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Sometimes politics and business collide in ways that nobody really expects. That’s exactly what happened to Donaco International’s Star Vegas casino in the second quarter of this year. The casino, situated in the border town of Poipet, Cambodia, found itself caught in the middle of a heated dispute between Thailand and Cambodia, which cut off their main source of customers.
The company released its financial results on Wednesday. Net revenue at Star Vegas dropped by 31.4 percent compared to the previous quarter, falling to AU$4.31 million (about US$2.81 million). But their property-level EBITDA took an even bigger beating, plummeting by 48.9 percent to just AU$1.78 million (US$1.16 million).
The Border Crisis That Changed Everything
So what exactly happened? It all started going downhill in late May when there was a military clash that ended up killing a Cambodian soldier. That alone was bad enough, but things got even messier when former Cambodian leader Hun Sen decided to release audio of a private conversation he had with Thailand’s Prime Minister, Paetongtarn Shinawatra.
By June 24th, Thailand had pretty much shut down most of the land crossings between the two countries. For a casino that depends heavily on Thai customers crossing over to gamble, this was a disaster waiting to happen. And that’s exactly what it turned out to be.
Donaco was straightforward with the situation in their earnings report. “The company’s performance was impacted by increased tensions along the border between Thailand and Cambodia during the quarter. This included a border closure to nearly all travellers, which has directly affected visitation at Star Vegas,” they explained.
A Completely Different Customer Base
Before this issue started, most of their customers were Thai nationals who would cross the border specifically to gamble. After the closure, that stream of visitors just disappeared overnight. “Star Vegas’ operations remain at reduced activity following border tensions, with its primary customers, who were travelling from Thailand before the border restrictions, unable to cross the border. Since the border closure, the Star Vegas customer base has consisted of foreigners in Poipet, primarily expatriates and businesspeople from Indonesia, China and Korea.“
Good News from Vietnam, Mixed Results Overall
Their other property, the Aristo International Hotel in northern Vietnam, actually had a pretty decent quarter. Net revenue there went up by 10.9 percent to AU$4.16 million (US$2.71 million), and property-level EBITDA increased by 9.1 percent to AU$2.52 million (US$1.64 million).
But even with Vietnam doing well, the problems at Star Vegas were big enough to drag down the whole company’s performance. Group-wide revenue took a hit too: net revenue slid 15.6% down to AU$8.47 million (that’s around US$5.5 million), and EBITDA wasn’t spared either, down 10.2% to AU$3.68 million (US$2.4 million).
Uncertain Times Ahead
Looking forward, Donaco is being pretty honest about not knowing what comes next. “The operating environment for Donaco remains mixed in the near term,” they said. While they’re optimistic about Vietnam continuing to do well – “Aristo continues to perform strongly, demonstrating stable revenue growth and improved visitation, with this trajectory expected to continue following a broader regional tourism recovery” – Star Vegas is a different story entirely.
“Star Vegas is currently experiencing operational challenges due to the border dispute between Thailand and Cambodia,” the company stated. “As the political landscape continues to evolve, Donaco is currently unable to determine the short-term outlook on the impacts of the border dispute on the Star Vegas operation.“
While all of this is happening, Donaco is dealing with another major issue, a shareholder vote next week about On Nut Road Limited’s proposal to acquire all the shares in the company it doesn’t already own.
The Bigger Picture
Donaco’s situation just goes to show how casinos can be affected by politics at any moment. What started as some political dispute has turned into Donaco’s ongoing headache. And for Star Vegas? It’s less “what happens in Vegas stays in Vegas” and more “what happens at the border can disrupt your business.”
Source: Inside Asian Gaming (IAG)
