Taipei Times: What benefits can casinos bring to Penghu?
Michael Treanor (MT): I think that casino gaming is going to be an important stimulus to economic activity in Taiwan in general, but very specifically in Penghu County. It will be the catalyst that spurs significant development. The real intent here is an integrated resort. We anticipate the developments will have many different amenities to them: recreational, shopping, dining, etc. So it will become a very desirable destination for families and tourists, not only from Taiwan, but also internationally.
Carl Burger (CB): In many cases other developments actually eclipse what happens in the casinos. Take Las Vegas as an example. Casinos are not the driving reason why many, many people go to Las Vegas. They go there for many of the other facilities. The phrase “integrated resort” was coined in Singapore. What it essentially means is a hotel with many facilities outside of the casino environment. The casino is the anchor tenant and if you move beyond that, you’ve got all the outside interests that begin to form around it. You’ve got condominium potential, you’ve got suppliers, not only to the hotels, but to the other resort facilities. They will start to develop. In terms of the finance world, that then becomes more open to financing other businesses in the immediate environment. In this particular case that’s Penghu.
PHOTO: RICHARD HAZELDINE, TAIPEI TIMES
Probably one of the closest examples we could give is Paradise Island in the Bahamas, which is just offshore. [South African gambling magnate Solomon] Kerzner went in there and he bought the Paradise Island Atlantis Resort and made a huge difference to the whole island.
TT: The gaming legislation may have passed, but now everything depends on a referendum (tentatively set for April or May). There is a lot of opposition from religious, social and environmental groups. Are you optimistic the referendum will gain enough support?
MT: Whenever a gaming initiative is introduced there’s always opposition. Oftentimes it’s misinformed people thinking that with gaming may come social evils. But that is not always the case. It has been the case in certain circumstances, but not if done right. We think that Taiwan, which is following the Singapore model for development of integrated resorts, is approaching it from a very responsible manner, which is to make them family friendly and not make gaming the centerpiece. The development will bring thousands of jobs to a fairly impoverished part of Taiwan, so we don’t see how it’s anything but good. Sure, there will be opposition, there already has been and we expect to address the opponents in a responsible manner.
CB: It is our understanding that two previous referendums went through. There have also been a number of polls and in actual fact we did our own survey just over a year ago and it was well in favor of having gaming. There’s a place for the opposition because they’re the guys that keep everybody honest.
TT: The Council for Economic Planning and Development Chairman Chen Tian-jy (陳添枝) said on Jan. 13 that potential developers must be multinational corporations with huge capital. Does AMZ, as a relatively new and small company, qualify? And how confident are you that AMZ will win one of the two or three licenses on offer?
MT: It’s likely we won’t qualify under those standards, notwithstanding that we have extensive gaming development and operational expertise. Being realistic, it’s likely Taiwan is going to want a name brand operator for its first few casinos. So for that reason, we will be in discussions with major international operators because we think the winning bidder will both need land to build on as well as a marquee operator. What we’re committed to doing is assembling a package that has a marquee operator and a piece of land that is ready to go and meeting any other criteria as best we can. We know what we are and we would expect an international operator to step in and handle operation of the resort.
CB: We do realize our limitations, but bear in mind our executive structure. We have many, many years of experience in managing and opening projects overseas. Because we are a listed company, were just as adept at raising money. Clearly the big operators are in trouble at the moment. They’re pulling back from projects and [Penghu] will probably require a multi-focus approach in terms of joint ventures. This is what you’ve seen in Singapore when joint ventures were formed for bidding and that’s probably what you’re going to see here in the current economic climate.
TT: Alan Feldman of MGM Mirage Group has said convenient transportation and comfortable weather will attract people to casinos. Penghu doesn’t really have either of these. What makes you think you can build a profitable casino there?
MT: I believe that the infrastructure is actually quite good as a starting point in Penghu. The airstrip is quite large and can accommodate most commercial planes.
The airport was recently expanded to accommodate increased volume. There’s a whole international arrivals area that’s unused right now. Water, power production and roads are adequate to better than adequate. Development related to the resorts will improve that infrastructure. On the weather issue, for six to eight months of the year the climate in Penghu is quite lovely. I say that from personal experience. Four months of the year it’s a little windy and perhaps a little cold but the resort is intended to have both indoor and outdoor activities and so it’s not necessary to have beach weather year round. For three months of the year Las Vegas is inhospitably hot. The fact that the weather has some extremes to it is not a big factor.
CB: From my perspective and again from my operational experience,you look at the similar style resorts where weather may be a factor: All that means is there may well be high and low seasons. From a point of view of families and the usage of other resorts, take Atlantic City. You have some extremes of temperature there, it’s not a resort, but they have other facilities like shopping and entertainment. In Paradise Island they have low seasons. All that happens in those off seasons, you tend to put on more entertainment, people tend to do the retail and they find other things to do.
TT: In terms of numbers, Macau’s success comes from its proximity to Hong Kong and China. Penghu doesn’t really have the same advantage. Where’s Penghu’s advantage?
MT: Macau’s proximity to China is a double-edged sword. It’s great when visas are being granted to Chinese and that certainly was the engine pushing economic growth up until recently. But then visa restrictions were imposed and operators are suffering tremendously and having to scale back, if not cancel projects. Taiwan has 23 million people and no travel restrictions. It sits in the center of South Asia [sic] and is just a short-haul flight from many major Asian cities, not just Chinese cities. It’s our opinion that if only Taiwanese nationals patronize the casino resorts that they will do very, very well. In addition it can be expected that you will have people coming from other jurisdictions.
TT: You’re on record as saying that your company is confident it can win the support of Penghu residents. How do you intend to do that?
MT: I think where we are confident is that we can put together a development and operational team that will operate on our site that Penghu residents will view as responsible, being consistent with the history and traditions of Penghu and Taiwan, and responsible from a social perspective. Meaning lots of good jobs and employment and generally contributing to the overall improvement of life there. That’s our mission, so assembling a world-class team is the way to do that. And we think once we do that Penghu residents will respond.
TT: On the subject of jobs, casinos will generate a lot of low-paid jobs and a few management positions, jobs that Penghu residents would not qualify for or would not be prepared to do. How do you intend to ensure that most of the jobs created by casinos will go to locals?
MT: Of course the objective of any resort/casino operator is to try to have as many jobs as possible sourced locally. It’s likely that there will be some interim period where there may be some ex-pats that hold senior management positions, but that only because the transfer of skills is necessary for time period, and once that transfer happens it’s likely that Taiwanese that show an aptitude for the business would rise to important management levels. That happens in country after country. In Las Vegas for example, a market [we] are very familiar with. That’s a place where with a high-school education you can make over US$100,000 a year if you happen to be good at what you do, a dealer, sales or customer service, or food and beverage. With a relatively low level of education you can actually make quite a bit of money and rise to some relative seniority. There will be low-paying jobs and we’ll have to address that issue. If that means looking outside of Penghu for workers then that’s what we’ll have to do.
CB: The company will have a responsibility to develop the local labor force. You identify what you need for dealers and mid-level [staff] and recruit them locally and train them and gradually bring them up through the ranks. The top-level management will come from overseas because there’s nobody on the ground. You will almost immediately start a graduate program which will bring the high-flyers and maybe even bring university-type people in to start to train them at mid-level management. In addition to that, Penghu has a university with a hospitality department, so straight away there’re synergies and we would definitely supplement that and try to encourage them to integrate with one of the globally recognized hospitality diplomas and sponsor a number of people to go through that.
TT: Environmentalists are concerned that an increase in tourists brought by casinos will have an impact on Penghu’s fragile environment, scarce water supplies and fisheries. What do you have to say to them?
CB: You either want to have a pristine island and not have any visitors, in which case that is a [nature] reserve. Penghu already has a population, they’ve indicated they want to move forward with resorts, and all you can try and do is mitigate the impact you have on the environment. That’s regulated by what the environmental protection [administration] does and we’ve gone through those studies already and it’s been agreed and approved for our resort. In terms of addressing items like water, electricity, we had to submit that we would have almost zero effluent content and we would need to bring in the latest technology, things like desalinization plants. All those things have been stipulated in our plans so we’re not reliant on the local ecosystem. A desalinization plant also benefits the local community. I don’t want to quote the cliche about not breaking any eggs. But we’re not going into a reserve here. All the resorts can do is to be as responsible as possible to put themselves into the environment with as little impact as possible.
MT: There’ll be significant additional revenue for Penghu County as a result of the business activity, which puts it in the position of being able to spend money on environmental protection activity, etc. Perhaps even purchasing and designating some land as a reserve, as has happened in many other places.
CB: What the environmentalists can’t come up with is an alternative to generate the same kind of opportunities and revenues.
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