Eric Coskun said IPI’s main problem was its business model, which he called “utterly unsustainable.”

“Almost all of their efforts are focused on the top end of the VIP market,” he said, “yet most experts know that top-level VIP players have a shelf life of two to three years, and most of these top-level players usually play on credit.”

Uncertainty remains due to Beijing’s current crackdown on gambling promotions, scrutiny of money transfers and a planned travel blacklist that could keep mainland Chinese away from gambling hubs outside Macau, said Bussmann. And the ongoing pandemic has only exacerbated a grim situation.

Bussmann agreed there’s an “ebb and flow” to VIP patronage, “but all of that got cut off a year ago, when travel was cut off. Over time, this may all look different because the Asian customer casinos relied on before may not have the means to (gamble) as they did before, or the capacity to travel.”

That said, Saipan has all the ingredients to become “a really strong destination” because of its proximity to Asia, including Japan, Hong Kong, Taiwan, Vietnam and the Philippines as well as China.

“In Asia as a whole,” Bussmann said, “there’s a lot of opportunity beyond the Chinese customer.”

As things stand now, IPI is virtually certain to miss its latest Phase 2 construction deadline this month, another “serious breach of contract,” according to the Commonwealth Casino Commission. While it’s pledged to clear millions in back pay and penalties, only part of that backlog has been satisfied, and an attorney for IPI has requested a payment plan.

A January 28 headline in Asia Gaming Brief was uniquely appalling: “IPI Claims Ignorance, Powerlessness, and Poverty Before U.S. Courts.”

With such a tarnished history, said Bussmann, at this point it may be necessary for lawmakers and regulators in the commonwealth “to blow the whole thing up and start over.”

Just look at Baha Mar. “Baha Mar had some challenges, but appears to be on the right footing now.”

Articles by Author: Marjorie Preston

Marjorie Preston is a staff writer for Global Gaming Business. She is a writer, editor, author and expat Pennsylvanian who now considers herself a New Jerseyan. Based on Brigantine Island north of Atlantic City, Preston has been writing about the gaming industry since 2007, when she joined the staff of Global Gaming Business as managing editor of Casino Connection.